Travelex Holdings Limited Annual report & consolidated financial ...

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Travelex Holdings Limited
Notes to the financial statements
for the year ended 31 December 2001
1 Accounting policies
(a) Basis of preparation
These financial statements have been prepared under the historical cost convention, in accordance with applicable accounting
standards. A summary of the more important Group accounting policies is set out below, together with an explanation
of where changes have been made to previous policies on the adoption of new accounting standards in the year.
The Group financial statements consolidate the financial statements of the Company and all its subsidiaries. All significant
intercompany transactions have been eliminated on consolidation. Equity accounting is applied for all associate undertakings.
The Company was incorporated on 13 October 2000 as the ultimate holding company of the Group.
On 25 January 2001, the company acquired all of the issued shares of Travelex plc, the previous holding company, by issuing
an equal number of shares in the Company to the shareholders of Travelex plc. This has been accounted for using merger
accounting principles. The consolidated and Company financial statements for the year ended 31 December 2001 include the
results of the new parent from 13 October 2000 to 31 December 2001. The comparatives show the consolidated and
Company results of the previous holding company, Travelex plc, for the period 7 August 2000 to 31 December 2000.
(b) Changes in accounting policies
The Group has adopted FRS 19 ‘Deferred tax’ in these financial statements. The adoption of this standard represents
a change in accounting policy, however there were no changes to the comparative figures.
FRS 18 ‘Accounting policies’ has been adopted in the current year, however this did not require any change
in accounting policy.
(c) Revenue recognition
The key components of turnover are described below:
1 Revenue from currency exchange transactions is recognised as the difference between the cost and selling price
of currency, together with foreign exchange commissions on the sale and purchase of currencies and commissions
on the sale and purchase of travellers cheques.
2 Revenue from the sale of insurance policies is recognised at the time of sale of the insurance policy and represents the
commission earned on the sale of the policy.
3 Revenue from global payments is recognised as the currency margin on the transactions at the rates prevailing on the
transaction date plus any commissions charged.
4 Income from investment activities is derived principally from the investment of funds arising from the sale of travellers
cheques. Such funds are held to satisfy unencashed travellers cheques included within the travellers cheques awaiting
redemption balance. The income comprises interest on deposits with financial institutions.
In the opinion of the directors, disclosure of revenue is most appropriately represented for the Group by including the items
above. This represents an adaptation of the profit and loss account format laid down in Schedule 4 to the Companies Act
1985 due to the special nature of the Group’s business.
(d) Cost of sales
Cost of sales comprises direct selling costs (including salaries), rebates and incentive commissions.