Financial assets / liabilities & Provisions / Contingencies

Financial assets

Classified as loans and receivables and available-for-sale financial assets (with no control neither meaningful influence). In both cases, they are initially recognised at fair value, whenever an active market exists, plus the transaction costs which are directly allocable. The Group has no financial assets carried at fair value through profit or loss or held-to-maturity investments.

Loans and receivables: are recorded under the accounts “trade and other receivables” and all the collection rights included in “other non-current financial assets” and “other current financial assets”. Such assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in income

Financial assets at fair value through profit or loss are held-for-trading financial assets acquired with the intention of selling them, mainly in the short term.

Concerning assets available for sale, the main movements in 2012 were disposals due to the sales of 2 portfolios.

Financial liabilities

Initially recognised at fair value, they are adjusted for directly attributable transaction costs. All the Group’s non-derivative financial liabilities are included within the classification of financial liabilities carried at amortised cost.

Debt issues are initially recognised at the fair value of the payment received. They are measured at amortised cost applying the effective interest method. They asses the features of the share in order to determine whether it is a financial liability or an equity instrument.

Provisions

Provisions are recognised when the Group:

•          Has a present  obligation (legal or implicit) as a result of a past event.

•          It is probable that an outflow of funds including economic benefits will be required to settle the obligation.

•          A reliable estimate can be made of the amount of the obligation.

Provisions are carried at the present value of the best possible estimate of the amount needed to settle the liability or transfer it to a third party; adjustments arising from the restatement of provisions as financial expenses are recorded as they arise. When the provision will be applied or reversed in one year or less and the financial effect is not significant, it is not discounted.

The balance sheet shows an amount of €38.2 million in non-current liabilities in respect of provisions for liabilities and charges. This account includes the Group’s commitments with staff, provisions for taxes from prior years which have been appealed against or are pending to court resolution, as well as the provisions recorded to cover the various liabilities and contingencies arising from operations

In addition, contingent liabilities are possible obligations arising from past events, the materialisation of which is conditional on the occurrence of future events that are not entirely under the Group’s control, and present obligations resulting from past events in respect of which there is not likely to be an outflow of funds to settle the obligations or which cannot be reliably measured. These liabilities are not recognised in the accounts but they are analysed in the notes.

Contingent assets and liabilities

The Group has commitments with third parties in respect of assets and liabilities not recognised on the balance sheet due to the limited probability that they will entail an outflow of funds in the future or because the commitments must not be recognised pursuant to prevailing legislation. 

The Meliá Hotels international Group operates 85 hotels under leases. The average term of these leases, excluding the land on which 17 finance lease hotels stand, is 9.43 years.