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AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2012
22
10. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
GROUP
2012
$M
GROUP
2 011
$M
COMPANY
2012
$M
COMPANY
2 011
$M
PLANT AND EQUIPMENT
Cost 375 378 339 346
Accumulated depreciation (253) (267) (235) (252)
Carrying value at the beginning of the year 122 111 104 94
Additions 31 38 28 33
Acquisitions from business combinations 2 - - -
Disposals (2) (1) (1) (1)
Depreciation (27) (26) (23) (22)
Carrying value at the end of the year 126 122 108 104
Represented by:
Cost 368 375 330 339
Accumulated depreciation (242) (253) (222) (235)
Carrying value at the end of the year 126 122 108 104
LAND AND BUILDINGS
Cost 326 315 302 298
Accumulated depreciation (98) (88) (90) (81)
Carrying value at the beginning of the year 228 227 212 217
Additions 24 18 19 9
Disposals - (2) - (1)
Depreciation (20) (15) (18) (13)
Carrying value at the end of the year 232 228 213 212
Represented by:
Cost 346 326 317 302
Accumulated depreciation (114 ) (98) (104) (90)
Carrying value at the end of the year 232 228 213 212
Land and buildings comprise:
Leasehold properties 219 213 200 198
Freehold properties 13 15 13 14
232 228 213 212
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 2011 the useful lives and residual values of the Boeing 747-400 fleet were reassessed and
depreciation expense was reduced by $13 million.
Aircraft and aircraft related assets of $1,923 million as at 30 June 2012 (30 June 2011: $1,539 million) are pledged as security over
borrowings and finance lease obligations.
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. The indicative market valuations of aircraft 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 exceeded the book value of
the aircraft, based on the directors’ current assessment of the Group’s future trading prospects.
The aircraft carrying values were tested for impairment based on a value in use discounted cash flow valuation. Cash flow projections
were prepared for 5 years using Board reviewed business plans. Key assumptions include exchange rates, jet fuel costs, passenger
load factors and route yields. These assumptions have been based on historical data and current market information. The cash flow
projections are particularly sensitive to fluctuations in fuel prices, exchange rates and economic demand and are extrapolated using
an average growth rate of approximately 2.0 percent (30 June 2011: 2.0 percent). The cash flow projections are discounted using rates
of 8.0 and 10.0 percent (30 June 2011: 8.0 and 10.0 percent). The valuation confirmed that there was no impairment to the aircraft
assets required.
Notes to the Financial Statements (Continued)
As at 30 June 2012