CzeCh airlines - České aerolinie

Notes to the Consolidated Financial Statements
For the Year ended 31 December 2010
annual report 2010 | 104
where the impairment of the inventory is not deemed permanent. The amount of
the allowance is based on an analysis of turnover and utilizability of inventory and
based on an individual assessment of specifically those inventories that have been
idle for more than three years.
Receivables
Upon origination, receivables are stated at their nominal value and subsequently
reduced by an appropriate allowance for doubtful and bad amounts.
Allowances
An allowance for receivables is recognized on the basis of an aging analysis of the
debts. Allowances are additionally recorded based on an individual assessment of
the financial health of debtors whose balances would not have been provided for
according to the aging analysis.
Trade Payables
Trade payables are stated at their nominal value.
Bank and Non-Banking Loans
Loans are stated at their nominal value.
The portion of long-term loans maturing within one year from the balance sheet
date is included in short-term loans.
Interest is accrued and included in the profit or loss for the period.
Provisions
Provisions are intended to cover future obligations or expenditure, the nature of
which is clearly defined and which are either likely to be incurred, but which are uncertain
as to the amount or the date on which they will arise; however, their reliable
estimate can be made.
The Group recognizes provisions for repairs of tangible fixed assets. These provisions
are either non-tax deductible (i.e. accounting provisions) or tax deductible as
defined by the Act on Provisions 593/1992 Coll. The level of the recognized provision
for repairs is based on the anticipated costs of repairs and the time to lapse
before the repair commences. The provision is recognized as equal to the ratio of
the current cost of repairs net of the charge already recognized and the number of
years to elapse before the repair commences. As a result of the amendment to the
Act on Provisions 593/1992 Coll., effective 1 January 2009, the Group has recorded
only non-tax deductible charges with respect to the provisioning commenced in
2009.
As the Group prepares the financial statements ahead of the income tax return for
the current period and the current tax expense is not exactly determined, the Group
recognizes an income tax provision. The provision is released in the next accounting
period and the Group records actual tax liability.
In addition, the Group recognizes other provisions for known risks, which are anticipated
to give rise to a future probable liability. This specifically involves a provision
for outstanding vacation days, the Frequent Flyer Programme and not yet paid out
remunerations related to the current accounting period.
Frequent Flyer Programme
Members of the Frequent Flyer Programme can exchange earned points for free air
tickets and selected goods and services. The Group recognizes provisions for these
future costs. The provisions include incremental fuel, catering servicing costs and
the cost of free travel provided by other partners.
Foreign Currency Translation
Transactions denominated in foreign currencies during the accounting period are
translated using the fixed monthly exchange rate.
All monetary assets and liabilities denominated in a foreign currency are translated
using the effective exchange rate stated by the Czech National Bank as of the balance
sheet date. Any resulting foreign exchange rate gains and losses are recorded
through the current year’s financial expenses or revenues as appropriate.
Foreign exchange rate gains or losses arising from the year-end translation of securities
and equity investments are treated as a component of the fair value. If the security
or equity investment is not recognized at fair value, then the foreign exchange
rate gains or losses are recorded through equity accounts on the balance sheet.