2014 Registration Document and Annual Financial Report - page 182

Financial Statemements
Consolidated Financial Statements and Notes
Basis for preparation of the financial statements
The financial statements of consolidated companies, prepared in
accordance with local accounting principles, have been restated to
conform to Group policies prior to consolidation. All consolidated
companies have a December 31 fiscal year-end, except for certain
Indian companies that have a March 31 fiscal year-end and are
therefore consolidated based on financial statements for the twelve
months ended September 30.
The preparation of consolidated financial statements implies the
consideration by Group management of estimates and assumptions
that can affect the carrying amount of certain assets and liabilities,
income and expenses, and the information disclosed in the notes
to the financial statements. Group management reviews these
estimates and assumptions on a regular basis to ensure that they
are appropriate based on past experience and the current economic
situation. Items in future financial statements may differ from current
estimates as a result of changes in these assumptions.
The main estimates and judgments made by management in the
preparation of financial statements concern the valuation and the
useful life of intangible assets, property, plant and equipment
and goodwill, the amount of provisions for contingencies and the
assumptions underlying the calculation of pension obligations,
claims and litigation and deferred tax balances.
The main assumptions made by the Group are presented in the
relevant notes to the financial statements.
When a specific transaction is not covered by any standards or
interpretations, management uses its judgment in developing
and applying an accounting policy that results in the production of
relevant and reliable information. As a result, the financial statements
provide a true and fair view of the Group’s financial position, financial
performance and cash flows and reflect the economic substance
of transactions.
Capital management
The Group’s main capital management objective is to maintain a
satisfactory credit rating and robust capital ratios in order to facilitate
business operations and maximize shareholder value.
Its capital structure is managed and adjusted to keep pace with
changes in economic conditions, by adjusting dividends, returning
capital to shareholders or issuing new shares. Capital management
objectives, policies and procedures were unchanged in 2014.
The main indicator used for capital management purposes is the
gearing or debt-to-equity ratio (corresponding to net debt divided by
equity: see Note “Key Management Ratios”). Group policy consists
of keeping this ratio below 100%. For the purpose of calculating
the ratio, net debt is defined as all short and long-term borrowings,
including lease liabilities, derivative instruments with negative fair
values and bank overdrafts less cash and cash equivalents, derivative
instruments with positive fair values and disposal proceeds receivable
in the short-term. Long-term loans, made primarily to hotel owners
and to certain companies in which Accor holds a minority interest
with the aim of developing long-term investments, are treated as
cash flows from investing activities and not financing activities.
Consequently, they are excluded from the net debt calculation.
Equity includes the Group’s share of reserves and retained earnings,
and unrealized gains and losses recognized directly in equity, but
excludes minority interests.
Moreover, the Group has set a target at the end of December 2014
of maintaining the Adjusted funds from ordinary activities/Adjusted
net debt ratio at more than 25%.
The main accounting methods applied are as follows:
A. Consolidation methods
The Group’s organizational policy consists of creating subsidiaries in
France and, generally, in all of its host countries.These subsidiaries
are set up for the sole purpose of operating Accor Group hotels.
In most cases, they are wholly owned by Accor and controlled
exclusively by the Group. They are therefore fully consolidated.
IFRS 10 – Consolidated Financial Statements states that an investor
controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. No
account is taken of the potential ability to direct the relevant activities
arising from rights that cannot yet be exercised or that are subject
to the occurrence of a future event. The investor must have the
current, practical ability to direct the relevant activities that most
significantly affect the returns of the investee. In the hotel business,
an investor has power over a hotel operator,
existing rights that
give the investor the current ability to direct the relevant activities
that significantly affect the hotel’s returns, when it has the ability to
make all operational, financial and strategic management decisions.
In practice, this means that the investor has the power to appoint
the hotel operator’s management and to approve the operator’s
business plan and annual budget. In the case of managed and
franchised hotels, Accor has no such power and is not in a position
to decide on the business plan or the annual budget. In the case
of managed hotels, Accor acts on behalf and for the benefit of the
hotel owner and as such is a representative of the owner.
The Group has not identified any companies that it controls despite
holding less than half of the voting rights. Similarly, The Group has
not identified any companies that it does not control despite holding
more than half of the voting rights.
In connection with the development of certain hotel businesses,
Accor may set up partnerships with other companies to pool their
complementary skills. In all cases, the partnerships are organized as
separate, independently managed vehicles in which both partners
have rights to the net assets. All of these companies are controlled
jointly by Accor and the partner under a contractual arrangement,
according to which decisions about the relevant activities require the
unanimous consent of the parties sharing control. They qualify as
joint ventures based on the criteria in IFRS 11 – Joint Arrangements,
and have therefore been accounted for by the equity method in
the consolidated financial statements as from January 1, 2014 in
line with the requirements of IFRS 11.
In some countries, Accor may choose to acquire a minority interest
(generally less than 40%) in a local company that is then used as a
vehicle for developing hotel projects. In exchange for its investment
Accor generally acquires the right tomanage the hotels concerned. In
most cases, Accor has a seat on the Board, allowing it to participate in
decisions proportionately to its percentage interest in the Company’s
capital. However, the power to control the Company remains in the
hands of the other investors. These companies over which Accor
exercises significant influence, directly or indirectly, are qualified
as associates and are accounted for by the equity method in the
consolidated financial statements.
Registration Document 2014
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