annual report 2009 - Aer Lingus

Financial Statements Aer Lingus Group Plc – Annual Report 2009612 Summary of significant accounting policies [continued]2.17 BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost.Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement overthe period of the borrowings using the effective interest method.Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least12 months after the end of the reporting period.2.18 Current and deferred income taxThe tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extentthat it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in othercomprehensive income or directly in equity, respectively.The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financialposition date in the countries where the group companies operate and generate taxable income. Management periodically evaluatespositions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishesprovisions where appropriate on the basis of amounts expected to be paid to the tax authorities.Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accountedfor if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of thetransaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that havebeen enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferredincome tax asset is realised or the deferred income tax liability is settled.Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against whichthe temporary differences can be utilised.Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the Groupcontrols the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future.Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against currenttax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authorityon either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable that future taxableprofits will be available against which these losses can be utilised.2.19 Employee benefits(a) Pension obligationsThe Group companies operate various pension schemes. The schemes are generally funded through payments to trustee-administeredfunds. The Group contributes to defined contribution plans. A defined contribution plan is a pension plan under which the Group paysfixed contributions into a separate entity and the Group has no legal or constructive obligations to pay further contributions if the funddoes not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.