TUI Aktiengesellschaft
http://www.tui-group.com/en/ir/reports/interim_reports_2008/2nd_quarter_2008/financial_statements/accounting_principles.html
Financial Statements Accounting Principles

Financial Statements Accounting Principles

Accounting principles

In accordance with IAS 34 ‘Interim Financial Reporting’, the Group’s interim financial statements as at 30 June 2008 were prepared in a condensed form compared with the consolidated annual financial statements. The only deviation from the historical cost principle was the accounting method applied in measuring financial instruments.

As of the beginning of the 2008 financial year, interpretation IFRIC 11 – ‘IFRS 2 – Group and Treasury Share Transactions’ –, published by the IASB, was appli­cable. The application of this interpretation did not have any effects on the interim financial statements as at 30 June 2008.

As a matter of principle the interim financial statements as at 30 June 2008 were prepared in accordance with the same accounting and measurement principles as those applied in the preceding consolidated financial statements as at 31 December 2007.

Since the beginning of the 2007 financial year, TUI AG has exercised the option offered under IAS 1 to structure the consolidated profit and loss statement in accordance with the cost of sales format.

In order to enhance international comparability, expenses and income from changes in the value of financial instruments resulting from bunker oil hedges, aircraft fuel hedges and hedges for future cash flows in foreign currencies were allocated to the expense or income items also showing the hedged items. As a result, the previous year’s financial result declined by € 28.4 million in the reference quarter.

Basis of consolidation

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 30 June 2008 included a total of 45 domestic and 712 foreign subsidiaries, besides TUI AG.

Since 1 January 2008, one company has been included in consolidation due to an expansion of its business operations as well as one newly founded company. An additional 30 companies have been newly included due to acquisitions. All additions to consolidation related to the tourism division.

Four companies were removed from consolidation as against the end of 2007. One of these companies related to shipping. It was deconsolidated due to a reduction in its business operations. An additional three companies were removed from consolidation in the tourism division due to liquidation, merger or accrual.

Acquisitions – divestments

In the first half of 2008, 30 tourism companies (of which in Q2 2008: 23) were acquired at acquisition costs (including incidental costs) amounting to the equivalent of € 96.6 million (of which in Q2 2008: € 69.2 million).

Summary presentation of the acquisitions


Name and headquarters of the acquired
company
Business
activity

Acquirer
Date of
acquisition
Acquired
share		 Acquisition
costs1)
€ million
Active Safary Pty. Ltd., West Leederville, Australia, and its interest in one company Special tour operator
for Australia		 Trek America Travel Ltd. 21 Jan 08 each 100% 1.3
Destination Florida-New England, Inc., Florida, USA and its interest in one company Provider of services
for cruise companies		 First Choice Holdings, Inc. 17 Jan 08 each 100% 4.7
Gullivers Group Ltd., Tewkesbury, UK and its interest in one company Special tour operator TUI Travel PLC 29 Feb 08 each 100% 21.1
Your Sporting Challenge Ltd., Southampton, UK Special tour operator TUI Travel PLC 19 Mar 08 100% 0.3
Real Travel Ltd., Tunbridge Wells, UK and its interest in three companies Special tour operator TUI Travel PLC 03 Apr 08 each 100 % 20.4
World Challenge Holdings Ltd., London, UK and its interest in seven companies Special tour operator TUI Travel PLC 29 Apr 08 each 100 % 25.1
Sportsworld Holdings Ltd., Reading, UK and its interest in nine companies Special tour operator TUI Travel PLC 13 May 08 each 100 % 18.2
Travelmood Ltd., London, UK Special tour operator TUI Travel PLC 02 Jun 08 100 % 5.5
Total         96.6
           
 

1) The acquisition costs in foreign currencies were translated into € and also comprised the incidental costs.



In some cases, acquisition costs also comprised the best possible estimates of additional purchase price elements depending on future events, in addition to the purchase prices already paid.

Summary presentation of the first-time consolidation balance sheets




€ million (translated)		 Carrying
amounts
as at
acquisition
date
Revaluation
of assets
and
liabilities		 Revalued
carrying
amounts
at date
of first-
time con-
solidation
Other intangible assets 0.0 35.1 35.1
Property, plant and equipment 4.2 – 4.2
Investment property 0.9 – 0.9
Fixed assets 5.1 35.1 40.2
Inventories 2.5 – 2.5
Receivables and other assets including prepaid expenses 28.7 – 28.7
Cash and cash equivalents 24.1 – 24.1
Deferred tax provisions – 9.6 9.6
Other provisions 24.1 – 24.1
Financial liabilities 10.0 – 10.0
Liabilities and deferred income 46.9 – 46.9
Equity - 20.6 25.5 4.9
       
 



The total difference of € 91.7 million (converted as at the acquisition date) between the acquisition costs and the acquired revalued net assets was temporarily carried as goodwill in each case.

Due to the short period of time between the acquisition of the companies and the preparation of the present interim financial statement of the TUI Group, the purchase price allocation to the individual assets and liabilities was only prepared on a temporary basis and it was not possible to make any further disclosures on IFRS 3.

The determination of the fair values of acquired assets and contingent liabilities, only prepared on a preliminary basis in the 2007 financial year due to the short period of time between the acquisition of the Holidays Services Group (Morocco) and the preparation of the consolidated financial statements, was finalised in the last quarter of the completed financial year within the period of twelve months from the acquisition date allowed under IFRS 3.62. Reference information for report­­ing periods prior to the completion of the first-time accounting of the acquisition transaction must be presented retrospectively as if the purchase price allocation had already been completed as at the acquisition date. The table below provides an overview of the final purchase price allocation:

Holidays Services, S.A. (Morocco)




 Revalued
carrying
amounts at
date of
first-time
consolidation1)
MAD million


€ million		 Revaluation
of assets
and
liabilities
MAD million


€ million		 Revalued
carrying
amounts at
date of
first-time
consolidation
restated
MAD million


€ million
Other intangible assets 5.0 0.4   0.0 5.0 0.4
Property, plant and equipment 69.5 6.2 - 20.1 - 1.8 49.4 4.4
Investment property 13.4 1.2     13.4 1.2
Fixed assets 87.9 7.8 - 20.1 - 1.8 67.8 6.0
Inventories 2.2 0.2     2.2 0.2
Receivables and other assets including prepaid expenses 83.8 7.6 - 7.8 - 0.7 76.0 6.9
Cash and cash equivalents 39.2 3.5     39.2 3.5
Deferred tax provisions     6.1 0.5 6.1 0.5
Other provisions 0.6 0.1     0.6 0.1
Financial liabilities 44.5 4.0 - 10.4 - 0.9 34.1 3.1
Liabilities and deferred income 95.3 8.5     95.3 8.5
Equity 72.7 6.5 - 23.6 - 2.1 49.1 4.4
             
 

1) Carrying amounts including a 100% subsidiary of Holidays Services, S.A.


The goodwill arising in the consolidated balance sheet from the elimination of the purchase price for the acquisition of around 40.2% of the shares against the pro­rated revalued equity rose by € 0.3 million due to changes in the purchase price allocation and after elimination of minority interests.