Air New Zealand 2011 Annual Report Download - page 17

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RESERVES
Cash flow hedge reserve
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
Foreign currency translation reserve
The foreign currency translation reserve comprises foreign exchange differences arising on consolidation of foreign operations together
with the translation of foreign currency borrowings designated as a hedge of net investments in those foreign operations.
Investment revaluation reserve
The equity investment reserve comprises changes in the fair value of the investment in quoted equity instruments.
FINANCIAL GUARANTEE CONTRACTS
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group, the
Company considers these to be insurance contracts (as defined by NZ IFRS 4 - Insurance contracts) and accounts for them as such.
TAXATION
The income taxation expense for the period is the taxation payable on the current period’s taxable income at tax rates enacted or
substantively enacted at reporting date. This is adjusted by changes in deferred taxation assets and liabilities. Income taxation expense
is recognised in the Statement of Financial Performance except where it relates to items recognised directly in equity, in which case it is
recognised in equity.
Deferred income taxation is provided in full, using the balance sheet liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets and unused tax losses are only recognised to the extent that it is probable that future taxable amounts will
be available against which to utilise those temporary differences and losses.
EMPLOYEE BENEFITS
Pension obligations
Payments to defined contribution retirement plans are charged as an expense as they fall due. Payments made to multi-employer
retirement benefit schemes are treated in the same way as payments to defined contribution schemes where sufficient information is
not available to use defined benefit accounting.
Air New Zealand’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by an independent
actuary, as being the present value of the future obligations to the members less the fair value of the plan’s assets, adjusted for any
unrecognised actuarial gains or losses and unrecognised past service costs. The discount rate reflects the yield on government bonds
that have maturity dates approximating the terms of Air New Zealand’s obligations. When the calculation results in a benefit to Air New
Zealand, the value of the asset recognised cannot exceed in aggregate the value of any unrecognised net actuarial losses and past
service cost, and the present value of any future refunds from the plan or reductions in future contributions to the plan.
Any actuarial gains or losses are amortised under the corridor method over the members’ expected average remaining working lives.
Share based compensation
All equity options are disclosed in the notes to the financial statements. The fair value (at grant date) of options granted to employees is
recognised as an expense, within the Statement of Financial Performance, over the vesting period of the options, with a corresponding
entry to Issued Capital. The amount recognised as an expense is adjusted at each reporting date to reflect the extent to which the
vesting period has expired and management’s best estimate of the number of share options that will ultimately vest.
Termination costs
Termination costs are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal,
to a formal detailed plan to terminate employment before the normal retirement date.
PROVISIONS
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an
outflow of economic benefits will be required to settle the obligation, and the provision can be reliably measured.
AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2011