CzeCh airlines - České aerolinie

Notes to the Consolidated Financial Statements
For the Year ended 31 December 2010
annual report 2010 | 105
Finance Leases
A finance lease is the acquisition of a tangible fixed asset such that, over or after the
contractual lease term, the asset’s ownership title transfers from the lessor to the lessee;
pending the transfer of title, the lessee makes lease payments to the lessor for the asset
that are charged to expenses.
During the leasing period, the acquisition cost of assets acquired under finance leases
is not capitalized as part of fixed assets. Aggregated amounts related to finance leases
(leasing instalments) are accrued and regularly expensed over the lease period.
Amounts payable in future periods, but not due at the balance sheet date, are disclosed
in the notes, but are not recognized in the balance sheet.
Advances paid for finance lease that are not re-financed and fees and other expenses related
to the conclusion of an agreement on the finance lease are recognized as advances
or acquired fixed assets, are not depreciated and form part of the aircraft acquisition
costs when the finance lease terminates.
Taxation
Depreciation of Fixed Assets for Tax Purposes
Depreciation of fixed assets is calculated using the straight line method for tax
purposes.
Current Tax Payable
The tax currently payable is based on taxable profit for the reporting period. Taxable
profit differs from the net profit as reported in the profit and loss account because it excludes
items of income or expense that are taxable or deductible in other periods and it
further excludes items that are never taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted by the balance sheet date.
Deferred Taxation
Deferred tax is accounted for using the balance sheet liability method.
Under the liability method, deferred tax is calculated at the income tax rate that is
expected to apply in the period when, according to Group’s expectation, the tax liability
is settled or the asset realized.
The balance sheet liability method focuses on temporary differences, which are differences
between the tax base of an asset and/or liability and its carrying amount in the
balance sheet. The tax base of an asset or liability is the amount that will be deductible
for tax purposes in the future.
Deferred tax assets are recognized if it is probable that sufficient future taxable profit
will be available against which the assets can be utilized.
Deferred tax is charged or credited to the profit and loss account, except when it
relates to items charged or credited directly to equity, in which case the deferred tax is
also dealt with in equity.
Deferred tax assets and liabilities are offset and reported on an aggregate net basis in
the balance sheet, except when partial tax assets cannot be offset against partial tax
liabilities.
Retirement Benefit Costs
Contributions are made to the Government’s health retirement benefit and employment
schemes at the statutory rates in force during the year based on gross salary
payments. The cost of social security payments is charged to the Group’s income
statement in the same period as the related salary cost.
Furthermore, the Group realizes defined contribution schemes administered by
commercial pension funds for its employees. The contributions to these schemes are
charged to costs in the period in which they are incurred.
Government Grants
In accordance with the agreement on public service delegation, the Group is additionally
a recipient of funds to operate the air connection between Strasbourg and Prague.
The parties to the agreement include the Group, the Ministry of Foreign and European
Affairs in France, the Trade and Industrial Chamber in Strasbourg and the Department
Bas-Rhin.
The grants are recognized in revenues in the period in which the eligible expenses
are recognized on an accrual basis or as an expense if the Group returns the grant
recognized as income in previous periods (in accordance with the grant conditions).