Air New Zealand 2008 Annual Report Download - page 22

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AIR NEW ZEALAND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS AT 30 JUNE 2008
10. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
GROUP
2008
$M
GROUP
2007
$M
COMPANY
2008
$M
COMPANY
2007
$M
LAND AND BUILDINGS
Cost 276 264 265 253
Accumulated depreciation (55) (49) (50) (44)
Carrying value at beginning of the year 221 215 215 209
Additions 26 18 23 18
Depreciation (13) (12) (12) (12)
Carrying value at end of the year 234 221 226 215
Represented by:
Cost 301 276 287 265
Accumulated depreciation (67) (55) (61) (50)
Carrying value at end of the year 234 221 226 215
Land and buildings comprise:
Leasehold properties 219 205 15 200
Freehold properties 15 16 211 15
234 221 226 215
The useful lives and residual values applied to property, plant and equipment are reviewed annually to ensure that they continue to be appropriate.
During the year ended 30 June 2008 the useful lives and residual values of the Boeing 747-400 fleet were reassessed and depreciation expense was
increased by $13 million.
Aircraft and aircraft related assets of $1,553 million (30 June 2007: $1,629 million) are pledged as security over borrowings and finance lease
obligations.
AIRCRAFT MARKET VALUES
The market values of aircraft tend to fluctuate from year to year. The directors have obtained independent valuations as at 30 June 2008 from The
Aircraft Value Analysis Company and Ascend Worldwide Limited (previously named Airclaims Limited) to ascertain indicative market values of each
aircraft on a stand alone basis. The average of the valuations obtained is shown below:
INDICATIVE
VALUATION
USD
$M
INDICATIVE
VALUATION
NZD
$M
BOOK
VALUE*
NZD
$M
DIFFERENCE
NZD
$M
@ 0.7612
As at 30 June 2008 1,377 1,810 1,797 13
@ 0.7698
As at 30 June 2007 1,377 1,789 1,873 (84)
* Book Value excludes simulators, spare engines and operating leased aircraft improvements.
If market value is lower than book value, New Zealand generally accepted accounting practice requires book values to be written down to the higher
of fair value less costs to sell or value in use. As at 30 June 2007 the indicative market valuations were less than the book value. In the opinion of the
directors, the recoverable value from continued use of the aircraft as part of a network and their ultimate sale proceeds exceeds the book value of the
aircraft, based on the directors’ current assessment of the Group’s future trading prospects. Accordingly, no provision was made for the difference
between the book value and the indicative market valuation for the year ended 30 June 2007.
20