Annual Report 2008-2009 - Emirates.com

Emirates
078
2. Summary of significant accounting policies (continued)
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the exchange rates ruling on the balance sheet date.
Taxation
Taxation is provided for as and when the liability arises except where management is of the firm opinion that exemption from such
taxation will ultimately be granted by the relevant authorities in the countries concerned.
Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Cost consists of purchase cost, together with any
incidental expenses of acquisition.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow and the cost can be reliably measured. Repairs and maintenance are
charged to the consolidated income statement during the period in which they are incurred.
Land is not depreciated. Depreciation is calculated on other items of property, plant and equipment so as to write off its cost, less
estimated residual values, on a straight-line basis over the estimated useful lives of the assets concerned. The estimated useful lives and
residual values are:
Passenger aircraft - new 15 years (residual value 10%)
Passenger aircraft - used 8 years (residual value 10%)
Aircraft engines and parts 5 - 15 years (residual value 0 - 10%)
Buildings 5 - 20 years
Other property, plant and equipment 3 - 15 years or over the lease term, if shorter
Major overhaul expenditure is depreciated over the shorter of the period to the next major overhaul or lease term or useful life of the asset
concerned.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its estimated
recoverable amount and is reviewed at each balance sheet date for possible reversal of the impairment loss.
Capital projects are stated at cost. When the asset is ready for its intended use, it is transferred from capital projects to the appropriate
category under property, plant and equipment and depreciated in accordance with Emirates’ policies.
Gains and losses on disposal are determined by comparing proceeds with the carrying amount and recognised in the consolidated
income statement.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of the assets
until such time the assets are substantially ready for their intended use. Where funds are borrowed specifically for the purpose of
obtaining a qualifying asset, any investment income earned on temporary surplus funds is deducted from borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised as an expense when incurred.