Accounting Principles

In accordance with IAS 34 ‘Interim Financial Reporting’, the Group’s interim report as at 30 June 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 Q3 2009/10 was the period from April to June 2009 (Q3 2008/09), while the comparative period for the nine-month period in 2009/10 was the period from October 2008 to June 2009 (9M 2008/09).

The comparative figures for the prior-year periods were adjusted for the purchase price allocations of the acquisitions made from 1 October 2008 to 30 June 2009, finalised within the mandatory 12-month period.

At the end of September 2009 Magic Life was classified as Discontinued Operation. Due to a change in the disposal plan the respective results were reallocated to Continuing Operations. This also applies to the comparative figures. 

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 report as per 30 June 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’
• Annual Improvements Project (2009) where IFRS 2 ‘Share-based Payment’ and IAS 38 ‘Intangible Assets’ 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 1 January 2009. The provisions of IFRIC 17 ‘Distribution of Non-cash Assets to Owners’ and IFRIC 18 ‘Transfers of Assets from Customers’ were voluntarily applied in the present interim report prior to their effective date of 1 November 2009.

The application of all amendments and newly published standards listed above did not result in any material effects on the TUI Group’s net assets, financial position and financial performance in the present interim report.
 

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 report as at 30 June 2010 included a total of 45 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 nine companies due to acquisitions. Two companies were newly established. One company previously measured at equity was included as a fully consolidated subsidiary due to the purchase of additional shares. Twelve 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

Following its formation, TUI Travel Hotel Management Services Ltd. acquired the business operations and associated contracts of a hotel management company, including services for hotels in Turkey.

Following acquisition of the shares listed 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 resulted in income of €0.2m, carried under Other income.

Acquisition costs comprised paid purchase prices and an amount of €1.4m which depends on the outcome of future events. 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 €11.2m.

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. As a result, goodwill rose by a total of €29.1m.

The 12-month period permitted under IFRS 3 for finalising purchase price allocations was used. It permits temporary allocation of the purchase price to the individual assets and liabilities until the end of that period.

€6.9m of the goodwill capitalised in the period under review are expected to be tax-deductible.

The companies and business operations acquired in the period under review posted turnover of €15.3m, contained in the profit and loss statement for the period from 1 October 2009 to 30 June 2010. They generated profits of €2.0m. If they had been included in the consolidated financial statements since 1 October 2009, turnover for the reporting period ended 30 June 2010 would have been €16.5m higher and the Group result would have changed by €1.3m.

In the present interim report, the purchase price allocations of the following companies and groups acquired in the period from 1 October 2008 to 30 June 2009 were finalised within the required 12-month period in accordance with the provisions of IFRS 3:

• Travel Adventures Inc., USA
• 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
• Adventure Tours Australia Group, Australia
• Williment World Travel Group, New Zealand
• Aragon Tours Ltd., UK
• Zeghram Expeditions Group, USA

Comparative information for reporting periods prior to the completion of the first-time accounting for an acquisition transaction retrospectively has to be presented 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 declined by €3.4m 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 Container Shipping, measured at equity, decreased by €16.7m as per 30 September 2009. At the same time, the result from joint ventures and associates for the previous year’s comparative period rose by €66.8m due to the changed depreciation or reversal of the assets and liabilities revalued in the framework of purchase price allocation. The prior year comparative periods were 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% stake 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 included in the periods under review 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.