Holiday Inn 2004 Annual Report Download - page 44

BASIS OF PREPARATION
The Group profit and loss account has been prepared by reference
to Format 1 as set out in Schedule 4 of the Companies Act 1985.
This is considered more appropriate to the Group post Separation
than the format used in previous years. Prior year comparatives
have been restated on a consistent basis.
BASIS OF ACCOUNTING
The financial statements are prepared under the historical cost
convention as modified by the revaluation of certain tangible fixed
assets. They have been drawn up to comply with applicable
accounting standards.
BASIS OF CONSOLIDATION
The Group financial statements comprise the financial statements
of the parent company and its subsidiary undertakings. The
results of those businesses acquired or disposed of during the
period are consolidated for the period during which they were
under the Group’s dominant influence.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the exchange
rates ruling on the dates of the transactions, adjusted for the
effects of any hedging arrangements. Assets and liabilities
denominated in foreign currencies are translated into sterling at
the relevant rates of exchange ruling at the balance sheet date.
The results of overseas operations are translated into sterling at
weighted average rates of exchange for the period. Exchange
differences arising from the retranslation of opening net assets
(including any goodwill previously eliminated against reserves)
denominated in foreign currencies and foreign currency
borrowings and currency swap agreements used to hedge those
assets are taken directly to reserves. All other exchange
differences are taken to the profit and loss account.
TREASURY INSTRUMENTS
Net interest arising on interest rate agreements is taken to the
profit and loss account.
Premiums payable on interest rate agreements are charged to the
profit and loss account over the term of the relevant agreements.
Currency swap agreements are retranslated at exchange rates
ruling at the balance sheet date with the net amount being
included in either current asset investments or borrowings.
Interest payable or receivable arising from currency swap
agreements is taken to the profit and loss account on a gross
basis over the term of the relevant agreements.
Gains or losses arising on forward exchange contracts are taken
to the profit and loss account in line with the transactions they are
hedging.
FIXED ASSETS AND DEPRECIATION
Goodwill Any excess of purchase consideration for an acquired
business over the fair value attributed to its separately identifiable
assets and liabilities represents goodwill. Goodwill is capitalised
as an intangible asset. Goodwill arising on acquisitions prior to
30 September 1998 was eliminated against reserves. To the
extent that goodwill denominated in foreign currencies continues
to have value, it is translated into sterling at each balance sheet
date and any movements are accounted for as set out under
‘foreign currencies’ above. On disposal of a business, any
goodwill relating to the business and previously eliminated against
reserves, is taken into account in determining the profit or loss
on disposal.
Other intangible assets On acquisition of a business, no value is
attributed to other intangible assets which cannot be separately
identified and reliably measured. No value is attributed to
internally generated intangible assets.
Tangible assets Freehold and leasehold land and buildings are
stated at cost, or valuation, less depreciation. All other fixed
assets are stated at cost less depreciation. Repairs and
maintenance costs are expensed as incurred.
When implementing FRS 15 ‘Tangible Fixed Assets’ in the year to
30 September 2000, the Group did not adopt a policy of revaluing
properties. The transitional rules of FRS 15 were applied so that
the carrying values of properties include an element resulting from
previous valuations.
Revaluation Surpluses or deficits arising from previous
professional valuations of properties, realised on the disposal of
an asset, are transferred from the revaluation reserve to the profit
and loss account reserve.
Impairment Any impairment arising on an income-generating unit,
other than an impairment which represents a consumption of
economic benefits, is eliminated against any specific revaluation
reserve relating to the impaired assets in that income-generating
unit with any excess being charged to the profit and loss account.
Depreciation and amortisation Goodwill and other intangible
assets are amortised over their estimated useful lives, generally
20 years.
Accounting policies
42 InterContinental Hotels Group 2004