Management review

Retirement benefit obligations

The retirement benefit obligation taken on with the award of the CrossCountry franchise was £12.0 million. This represents 60 per cent of the total obligation, in line with the established practice of accounting for the shared cost structure of the Railways Pension Scheme. Also in line with industry practice, a corresponding intangible asset has been created of £12.0 million, representing the right to operate the franchise, which will be amortised over the life of the franchise.

At 31 December 2007, total liabilities in respect of retirement benefit obligations fell to £73.7 million (2006: £173.8 million). The retirement benefit obligations in respect of the Arriva Trains Wales and new CrossCountry sections of the Railways Pension Scheme are £4.0 million (2006: £9.5 million) and £8.0 million respectively. The overall reduction in the group obligation was primarily due to higher long-term interest rates causing a consequent increase in the rate used to discount liabilities. The related deferred tax asset recognised in the balance sheet was £17.3 million (2006: £49.3 million).