CzeCh airlines - České aerolinie

NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 31 December 2010
annual report 2010 | 54
tickets and selected goods and services. The Company 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.
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 cost when 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 Company’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 Company’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.