42Accounting PoliciesBasis of accountingThese financial statements are prepared on a going concern basis <strong>and</strong> in accordance with International Financial<strong>Report</strong>ing St<strong>and</strong>ards (‘IFRSs’) as endorsed by the EU <strong>and</strong> with those parts of the Companies Act applicable tocompanies reporting under adopted IFRS. The historical cost convention is applicable to these financial statements withthe exception of investment properties <strong>and</strong> employee benefit scheme assets <strong>and</strong> obligations, which are fair valued ateach reporting date.The current economic conditions create uncertainty particularly over passenger numbers, which has a direct impact onincome. The Group has strong sustained margins together with the ability to manage its investment program accordingto affordability <strong>and</strong> business performance.At the year ended 31 March 20<strong>11</strong>, MAG had £526.8m (<strong>2010</strong> £541.9m) of committed facilities <strong>and</strong> a net debt position of£372.9m (<strong>2010</strong> £347.6m). MAG had financial headroom of £159.7m at the year end, a level comfortably in excess of theinternal compliance target. Under existing facilities <strong>and</strong> based on the board approved three year business plan MAG isforecast to have financial headroom in excess of £100m throughout 20<strong>11</strong>/12. The Group’s forecasts <strong>and</strong> projections,taking account of reasonably possible changes in trading performance, show that the Group should be able to operatewithin the level of its current facility.The directors believe that the Group is well placed to manage its business risks successfully despite the currentuncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Company <strong>and</strong>the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, theycontinue to adopt the going concern basis in preparing the annual report <strong>and</strong> financial statements.New accounting st<strong>and</strong>ards adopted for the first time in the preparation of these financial statements include the following:The revised IFRS 3 ‘Business Combinations’ includes changes relevant to any future business combinations involving theGroup. Contingent consideration is measured at fair value, with subsequent changes to the fair value being recognised inprofit. Transaction costs, other than share <strong>and</strong> debt issue costs, will be expensed as incurred. Any pre-existing interest inthe acquiree is measured at fair value with the gain or loss recognised in profit. Any non-controlling (minority) interest ismeasured at either fair value, or at its proportionate interest in the identifiable assets <strong>and</strong> liabilities of the acquiree, on atransaction-by-transaction basis.The revised st<strong>and</strong>ard was effective for business combinations on or after 1 January <strong>2010</strong> <strong>and</strong> will be appliedprospectively. As no business combinations have occurred during the period this new st<strong>and</strong>ard has no effect on theGroup’s results for the year.The amendments to IAS 27 ‘Consolidated <strong>and</strong> Separate Financial Statements (2008)’, IAS 39 ‘Financial Instruments:Recognition <strong>and</strong> Measurement – Eligible Hedged Items’, the amendment to IAS 32 ‘Classification of Rights Issues’, IFRS2 ‘Group Cash-settled Share-based Payment Transactions’, IFRIC 17 ‘Distributions of Non-Cash Assets to Owners’ <strong>and</strong>IFRIC 18 ‘Transfers of Assets from Customers‘ <strong>and</strong> the Improvements to IFRS (issued April 2009) have all been adoptedin the year. The adoptions of the amendments <strong>and</strong> improvements did not have a significant effect on the Group’s profitfor the period, net assets or cash flows.The preparation of these financial statements in accordance with prevailing accounting practice requires the use ofestimates <strong>and</strong> assumptions that affect the reported amounts of assets, liabilities, revenues <strong>and</strong> expenses. Theassumptions <strong>and</strong> estimates are based on management’s best knowledge of the event or actions in question, howeveractual results may ultimately differ from these estimates.The accounting policies that the Group has adopted to determine the amounts included in respect of material itemsshown in the Statement of Financial Position, <strong>and</strong> also to determine the profit or loss, are shown below. Unless statedotherwise, these have been applied on a consistent basis.Basis of consolidationThese consolidated accounts include the Income Statement, Statement of Comprehensive Income, Statement of FinancialPosition, Statement of Changes in Equity <strong>and</strong> Statement of Cash Flows for The <strong>Manchester</strong> <strong>Airport</strong> Group PLC <strong>and</strong> all ofits subsidiaries. