2013 Registration document and annual financial report - page 290

Registration Document 2013
Parent Company Financial Statements and Notes
If shares in subsidiaries and affiliates or other investment securities
are deemed to be impaired they are written down to the lower
of their fair value or value in use, based on the impairment tests
performed and taking into account their financial position. Where
the Company concerned is not certain of achieving operating
profitability in the future, the investment is written down to an
amount corresponding to the Company’s equity in the underlying
net assets. The measurement process also takes into account i)
the maturity of the business (for example no provision is recorded
for investments in companies that are in the start-up phase and
whose future profitability is assured) and ii) the fair value of certain
of the subsidiary’s assets that are not included in the balance sheet
(e.g. trademarks). Provisions for impairment recognized on these
investments are not permanent and may be reversed if the financial
position of the Company concerned improves. However, any reversals
of impairment provisions may not result in the investment’s carrying
amount being increased to above its historical cost.
Additional provisions may be recorded to write down loans and
advances to the Company concerned and, where necessary, a
provision for contingencies is also recorded.
d) Inventory
Inventory is measured at the lower of cost or probable realizable
value. Cost is determined by the weighted average cost method.
e) Deferred charges
In accordance with the applicable French accounting standards
relating to assets, since January 1, 2005 deferred charges have
consisted solely of debt issuance costs, which are amortized over
the life of the related debt.
f) Receivables
Receivables are recognized at nominal value and provisions for
impairment are subsequently recorded if their fair value is lower
than their carrying amount.
g) Marketable securities
Marketable securities are stated at the lower of cost or market value.
h) Revenue
Revenue includes the amount of services and contractual fees (i.e.
management and franchise fees) billed to managed and franchised
hotels, subsidiaries and non-related parties. It also includes amounts
billed under real estate and business lease contracts as well as
fees received in return for rent and debt guarantees issued by the
Revenue from product sales is recognized when the product is
delivered and ownership is transferred to the buyer. Revenue from
sales of services is recognized when the service is rendered.
rental and business lease revenues are recognized on a straight-line
basis over the life of the contract;
fees billed to subsidiaries and non-related parties are recognized
on a straight-line basis over the life of the contract;
fees for guarantees are recognized on a straight-line basis over
the term of the guarantee concerned;
revenue from other services is recognized when the service is
i) Untaxed provisions
Hotel fixed assets may be depreciated by the reducing balance
method for tax purposes. Any difference between straight-line
depreciation recorded in the accounts and reducing balance
depreciation calculated for tax purposes is recorded as excess tax
depreciation in shareholders’ equity.
j) Provisions for contingencies and charges
Provisions for contingencies and charges are determined in accordance
with standard CRC 2000-06 relating to liabilities.
A provision is recorded when the Company has an obligation towards
a third party, which is probable or certain of giving rise to an outflow
of economic resources without any inflow of economic resources
of at least an equivalent value being expected.
k) Provisions for pensions and other
post-employment benefit obligations
Since 2013, the Company has applied ANC recommendation 2013-02
issued on November 7, 2013, which had the effect of repealing
the previously applied CNC recommendation 2003-R01 of April 1,
2003. This change resulted in the reclassification of unrecognized
past service costs in equity. The Company’s total obligation for
the payment of pensions and other post-retirement benefits is
provided for in the balance sheet.This obligation concerns statutory
length-of-service awards payable in France and other defined benefit
plans.The projected benefit obligation is recognized on a straight-line
basis over the vesting period of the plans concerned, taking into
account the probability of employees leaving the Company before
retirement age.The provision recorded in the balance sheet is equal
to the discounted value of the defined benefit obligation, plus or
minus any actuarial differences, which are taken to the income
statement in the year in which they arise.
In addition to these statutory benefit schemes, certain employees
are members of:
a defined contribution supplementary pension plan funded by
periodic contributions to an external organization that is responsible
for the administrative and financial management of the plan as
well as for payment of the related annuities. The contributions
made by Accor under this plan are expensed as incurred;
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