Air New Zealand 2014 Annual Report Download - page 17

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AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2014 15
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 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, by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount
and deducting the fair value of the plan’s assets. 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 an asset, the value of the asset is limited to the
present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income.
Air New Zealand determines the net interest expense/income on the defined benefit liability/asset for the period by applying the
discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit
liability/asset, taking into account any changes in the net defined benefit liability/asset during the period as a result of contributions
and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in the Statement of
Financial Performance.
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.
STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
FOR THE YEAR TO 30 JUNE 2014