1998 Annual Report - Four Seasons Hotels and Resorts

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 1998 and 1997(In thousands of dollars except per share amounts)Four Seasons Hotels Inc. (“FSHI”) is incorporated under the Business Corporations Act of the Province of Ontario and,through its subsidiaries, is engaged in the management of, and the investment in, hotel, resort and vacation ownershipproperties throughout the world (note 16). (FSHI and its subsidiaries are collectively referred to as the “Corporation.”)At December 31, 1998, the Corporation managed 42 hotels and resorts, one vacation ownership property and hadvarious projects under construction or development, of which the Corporation had an equity interest in seven hotels andresorts under management, one vacation ownership property and five projects under construction. The Corporation earnsmanagement and other related fees under long-term management contracts based generally on a percentage of totalrevenues and operating profits of the managed properties.1. S I G N I F I C A N T A C C O U N T I N G P O L I C I E S:The Corporation’s accounting policies and its standards of financial disclosure comply with accounting principles that aregenerally accepted in Canada. The significant accounting policies are summarized below:(a) Principles of consolidation:The Corporation consolidates all of its wholly-owned subsidiaries, including its primary operating subsidiaries – FourSeasons Hotels Limited and FSR International Hotels Limited (“Regent”) (formerly Regent International Hotels Limited).The Corporation consolidates its 100% leasehold interests in the Four Seasons Hotel Vancouver and The Pierre NewYork, and until its disposition on January 1, 1998, the Corporation also proportionately consolidated its hotel jointventure, The Ritz-Carlton Hotel Chicago (25%) (note 5(b)).(b) Accounting for investments in hotel partnerships and corporations:The Corporation accounts for its investments in hotel partnerships and corporations by the cost method because eitherthe percentage ownership and structure does not give the Corporation significant influence over these investments or theinvestments were acquired with the intention that they be disposed of in the foreseeable future.The Corporation recognizes revenue on its investment in these partnerships and corporations when profit distributionsare receivable from the partnerships or corporations.In the event of a decline in value of an investment in the equity of a hotel partnership or corporation that is otherthan temporary, the investment is written down to the estimated recoverable amount.(c) Translation of foreign currencies:Foreign currency balances of the Corporation and of foreign operations designated as integrated are translated into domesticcurrencies at the rates of exchange on the balance sheet date for monetary items, and at the rates of exchange on the date oftransaction for non-monetary items. The resulting translation gains or losses are included in the determination of net earnings,except for gains or losses related to foreign currency denominated long-term debt designated as hedges of investments inself-sustaining foreign operations, which are deferred and included in a separate component of shareholders’ equity.Translation gains or losses on foreign exchange forward contracts designated as hedges of long-term receivables areincluded in income in the same period as the related translation losses or gains on the hedged receivables. Any premiumsor discounts on the forward contracts are amortized to interest expense over the terms of the contracts.Revenues and expenses denominated in foreign currencies are translated at the rates of exchange on the dates of thetransactions, except for revenues hedged by foreign exchange forward contracts, which are translated at the contract rates.65Four Seasons Hotels Inc.