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Accounting Principles

Kuoni Travel Holding Ltd. (the Company) is domiciled in Zurich. The consolidated financial statements for the year ended 31 December 2011 cover the Company and all its subsidiaries (Kuoni Group) and associates. The Company is one of Europe’s leading tourism companies, active in the leisure travel and destination management field. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

Basis of Preparation

The consolidated financial statements are presented in Swiss francs (CHF), rounded to the nearest thousand. The consolidated financial statements are prepared on the historical cost basis except for derivative financial instruments, financial assets and financial instruments available for sale, which are stated at their fair value. Noncurrent assets and discontinued operations held for sale are stated at the lower of the carrying amount and fair value less costs to sell.

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Critical judgements made by management in the application of IFRS that have a significant effect on the financial statements and key sources of estimation uncertainties are discussed separately. The accounting policies have been applied consistently to all periods presented in these consolidated financial statements, with the exceptions described below.

Adoption of New and Revised Standards

The Kuoni Group adopted the following new and revised standards and new interpretations with effect from 1 January 2011:

Revised standards:
  • IAS 24: Related Party Disclosures
  • IAS 32: Financial Instruments: Presentation (classifications of rights issues)
  • IAS 27: Consolidated and Separate Financial Statements
New interpretations:
  • IFRIC 14: Prepayments of a minimum funding requirement
  • IFRIC 19: Extinguishing financial liabilities with equity instruments
  • improvements to IFRSs (May 2010)

The adoption and application of the above standards and interpretations had no effect on these consolidated financial statements.

Future ifrs changes

With the exception of IAS 19, the Kuoni Group does not expect these new and revised standards and interpretations to have any significant effect on its results and financial situation to date. They will, however, have an impact on transactions effected on or after 1 January 2012. This applies in particular to:

The amendments to IAS 19 “Employee Benefits” must be adopted from 1 January 2013. From its corresponding analyses to date, the Kuoni Group expects such adoption to have the following impact on its consolidated results:

In future, actuarial gains and losses will be recognised immediately in “Other comprehensive income”. The previous option of deferring such recognition using the “corridor approach” will no longer be permitted. Under that approach, such gains and losses were shown in results for the period if they exceeded 10% of the higher of the prior year’s fund assets or pension obligations amount. As of 31 December 2011, unrecognised actuarial losses amounted to CHF 47 million. The adoption of the amendments to IAS 19 is thus likely to result in greater volatility in pension fund assets/liabilities and consolidated equity.

As a further consequence of the adoption of the amendments to IAS 19, interest on plan assets will no longer be estimated based on expected asset returns under current asset allocations. In future, such interest will be based on the discount rate. The net periodic pension cost of the Kuoni Group would have been around CHF 2.7 million higher if the new provisions had been adopted for the 2011 business year.

Subsidiaries

Subsidiaries are entities controlled by Kuoni Travel Holding Ltd. Control is the power to directly or indirectly govern the financial and operating policies of an entity so as to obtain benefits from its activities. This is the case where the Group holds more than 50% of the voting rights of an entity or where the Group has been granted management of an entity contractually or is exercising control by other means. Subsidiaries acquired in the course of the accounting year are consolidated from the date the control effectively commences. Subsidiaries sold in the course of the accounting year are deconsolidated as of the date on which control ceases.

The full consolidation method is used, under which all assets, liabilities, income and expenses of the subsidiaries are included in the consolidated financial statements. The share of net assets and net profit or loss attributable to minority shareholders is presented separately as non-controlling interest on the consolidated statement of financial position, and separately as non-controlling interest in the consolidated income statement.

Associates

Associates are entities in which the Group is able to exercise significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equity accounting basis, from the date significant influence commences until the date it ceases. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has incurred further obligations in respect of the associate.

Intragroup Transactions and Balances

All intragroup transactions and balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in the consolidation process.

Foreign Currency Transactions

Transactions in foreign currencies are translated at the exchange rate on the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at year-end rates. Non-monetary assets and liabilities in foreign currencies that are stated at historical cost are translated at the exchange rate on the date of the transaction. Non-monetary assets and liabilities in foreign currencies that are stated at fair value are translated at the exchange rate at the date the values were determined. Foreign exchange gains or losses arising from translation are recognised in the income statement.

Consolidation of Foreign Subsidiaries

The consolidated financial statements are presented in Swiss francs (CHF). The financial statements of foreign subsidiaries are prepared in their functional currency. Assets and liabilities (including goodwill and fair-value adjustments) of foreign subsidiaries are translated to CHF at year-end exchange rates. Revenue, expenses and cash flow amounts are translated at weighted average exchange rates. Foreign exchange differences arising from the translation of foreign subsidiaries are recognised directly in equity as a translation difference.

Turnover

The Group renders a wide range of travel services. The revenue from rendering these services is recognised in the income statement at the time when the significant risks and rewards are transferred to the customer. This is generally the case on the date of departure or, in the case of destination management activities, on the date of arrival. Turnover comprises net sales revenues from the tour operating business (after deduction of sales taxes, value added tax, discounts and commissions) as well as commissions received from leisure travel retailing.

Employee Benefits

Wages, salaries, social security contributions, paid vacation and sickness- related absences, bonuses and non-monetary benefits are allocated to and shown in the year in which the employee provided the service concerned for the Kuoni Group. Where Kuoni provides long-term employee benefits, the costs are accrued to match the service to be provided by the employee, and the liabilities of the Kuoni Group are discounted to take account of the time value of money where the effects are significant.