Annual Report and Accounts 2010-11 - Manchester Airport

Accounting Policies45Borrowing costsThe Group does not capitalise borrowing costs directly attributable to the acquisition, construction or production ofqualifying assets into the cost of property, plant and equipment, unless the criteria under IAS 23 are met.All other borrowing costs are recognised in the income statement in the period in which they are incurred.Trade and other payablesTrade and other payables are recognised at fair value.ProvisionsA provision is recognised in the Statement of Financial Position when the Group has a legal or constructive obligationas a result of a past event, and it is probable that an outflow of economic benefits will be required to settle theobligation.If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate thatreflects the current market assessments of the time value of money, and where appropriate, the risks specific to theliability.TaxationThe charge for taxation is based on the profit for the year and takes into account deferred taxation due to temporarydifferences between the tax bases of assets and liabilities and the accounting bases of assets and liabilities in thefinancial statements.The principal constituent of the deferred tax liability in the Group financial statements is temporary differences onproperty, plant and equipment where the carrying value in the financial statements is in excess of the tax base due toaccelerated capital allowances and the previous effects of revaluations under UK GAAP.Deferred tax assets are recognised to the extent that it is regarded as probable that the temporary difference can beutilised against taxable profit in the future. Taxation and deferred tax, relating to items recognised directly in equity, arealso recognised directly in equity.Deferred taxation is based on the tax laws and rates that have been enacted at the Statement of Financial Position dateand that are expected to apply when the relevant deferred tax item is realised or settled.Current tax has been calculated at the rate of 28% applicable to accounting periods ending 31 March 2011 (2010: 28%).The March 2011 Budget Statement announced a phased reduction to the main UK Corporation tax rate to 23%, with thefirst reduction to 26% taking effect from 1 April 2011. This first reduction was substantively enacted on 29 March 2011and deferred tax balances at 31 March 2011 have been calculated at 26% (2010: 28%)Employee benefit costsThe Group participates in several defined benefit and defined contribution schemes, which are contracted out of the statescheme as well as a defined contribution scheme.The costs of defined contribution schemes are charged to the income statement in the year in which they are incurred.Defined benefit schemes are accounted for as an asset or liability on the Statement of Financial Position. The asset orliability reflects the present value of defined benefit obligations, less the fair value of plan assets, adjusted for past servicecosts.The amount reported in the income statement for employee benefit costs includes past service costs, current service costs,interest costs and return on assets income. Past service costs are charged to the income statement immediately andcurrent service costs are charged to the income statement for the period to which they relate. Interest costs, reflecting theunwinding of the discounted value of the scheme obligations, and return on assets, reflecting the long term expected returnon scheme assets, are charged or credited to the income statement for the period to which they relate. Actuarial gains andlosses are recognised in the statement of comprehensive income.The defined benefit asset or liability, the current and past service costs are calculated at the reporting date by anindependent actuary using the projected unit credit method.DividendsA dividend to the Group’s shareholders is recognised as a liability in the consolidated financial statements during the periodin which the right to receive a payment is established via the declaration of a dividend by the Group’s Board of Directors.The Manchester Airport Group PLC Annual Report and Accounts 2010-11