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to governthe financial <strong>and</strong> operating policies of an entity so as to obtain benefits from its activities.Subsidiaries have been consolidated from the date that control commences until the date that control ceases.Minority Interests are not recognised where subsidiaries are in a net liabilities position, unless there is a binding obligation<strong>and</strong> ability to pay by the Minority Interest in a net liabilities position.RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group <strong>and</strong> the revenuecan be reliably measured.Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT <strong>and</strong> other salestax or duty.The <strong>Manchester</strong> <strong>Airport</strong> Group PLC <strong>Annual</strong> <strong>Report</strong> <strong>and</strong> <strong>Accounts</strong> <strong>2010</strong>-<strong>11</strong>
Accounting Policies43The following revenue recognition criteria apply to the Group’s main income streams: Various passenger charges for h<strong>and</strong>ling <strong>and</strong> security based upon the number of departing passengers, recognised atpoint of departure; Aircraft departure <strong>and</strong> arrival charges levied according to weight, recognised at point of departure; Aircraft parking charges based upon a combination of weight <strong>and</strong> time parked, recognised at time of parking; Car parking income recognised at the point of parking for Short <strong>and</strong> Long Stay parking. Contract Parking recognised overthe period to which it relates on a straight-line basis; Concession income from retail <strong>and</strong> commercial concessionaries is recognised in the period to which it relates on anaccruals basis; Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over thelease term; <strong>and</strong> Development profits are recognised upon legal completion of contracts.Property, plant <strong>and</strong> equipmentProperty, plant <strong>and</strong> equipment constitutes the Group’s operational asset base including terminal, airfield, car parking, l<strong>and</strong>,plant, <strong>and</strong> owner occupied property assets. Investment properties held to earn rentals or for capital growth are accountedfor separately under IAS 40 ‘Investment properties’.The Group has elected to use the cost model under IAS 16 ‘Property, plant <strong>and</strong> equipment’ as modified by the transitionalexemption to account for assets at deemed cost that were revalued previously under UK GAAP. Deemed cost is the costor valuation of assets as at 1 April 2005. Consequently property, plant <strong>and</strong> equipment is stated at cost or deemed costless accumulated depreciation. Cost includes directly attributable own labour.Depreciation is provided to write off the cost of an asset on a straight-line basis over the expected useful economic life ofthe relevant asset.Expected useful lives are set out below:YearsFreehold <strong>and</strong> long leasehold property 10 – 50Runways, taxiways <strong>and</strong> aprons 5 – 75Mains services 7 – 50Plant <strong>and</strong> machinery 5 – 30Motor vehicles 3 – 7Fixtures, fittings, tools <strong>and</strong> equipment 5 – 10Useful economic lives are reviewed on an annual basis, to ensure they are still relevant <strong>and</strong> prudent.No depreciation is provided on l<strong>and</strong>. Repairs <strong>and</strong> maintenance costs are written off as incurred.Assets under construction, which principally relate to airport infrastructure are not depreciated until such time that they areavailable for use. If there are indications of impairment in the carrying value then the recoverable amount is estimated <strong>and</strong>compared to the carrying amount. Recoverable amount is determined as the value that will ultimately be capitalised as anAsset, based upon IAS 16 recognition <strong>and</strong> capitalisation criteria.Intangible AssetsIntangible assets that are acquired by the Group have finite useful lives <strong>and</strong> are measured at cost less accumulatedamortisation <strong>and</strong> accumulated impairment losses.Subsequent expenditure is capitalised only when it increases future economic benefits embodied in the specific assets towhich it relates.Amortisation is based on the costs of an asset less its residual value.Amortisation is recognized in the income statement on a straight-line basis over the estimated useful economic life, fromthe date that they are available for use.Amortisation methods, useful lives <strong>and</strong> residual values are reviewed at each reporting date <strong>and</strong> adjusted if appropriate.The <strong>Manchester</strong> <strong>Airport</strong> Group PLC <strong>Annual</strong> <strong>Report</strong> <strong>and</strong> <strong>Accounts</strong> <strong>2010</strong>-<strong>11</strong>
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