EasyJet 2010 Annual Report Download - page 63

Overview Business review Governance Accounts Other information
easyJet plc
Annual report and accounts 2010
61
Basis of consolidation
The consolidated accounts incorporate those of easyJet plc and its subsidiaries for the years ended 30 September 2009 and 2010.
A subsidiary is an entity controlled by easyJet. Control exists when easyJet has the power, directly or indirectly, to govern the financial
and operating policies of an entity so as to benefit from its activities.
Intragroup balances, transactions and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the
consolidated accounts.
Foreign currencies
The primary economic environment in which a subsidiary operates determines its functional currency. The consolidated accounts of
easyJet are presented in sterling, which is the Company’s functional currency and the Group’s presentation currency. Certain subsidiaries
have operations that are primarily influenced by a currency other than sterling. Exchange differences arising on the translation of these
foreign operations are taken to reserves until all or part of the interest is sold, when the relevant portion of the exchange gains or losses is
recognised in the income statement. Profits and losses of foreign operations are translated into sterling at average rates of exchange during
the year, since this approximates the rates on the dates of the transactions.
Transactions arising in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated into sterling using the rate of exchange ruling at the balance sheet date
and (except where the asset or liability is designated as a cash flow hedge) the gains or losses on translation are included in the income
statement. Non-monetary assets and liabilities denominated in foreign currencies are translated into sterling at foreign exchange rates
ruling at the dates the transactions were effected.
Revenue recognition
Revenues comprise the invoiced value of airline services (net of air passenger duty, VAT and discounts), and ancillary revenue.
Passenger revenue arises from the sale of flight seats and is recognised when the service is provided. Unearned revenue represents
flight seats sold but not yet flown and is included in trade and other payables until it is realised in the income statement when the service
is provided.
Ancillary revenue is generally recognised when the flight to which it relates departs. Certain types of ancillary revenue are recognised
at the time the benefit of the service provided passes to the customer.
Amounts paid by “no-show” customers are recognised as passenger or ancillary revenue as appropriate when the booked service
is provided as such customers are not generally entitled to change flights or seek refunds once a flight has departed.
Business combinations
Business combinations in prior years were accounted for by applying the purchase method. The cost of the acquisition was measured
at the aggregate of the fair values, at the date of exchange, of assets given and liabilities incurred or assumed plus any costs directly
attributable to the business combination. The acquiree’s identifiable assets and liabilities were recognised at their fair values at the
acquisition date. There have been no business combinations since the effective date of IFRS 3 Business Combinations (Revised).
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over easyJet’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
Goodwill and other intangible assets
Goodwill is stated at cost less any accumulated impairment losses. It has an indefinite expected useful life and is tested for impairment
at least annually or where there is any indication of impairment.
Landing rights are stated at cost less any accumulated impairment losses. They are considered to have an indefinite useful life as they will
remain available for use for the foreseeable future provided minimum utilisation requirements are observed, and are tested for impairment
at least annually or where there is any indication of impairment.
Other intangible assets are stated at cost less accumulated amortisation, which is calculated to write-off their cost, less estimated residual
value, on a straight-line basis over their expected useful lives. Expected useful lives and residual values are reviewed annually.
Expected useful life
Computer software 3 years
Contractual rights Over the length of the related contracts