SOL MELIA ANNUAL REPORT 00 COMP
SOL MELIA ANNUAL REPORT 00 COMP SOL MELIA ANNUAL REPORT 00 COMP
5 Accounting Principles The most significant accounting principles applied in the preparation of the 2000 consolidated annual accounts are as follows: 5.1 Goodwill and negative differences on consolidation The valuation differences between the investment and the equity, whenever these could not be attributed to specific assets or liabilities at purchase time are reflected, when first consolidated, under two possible headings: • Goodwill on consolidation The differences between the acquisition price of subsidiaries or associated companies (Note 2) and their net book value, whenever these are not attributable as a higher value of specific fixed assets of the acquired companies, are recorded as goodwill, which is amortised on a straight-line basis over a 10 year period for those existing at December 31, 1998 and over 20 years for the differences arising after that date. The reason for amortising over more than 10 years is due to the fact that this is considered as the period during which the investment will contribute to generate profits for the Group (See Note 6). The surplus assigned to specific assets is amortized, when applicable, based on the actual depreciation. • Negative consolidation differences The negative consolidation difference is calculated by taking into account the difference between the book value of the participation, direct or indirect, of the parent company in the subsidiary’s share capital and the value of the proportional part of the subsidiary’s equity attributable to such participation on the first consolidation date (See Note 7). Negative consolidation differences are recorded under liabilities in the consolidated balance sheet. 5.2 Minority shareholders and results • Minority shareholders: This heading in the balance sheet liabilities includes the proportional part of the shareholders’ equity on the first consolidation date that corresponds to third parties not belonging to the Group (See Note 19). • Results attributed to minority shareholders This is the participation in the consolidated profit or losses for the year that corresponds to minority shareholders (See Note 19). 5.3 Transactions between consolidated companies Results arising from internal operations within the consolidated group are eliminated, whenever the amount is significant, and deferred until they are realised with third parties outside the Group. S OL M ELIÁ A NNUAL R EPORT 2000 90
ACCOUNTING PRINCIPLES Credits and debits between the companies included in the consolidation as well as internal income and expenses have been eliminated in the consolidated annual accounts. 5.4 Uniformity It has not been necessary to adjust the individual accounts of the Group’s companies to unify them since, in general, the same uniform internal norms exist and are applied. The annual accounts year-end closing date for all the consolidated companies is December 31, 2000. 5.5 Conversion of annual accounts of foreign companies All assets, rights and obligations of the foreign companies included in the consolidation are converted into pesetas by applying the exchange rate prevailing on December 31, 2000. The items of the profit and loss account have been converted by applying an appropriate weighted average exchange rate in view of the volume of the transactions during each period. The difference between the amount of the foreign companies’ equity, including the balance of the profit and loss account calculated according to the preceding paragraph, converted at the historical exchange rate, and the net worth resulting from the conversion of the assets, rights and obligations according to the first paragraph, are recorded as gains or losses, whenever applicable, in the shareholders’ equity of the consolidated balance sheet under the heading “Foreign currency gains/(Losses)”, after deducting the part of such difference that corresponds to the minority shareholders recorded in “Minority shareholders” on the liabilities side of the consolidated balance sheet (See Notes 18.5 and 18.6). 5.6 Start-up expenses The start-up expenses of the different companies included in the consolidation are valued at cost, net of the corresponding amortisation which is calculated using the straight-line method over 5 years (See Note 9). 5.7 Intangible fixed assets Intangible fixed assets relate to sundry software applications and rights derived from financial leasing contracts. Software applications are valued at cost and are amortised on the straight-line method over a five-year period. Acquisition goodwill is amortised on the straight-line method over 5 to 20 years. The cost of the assets acquired by financial leasing contracts does not include financing charges but it does include the value of the legal revaluation according to Royal Decree Law 7/1996, of June 7th (See Note 11 and 18) and is accounted for in accordance with the prevailing Spanish General Chart of Accounts. S OL M ELIÁ A NNUAL R EPORT 2000 91
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ACCOUNTING PRINCIPLES<br />
Credits and debits between the companies included in the consolidation as well as internal income and expenses have been<br />
eliminated in the consolidated annual accounts.<br />
5.4 Uniformity<br />
It has not been necessary to adjust the individual accounts of the Group’s companies to unify them since, in general, the same<br />
uniform internal norms exist and are applied.<br />
The annual accounts year-end closing date for all the consolidated companies is December 31, 2<strong>00</strong>0.<br />
5.5 Conversion of annual accounts of foreign companies<br />
All assets, rights and obligations of the foreign companies included in the consolidation are converted into pesetas by applying<br />
the exchange rate prevailing on December 31, 2<strong>00</strong>0.<br />
The items of the profit and loss account have been converted by applying an appropriate weighted average exchange rate<br />
in view of the volume of the transactions during each period.<br />
The difference between the amount of the foreign companies’ equity, including the balance of the profit and loss account<br />
calculated according to the preceding paragraph, converted at the historical exchange rate, and the net worth resulting from<br />
the conversion of the assets, rights and obligations according to the first paragraph, are recorded as gains or losses, whenever<br />
applicable, in the shareholders’ equity of the consolidated balance sheet under the heading “Foreign currency<br />
gains/(Losses)”, after deducting the part of such difference that corresponds to the minority shareholders recorded in<br />
“Minority shareholders” on the liabilities side of the consolidated balance sheet (See Notes 18.5 and 18.6).<br />
5.6 Start-up expenses<br />
The start-up expenses of the different companies included in the consolidation are valued at cost, net of the corresponding<br />
amortisation which is calculated using the straight-line method over 5 years (See Note 9).<br />
5.7 Intangible fixed assets<br />
Intangible fixed assets relate to sundry software applications and rights derived from financial leasing contracts.<br />
Software applications are valued at cost and are amortised on the straight-line method over a five-year period.<br />
Acquisition goodwill is amortised on the straight-line method over 5 to 20 years.<br />
The cost of the assets acquired by financial leasing contracts does not include financing charges but it does include the value<br />
of the legal revaluation according to Royal Decree Law 7/1996, of June 7th (See Note 11 and 18) and is accounted for in<br />
accordance with the prevailing Spanish General Chart of Accounts.<br />
S OL<br />
M ELIÁ<br />
A NNUAL R EPORT 2<strong>00</strong>0<br />
91
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