Accounting Principles

In accordance with IAS 34 ‘Interim Financial Reporting’, the Group’s interim financial statements as at 31 March 2010 are published in a condensed form compared with the consolidated annual financial statements. As before, they were based on the historical cost principle, the only exception being the accounting method applied in measuring financial instruments.

Following the change in TUI AG’s financial year-end to 30 September, the TUI Group now reports about the period from 1 October of any one year until 30 September of the subsequent year. Accordingly, the comparative period for Q2 2009/10 was the period from 1 January to 31 March 2009 (Q2 2008/09), while the comparative period for H1 2009/10 was the period from 1 October 2008 to 31 March 2009 (H1 2008/09).

As a matter of principle, the accounting and measurement methods applied in the preceding consolidated financial statements as per 30 September 2009 were retained in preparing the interim financial statements as per 31 March 2010.

In addition, the following standards and interpretations revised or newly published by the IASB were mandatory as of the beginning of financial year 2009/10:

• IFRS 3: ‘Business Combinations’
• IAS 27: ‘Consolidated and Separate Financial Statements according to IFRS’
• IAS 39: ‘Financial Instruments: Recognition and Measurement – Eligible Hedged Items’
• IFRIC 12: ‘Service Concession Arrangements’
• IFRIC 16: ‘Hedges of a Net Investment in a Foreign Operation’
• IFRIC 17: ‘Distribution of Non-Cash Assets to Owners’
• IFRIC 18: ‘Transfers of Assets from Customers’
• Annual Improvements Project (2009) where IFRS 2 ‘Share-based Payment’, IAS 38 ‘Intangible Assets’ and IFRIC 9 ‘Reassessment of Embedded Derivatives’ are concerned

TUI AG has been an early adopter of the amendments to IFRS 3 ‘Business Combinations’ and IAS 27 ‘Consolidated and Separate Financial Statements according to IFRS’ and has applied the amendments since its half-year financial report as at 30 June 2009 with retroactive effect from 1 January 2009. The profit and loss statement for the period from 1 January to 31 March 2009 and the statement of financial position as at 31 March 2009 have therefore been restated as follows:

Effects of the application of IFRS 3 and IAS 27 on the comparative period as at 31 March 2009

The mandatory application of all other amendments listed above did not give rise to any effects on the TUI Group’s net assets, financial position and financial performance.
 

Group of Consolidated Companies

The consolidated financial statements included all major subsidiaries in which TUI AG was able to directly or indirectly govern the financial or operating policies such that the Group obtained benefits from the activities of these companies.

The interim financial statements as at 31 March 2010 included a total of 46 domestic and 693 foreign subsidiaries, besides TUI AG.

Since 1 October 2009, four companies have been newly included in consolidation due to an expansion of their business operations and a further seven companies due to acquisitions. Two companies were newly established in the first half of the year. One company previously measured at equity was included as a fully consolidated subsidiary due to the purchase of additional shares. Ten companies were deconsolidated due to mergers or liquidation. Five companies were sold and therefore removed from consolidation. Two companies were newly included in the group of companies measured at equity due to acquisitions, and one company was measured at equity for the first time due to an expansion of its business operations.

Acquisitions  

Summary presentation of acquisitions

As regards The Hampstead School of English Ltd., the business operations of a language school and the requisite assets were acquired. Following its formation, TUI Travel Hotel Management Services Ltd. economically acquired the business operations and associated contracts of a hotel management company, including services for hotels in Turkey. The remaining acquisitions relate to 100% and 50%, respectively, of the equity instruments containing potential voting rights.

Acquisition costs exclusively consisted of paid purchase prices. Ancillary acquisitions costs and payments for future services by the employees of the acquired companies were carried as administrative expenses through profit and loss in accordance with the amendments to IFRS 3. In the period under review, total acquisition costs amounted to €10.4m.

Following the acquisition of the stakes mentioned above, TUI AG now holds 100% of TURKUAZ Insaat Turizm A.S. Fair value measurement of the previously held shares of €3.7m as at the acquisition date generated income of €0.2m, carried under Other income.

Summary presentation of statements of financial position as at the date of first-time consolidation

The difference arising between the acquisition costs and the revalued acquired net assets, constituting synergy potential, was temporarily carried as goodwill. Goodwill therefore rose by a total of €9.7m.

The twelve-month period permitted under IFRS 3 for finalising purchase price allocations was used; accordingly, the purchase price was temporarily allocated to the individual assets and liabilities until the end of that period.

Apart from the acquisitions individually listed, the business operations and assets of fifteen travel agencies in Germany were acquired. The purchase price totalled €6.1m, resulting in goodwill of €5.6m. Of the goodwill, €5.6m are expected to be deductible for tax purposes.

The turnover of the companies and business operations acquired in the period under review, contained in the profit and loss statement for the period from 1 October 2009 to 31 March 2010, totalled €7.8m. They generated profits of €1.1m. If they had been included in the consolidated financial statements since 1 October 2009, turnover for the reporting period ended 31 March 2010 would have been €2.8m higher and the Group result would have changed by €-0.7m.

Five additional business combinations were acquired after 31 March 2010. Due to the short time interval, these business combinations have not yet been accounted for in accordance with IFRS 3.

In the present half-year financial report, the purchase price allocations of the following companies and groups acquired in the period from 1 October 2008 until 31 March 2009 were finalised within the required twelve-month period in accordance with the provisions of IFRS 3:

• Travel Adventures Inc., US
• Sport Abroad Ltd., UK
• Teamlink Travel Group, UK
• Sunshine Cruises Ltd., UK
• Edwin Doran Travel Ltd., UK
• Master Yachting GmbH, Germany
• On the piste.com Group, UK

Comparative information for reporting periods prior to the completion of the first-time accounting for an acquisition transaction has to be presented retrospectively as if the purchase price allocation had already been finalised as at the acquisition date. The table below provides an overview of the combined final
purchase price allocations:

Summary presentation of the final statements of financial position as at the date of first-time consolidation

The goodwill arising in the consolidated statement of financial position on eliminating the acquisition cost against the acquirer’s interest in the revalued equity did not change as against 30 September 2009. The capitalised goodwill essentially represents a part of the expected synergy potential.

As at the end of March 2009, the 43.33% stake in ‘Albert Ballin’ Joint Venture GmbH & Co. KG was measured at equity for the first time. The determination of the fair values of the assets and liabilities, in particular of Hapag-Lloyd AG, implemented in connection with this measurement, was finalised in the second quarter of 2009/10. As a result, the carrying amount of Shipping, measured at equity, decreased by €16.7m as per 30 September 2009. The statement of financial position was restated accordingly.

Divestments
The tourism operations of the TUI Travel Group in Canada, hereinafter referred to as Canada Mainstream, were classified as a disposal group in accordance with IFRS 5 as at 30 September 2009.

On 14 January 2010, following regulatory clearance by the competent authorities, Canada Mainstream was contributed to the Sunwing Group. In consideration, TUI Travel received a 49% interest in the tourism venture formed with the Sunwing Travel Group. In addition, €97.7m were paid as the purchase price for shares in the new company and as a cash contribution to the new company. The new company will be measured at equity as an associated company. The disposal resulted in income of €2.0m, carried under Other income.

In order to enhance comparability, the expenses and income of Canada Mainstream contained in the reported periods are presented below.

Effect of the change in the basis of consolidation on the profit and loss statement due to the disposal of Canada Mainstream

Other divestments did not have any noteworthy effects on the TUI Group’s net assets, financial position and financial performance.