48Spire Healthcare Annual Review 2010Spire Healthcare Limited PartnershipNotes to the financial statementsFor the year ended 31 December 20101. Accounting policiesStatement of complianceThe financial statements have been prepared in accordance with International Financial Reporting Standards. Basis of preparationThe financial statements are prepared on the historical cost basis, as modified by the revaluation of derivative financial instruments.Going concernAs at 31 December 2010, the consolidated balance sheet showed net liabilities of £356.6 million and the consolidated income statement a loss after tax for the year ended 31 December 2010 of £52.8 million. Therefore the General Partner has considered whether this could impact the preparation of these financial statements and in particular the adoption of the going concern basis of accounting.As set out in note 15, the Group is financed by long-term loans. These include:(i) loans from parent undertakings of £601.8 million, which are not repayable until the earlier of the sale of the business and 2037-2038. Interest costs arising theron, which totalled £64.6 million in 2010, are rolled up and are not required to be cash settled in the foreseeable future.(ii) bank loans of £1,293.7 million, of which £1,275.8 million are not due for repayment until 2014-2018. Cash flow forecasts prepared as at 31 December 2010 show that the anticipated trading performance of the Group will generate funds sufficient to meet its liabilities as they fall due and that the Group is compliant with the covenants imposed by the bank loan facilities.(iii) finance lease liability of £74.0 million, of which £67.7 million is not due for repayment until 2012-2040.In view of the foregoing, the General Partner is of the opinion that the accounts of Spire Healthcare Limited Partnership should continue to be prepared on a going concern basis.Accounting policies and consolidationAll accounting policies are consistent with those of the previous financial year, except for the adoption of the amended standard as follows:New and amended standards and interpretations adopted by the Group The following new standard has been applied in the preparation of these financial statements. . IFRS 3 Business Combinations (revised)IFRS 3 (revised) introduces significant changes in the accounting for business combination such as valuation of non-controlling interests, business combination achieved in stages, the initial recognition and subsequent measurement of a contingent consideration and the accounting for transaction costs. These changes may have an impact on profit or loss reported in the period of acquisition, the amount of goodwill recognised in a business combination and profit or loss reported in future periods. During the year, as a result of the revised standard, the Group charged £421,000 (2009: £nil) to the profit and loss account in respect of acquisition costs.

49Spire Healthcare Limited PartnershipStandards and interpretations issued but not yet applied The following standards and interpretations are effective for annual accounting periods beginning after the date of these financial statements. . IFRS 9 Financial Instruments: Classification and Measurement (effective 1 January 2013) . IAS 24 Related Party Disclosures (Amendment) (effective 1 January 2011) . Improvements to IFRS (issued in May 2010) The Directors are evaluating the impact of these new standards and amendments on the Group's financial statements.The results of all subsidiary undertakings are included in the consolidated financial statements. The results of subsidiary undertakings acquired during the period are brought into the accounts from the date of purchase. The results of subsidiaries disposed of during the period are included in the accounts until the date of disposal.The accounts of all Group undertakings are made up to 31 December.Accounting conventionsA summary of the more significant accounting policies is set out below:Consolidated income statementIn the consolidated income statement in 2010, operating profit is reported excluding exceptional items, depreciation and rent, whereas in 2009 it was reported excluding exceptional items and depreciation only. This amendment has been made in order to calculate the Key Performance Indicator 'EBITDAR', in order to improve comparability in measuring performance year-on-year.RevenueRevenue represents the amounts derived from the provision of private healthcare services in the UK, after deducting trade discounts and value added tax. Revenue from charges to patients is recognised when the treatment is provided.GoodwillGoodwill represents the excess of the cost of acquisition over the fair value of the assets, liabilities and contingent liabilities of the acquired subsidiary company at the date of acquisition.Goodwill on the acquisition of subsidiary companies is capitalised and presented as part of intangible assets in the consolidated balance sheet. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment, or more frequently if there is an indication that the value of the goodwill may be impaired.InventoriesInventories are stated at the lower of cost and net realisable value.Cost means purchase price, less trade discounts, calculated on an average basis. Net realisable value means estimated selling price, less trade discounts, and less all costs to be incurred in marketing, selling and distribution.Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.Property, plant and equipmentFreehold and leasehold properties and other tangible assets are stated at cost less accumulated depreciation.