Annual Report 2003 - Antofagasta plc

Notes to the Financial Statements1 Accounting Policies (continued)m) Provision for severance indemnitiesProvision is made for severance indemnities which are payable on termination of employment or on the eventual closureof an operation with a finite life, based on the net present value of estimated future costs. The release of the discountapplied in establishing the net present value of future costs is charged to the profit and loss account in each accountingperiod and is disclosed as a financing cost.n) Provision for decommissioning and site rehabilitation costsProvision is made for decommissioning and site rehabilitation costs in the accounting period when the relatedenvironmental impact occurs, based on the net present value of estimated future costs to rectify the environmentalimpact. Where an obligation is incurred in the course of acquiring or constructing tangible fixed assets, the discountedamount of the provision is capitalised and depreciated over the life of that asset. The release of the discount applied inestablishing the net present value of future costs is charged to the profit and loss account in each accounting periodand is disclosed as a financing cost.o) Provision for termination of water concessionThe accounting policy for the provision for the termination of the water concession acquired during the year is set outin e(iv).p) Deferred taxDeferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay moretax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on currentlegislation. Timing differences arise from the inclusion of items of income and expenditure in taxation computationsin periods different from those in which they are included in the financial statements.q) Cash and net liquid resourcesCash at bank and in hand includes amounts held in current accounts and demand deposits. For the purposes of the cashflow statement, liquid resources include cash on deposit maturing within twelve months.ANTOFAGASTA PLC Annual Report and Financial Statements 2003r) LeasesTangible fixed assets acquired under finance leases are included in the balance sheet at their equivalent capital value anddepreciated over their useful lives. The corresponding liabilities are recorded as a loan creditor and the interest elementof the finance lease rentals is charged to the profit and loss account in proportion to the amounts outstanding.Rentals under operating leases are charged on a straight-line basis over the lease terms.56