Air New Zealand 2016 Annual Report Download - page 24

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Notes to the Financial Statements (continued)
As at 30 June 2016
22
AIR NEW ZEAL AND ANNUAL FINANCIAL RESULTS 2016
16. Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable
that an outflow of economic benefits will be required to settle the obligation, and the provision can be reliably measured.
AIRCRAFT
LEASE
RETURN COSTS
$M
RESTRUCTURING
$M
OTHER
$M
TOTAL
$M
Balance as at 1 July 2015
Amount provided
Amount utilised and released
Foreign exchange differences
253
84
(34)
(8)
13
9
(18)
-
5
1
(2)
-
271
94
(54)
(8)
Balance as at 30 June 2016 295 4 4 303
Represented by:
Current
Non-current
80
215
4
-
3
1
87
216
Balance as at 30 June 2016 295 4 4 303
Nature and purpose of provisions
Aircraft lease return costs
Where a commitment exists to maintain aircraft held under operating lease arrangements, a provision is made during the lease
term for the lease return obligations specified within those lease agreements. The provision is calculated taking into account
a number of variables and assumptions including the number of future hours or cycles expected to be operated, the expected
cost of maintenance and the lifespan of limited life parts. It is based on historical experience, manufacturers’ advice and, where
appropriate, contractual obligations in determining the present value of the estimated future costs of major airframe inspections
and engine overhauls by making appropriate charges to the Statement of Financial Performance, calculated by reference to the
number of hours or cycles operated during the year. The provision is expected to be utilised at the next inspection or overhaul.
Restructuring
Restructuring provisions are recognised when the Group is demonstrably committed, without realistic possibility of withdrawal,
to a formal detailed plan to terminate employment before the normal retirement date. Costs relating to ongoing activities are
not provided for.
Other
Other provisions include insurance, warranty and an onerous contract provision. Insurance and onerous contract provisions are
expected to be utilised within 12 months. Insurance provisions are based on historical claim experience. Warranty provisions
represent an estimate of potential liability for future rectification work in respect of past engineering services performed.
17. Other Liabilities
Liabilities in respect of employee entitlements are recognised in exchange for services rendered during the accounting period, but
which have not yet been compensated as at reporting date. These include annual leave, long service leave, retirement leave and
accrued compensation.
2016
$M
2015
$M
Current
Employee entitlements
Amounts owing to associates
Other liabilities (including defined benefit liabilities)
229
1
7
232
18
8
237 258
Non-current
Employee entitlements
Other liabilities
13
11
12
5
24 17