CORPORATE FINANCE MANUAL This updated manual focuses on the IFRS accounting policies relevant to IHG. Guidance and interpretation is also provided on the key policies. US GAAP is not covered as the technical US GAAP issues are all dealt with by the Controllers Group. SectionContents1General2Updates and resolving queries3Accounting policies4Policy applicationSectionDescriptionPage1general52updates and resolving queries7SectionDescriptionPage3.1basis of accounting103.2consolidation113.2.1subsidiary undertakings113.2.2minority interest123.2.3associates and joint ventures133.2.4off balance sheet items143.2.5acquisition of subsidiary undertakings143.2.6disposals of subsidiary undertakings153.2.7translation of overseas subsidiaries153.2.8consolidation adjustments163.3foreign currencies173.4prior period adjustments183.5post balance sheet events193.6tangible fixed assets203.6.1tangible fixed assets203.6.2capital expenditure and initial measurement213.6.3capitalisation of own labour223.6.4depreciation223.6.5disposal / sale of fixed assets233.6.6licences243.6.7impairment reviews243.7intangible assets253.7.1software costs253.7.2research and development263.7.3inducement payments263.7.4management contracts273.8associates, joint ventures and other equity investments283.8.1fixed asset investments283.8.2associates and joint ventures283.8.3other equity investments293.9other non-current financial assets303.10inventory313.11cash and cash equivalents323.11.1cash equivalents323.12provisions for liabilities333.13contingencies343.14revenue recognition353.15revenue expenditure363.15.1research and development363.15.2repairs and maintenance363.15.3advertising, sponsorship and promotions373.15.4pre-opening expense373.16pensions, holiday pay and employee benefits383.16.1defined benefit pension scheme costs383.16.2defined contribution pension scheme costs383.16.3Holiday / vacation pay / long term service awards383.16.4Severance / termination / redundancy payments393.17share based payments403.18leases413.18.1finance leases413.17.2operating leases413.18.3other lease issues413.19segmental reporting423.20assets held for sale and discontinued operations443.20.1assets held for sale443.20.2discontinued operations44SectionDescriptionPage4.1identification of subsidiaries464.1.1principles and definitions464.2acquisitions and disposals474.2.1principles and definitions474.2.2acquisitions484.2.3disposals534.2.4key information to be gathered and retained534.3foreign currencies574.3.1principles and definitions574.3.2approach to foreign currency translation584.4tangible fixed assets594.4.1principles and definitions594.4.2carrying value594.4.3categorisation of tangible fixed assets604.4.4properties614.4.5fixtures, fittings and equipment624.4.6payments on account and assets in the course of construction624.5capital and revenue expenditure634.5.1principles and definitions634.5.2initial measurement644.5.3capital retirements654.6depreciation664.6.1principles and definitions664.6.2timing of depreciation and depreciation base664.6.3accelerated depreciation674.6.4depreciation rates684.6.5standard depreciation assumptions704.6.6illustration of assets and asset components714.7sales / disposals of fixed assets754.7.1principles and definitions754.7.2disclosure764.7.3accounting treatment764.8impairment of fixed assets and goodwill774.8.1overview774.8.2key concepts774.8.3impairment review794.8.4allocation of impairment losses804.8.5subsequent monitoring of cash flows804.9associates, joint ventures and other equity investments814.9.1principles and definitions814.9.2consolidated accounts834.9.3checklist for qualification of an investment as an associate844.9.4disclosure required in consolidated financial statements854.10non-current financial assets864.10.1principles and definitions864.10.2accounting864.11provisions for liabilities and charges874.11.1definition874.11.2recognition of provision874.11.3measurement of provision874.11.4future operating losses884.11.5onerous contracts884.11.6restructuring costs884.11.7disclosures894.12contingencies904.12.1principles and definitions904.12.2normal uncertainties904.12.3contingent assets914.12.4identification of contingent liabil