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.

50Spire Healthcare Annual Review 2010Spire Healthcare Limited PartnershipNotes to the financial statementsFor the year ended 31 December 20101. Accounting policies continuedDepreciationNo depreciation is charged on freehold land or properties under construction. Other assets are depreciated so as to write off the carrying amounts of the assets over their expected useful lives as follows:Freehold buildings and improvements - 5-50 yearsLeasehold buildings and improvements - lower of lease term or expected lifePlant and machinery - 5-10 yearsFixtures, fittings and equipment - 3-10 yearsThe expected useful lives of property, plant and equipment are reviewed annually and revised as appropriate. The review of the asset lives of properties takes into consideration the plans of the business and levels of expenditure incurred on an ongoing basis to maintain the properties in a fit and proper state for their ongoing use as hospitals.Exceptional itemsExceptional items are those items which, in the opinion of the General Partner, by virtue of their size or incidence, either individually or in aggregate, need to be disclosed separately if the financial statements are to give a true and fair view. Borrowing costsBorrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.All other borrowing costs are recognised as an expense in the period in which they are incurred.Interest-bearing borrowingsInterest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost on an effective interest basis.PensionsThe Group operates the Spire Healthcare Pension Plan and The London Gynaecology and Fertility Centre Pension Plan, two defined contribution schemes. The assets of the schemes are held separately from those of Spire Healthcare Limited Partnership in independently administered funds.Obligations for contributions to defined contribution pension schemes are recognised as an expense in the income statement as incurred.Employee benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonuses if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.ProvisionsA provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate.