Air New Zealand 2011 Annual Report Download - page 15

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PROPERTY, PLANT AND EQUIPMENT
Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the item and in bringing the asset to the location and
working condition for its intended use. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of
foreign currency purchases of property, plant and equipment.
Where significant parts of an item of property, plant and equipment have different useful lives, they are accounted for separately.
A portion of the cost of an acquired aircraft is attributed to its service potential (reflecting the maintenance condition of its engines) and
is depreciated over the shorter of the period to the next major inspection event, overhaul, or the remaining life of the asset.
Leased assets
Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other
leases are classified as operating leases.
Upon initial recognition, assets held under finance leases are measured at amounts equal to the lower of their fair value and the present
value of the minimum lease payments at inception of the lease. A corresponding liability is also established.
Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Manufacturers’ credits
The Group receives credits from manufacturers in connection with the acquisition of certain aircraft and engines. These credits are
recorded as a reduction to the cost of the related aircraft and engines. When the aircraft are held under operating leases, the credits are
deferred and deducted from the operating lease rentals on a straight-line basis over the period of the related lease as deferred credits.
DEPRECIATION
Aircraft
Depreciation of the aircraft fleet is calculated to write down the cost of these assets on a straight line basis to an estimated residual
value over their economic lives. The aircraft and related engines, simulators and spares are being depreciated on a straight line basis
as follows:
Airframe 10 – 22 years
Engines 5 – 22 years
Engine overhauls period to next overhaul
The residual values of aircraft are reviewed annually by reference to external projected values.
Non-aircraft
Non-aircraft assets are depreciated on a straight line basis using the following estimated economic lives:
Buildings 50 – 100 years
Aircraft specific plant and equipment 10 – 20 years
Non-aircraft specific leasehold improvements, plant, equipment, furniture and vehicles 3 – 10 years
Gains and losses on disposal are determined by comparing proceeds with carrying amounts. These are included in the Statement of
Financial Performance.
INTANGIBLE ASSETS
Goodwill
Goodwill represents the cost of an acquisition over and above the fair value of the Group’s share of the net identifiable assets acquired.
Goodwill arising on acquisition of a subsidiary is included in intangible assets. Goodwill arising on acquisition of an associate is included
in the carrying value of the investment in that associate. Goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Computer software and licences
Computer software acquired, which is not an integral part of a related hardware item, is recognised as an intangible asset. The costs
incurred internally in developing computer software are also recognised as intangible assets where the Group has a legal right to use
the software and the ability to obtain future economic benefits from that software. Acquired software licences are capitalised on the
basis of the costs incurred to acquire and bring to use the specific software.
These assets have a finite life and are amortised on a straight-line basis over their estimated useful lives of three to five years.
AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2011