Financial - Turkish Airlines

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(Convenience Translation of Report and Financial Statements Originally Issued in Turkish)TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIESNotes to the Audited Consolidated Financial StatementsFor the Year Ended 31 December 2012(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)33. FINANCIAL EXPENSESFinance expenses are as follows:1 January - 1 January -31 December 2012 31 December 2011Finance lease interest expense 208.066.460 204.097.145Finance lease administration expense 14.559.832 17.414.308Discount interest expense 18.834.339 9.779.121Cost of employee termination benefits interest 6.763.104 6.220.836Other financial expense 5.486.577 4.679.775Foreign exchange loss 161.031.299 -Loss from derivative transactions - 8.879.487414.741.611 251.070.67234. NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONSThe Group has decided to dispose of seven A340-type aircrafts in 2011 and had negotiations with several companiesinterested in this subject. These assets, which are expected to be sold within twelve months, are classified as non-currentassets held for sale as of 31 December 2011. Since proceeds from sale are expected to remain below the book value ofthe assets, the company has made provision for decrease in value at amount of TL 329,671,431 for the assets held forsale.In 2012, the Group decided to use current aircrafts by changing aircraft passanger placement plan; taking into accountthat price offers for its aircrats remained under the market prices.As a result of the change of the sales plan these aircrafts are transferred from non-current asset held for sale to tangibleassets. Related the these aicrafts According to IFRS 5, “Asset Held For Sale and Discontinued Operations Standard”, the calculated amortization amount of TL 101,208,868, which is not recorded as amortization amount between 31December 2011and 31 December 2012 since the aircrafts were transferred to non-current assets held-for-sale. Inaddition to that, it is observed that the transfer of these aircrafts to the property and equipment causes no impairmenton the related cash generating unit, which is the aircraft fleet, as of 31 December 2012. TL 351,142,323 which isrecorded to non-current assets held-for-sale as impairment provision, because of the reclassification, is cancelled andrecorded as income into other operating income on the income statement, as of 31 December 2012.1 January -31 December 20121 January -31 December 2011Net book value of non-current assets held-for-sale 279.472.200 652.177.708Provision for decrease in value - (329.671.431)Reversal from provision of impairment 351.142.323 -Foreign currency translation adjustment (15.000.211) (43.034.077)Transfers to property and equipment (615.614.312) -Adjusted net book value of non-current assets held-for-sale asof 31 December 2012- 279.472.20054 TÜRK HAVA YOLLARI ANNUAL REPORT 2012
(Convenience Translation of Report and Financial Statements Originally Issued in Turkish)TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIESNotes to the Audited Consolidated Financial StatementsFor the Year Ended 31 December 2012(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)35. TAX ASSETS AND LIABILITIESTax liability for the current profit is as follows:31 December 2012 31 December 2011Provisions for corporate tax 32.616.486 18.956.251Prepaid taxes and funds (32.616.486) (13.587.608)Tax liability - 5.368.643Tax expense consists of the following items:1 January - 1 January -31 December 2012 31 December 2011Current period tax expense 32.616.486 16.770.183Deferred tax expense 191.394.437 110.602.177Tax expense 224.010.923 127.372.360Tax effect related to other comprehensive income is as follows:1 January - 31 December 2012Amount Tax (expense) Amountbefore tax /income after taxForeign currency translation adjustment ( 228.479.860) - ( 228.479.860)Change in cash flow hedge reserve 1.535.719 ( 307.144) 1.228.575Other comprehensive income ( 226.944.141) ( 307.144) ( 227.251.285)Change in foreign currency translation adjustment that is included in other comprehensive income is TL 228,479,860for the period 1 January – 31 December 2012 (1 January – 31 December 2011: TL 795,001,243). In addition, the effect oftaxation does not exist for the year.Corporate TaxThe Group is subject to Turkish corporate taxes. Provision is made in the accompanying financial statements for theestimated charge based on the Group’s results for the years and periods. Turkish tax legislation does not permit aparent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in theaccompanying consolidated financial statements, have been calculated on a separate-entity basis.Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by addingback non-deductible expenses, and by deducting dividends received from resident companies, other exempt income andinvestment incentives utilized. The effective tax rate in 2012 is 20% (2011: 20%).In Turkey, advance tax returns are filed on a quarterly basis. Advance corporate income tax rate applied in 2012 is 20%(2011: 20%). Losses can be carried forward for offset against future taxable income for up to 5 years. However, lossescannot be carried back for offset against profits from previous periods.55
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