NATS-Annual-Report-2015

Annual Report and Accounts 2015 | NATS Holdings Limited
Financial Statements 93
Notes forming part of the
consolidated accounts
(continued)
Goodwill
Goodwill in relation to NATS (En Route) plc, being the excess
of consideration over the values of the net assets acquired
at the date of the Public Private Partnership (PPP), is
recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in the
income statement and is not subsequently reversed. For the
purpose of impairment testing NATS assesses the carrying
value of goodwill against the recoverable amount of the
cash generating unit to which goodwill has been allocated.
Where the recoverable amount is less than the carrying
value, the impairment loss is allocated to goodwill.
Recoverable amount is the higher of net realisable value
and value in use. Net realisable value is assessed by
reference to the Regulatory Asset Bases (RABs) of the
economically regulated activities. In assessing value in use,
the estimated future cash flows (with a RAB terminal value)
are discounted to their present value using the pre-tax
nominal regulated rate of return. A premium is applied to
the RAB (see note 3).
Leases
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other items are classified as
operating leases.
Assets held under finance leases are recognised as assets
of the group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined
at the inception of the lease. The corresponding liability
to the lessor is included in the balance sheet as a finance
lease obligation. Lease payments are apportioned between
finance expenses and reduction of the lease obligation
so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance expenses are
recognised immediately in profit or loss, unless they are
directly attributable to qualifying assets in which case they
are capitalised in accordance with the group’s policy on
borrowing costs (see below).
Rentals payable under operating leases are charged to
income on a straight-line basis over the term of the relevant
lease. Benefits received and receivable as an incentive to
enter into an operating lease are also spread on a straightline
basis over the lease term.
Property, plant and equipment
Property, plant and equipment are stated at cost
less accumulated depreciation and any provision for
impairments in value. The cost of property, plant and
equipment includes internal and contracted labour costs
directly attributable to bringing the assets into working
condition for their intended use. Depreciation is provided
on a straight-line basis to write off the cost, less estimated
residual value, of property, plant and equipment over their
estimated useful lives as follows:
> Leasehold land: over the term of the lease
> Freehold buildings: 10-40 years
> Leasehold buildings: over the remaining life of the lease
to a maximum of 20 years
> Air traffic control systems: 8-15 years
> Plant and other equipment: 3-15 years
> Furniture, fixtures and fittings: 10 years
> Vehicles: 5 years
Freehold land and assets in the course of construction and
installation are not depreciated.
The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between the sale
proceeds and the carrying amount of the asset and is
recognised in income.
Borrowing costs
Following the introduction of IAS 23: Borrowing Costs, the
costs of borrowings directly attributable to the acquisition,
construction or production of a qualifying asset are
capitalised as part of the cost of the asset (i.e. there is no
longer a choice to expense such costs). Qualifying assets
are those which take a substantial time to get ready for
intended use. These do not include assets which are ready
for use when acquired.
For NATS this assumes qualifying assets relate to any
additions to new projects that began from 1 April 2009,
included in assets under construction, and excludes
acquisitions that are acquired in a state ready for use.
When funds are borrowed specifically for the purpose
of acquiring or constructing a qualifying asset, the
Financial
Statements