EasyJet 2011 Annual Report Download - page 74

Notes to the accounts
Continued
1 Accounting policies continued
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 utlisation
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
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated to
write off the cost, less estimated residual value, of assets on a straight-line basis over their expected useful lives.
Expected useful lives are reviewed annually.
Expected useful life
Aircraft 23 years
Aircraft spares 14 years
Aircraft improvements 3–7 years
Aircraft – prepaid maintenance 3–10 years
Leasehold improvements 5–10 years or the length of lease if shorter
Fixtures, fittings and equipment 3 years or length of lease of property where equipment
is used if shorter
Computer hardware 5 years
Items held under finance leases are depreciated over the shorter of the lease term and their expected useful
lives, as shown above.
Residual values, where applicable, are reviewed annually against prevailing market rates at the balance sheet
date for equivalently aged assets and depreciation rates adjusted accordingly on a prospective basis.
The carrying value is reviewed for impairment if events or changes in circumstances indicate that the carrying
value may not be recoverable.
An element of the cost of a new aircraft is attributed on acquisition to prepaid maintenance and is depreciated
over a period ranging from three to ten years from the date of manufacture. Subsequent costs incurred which
lend enhancement to future periods, such as long-term scheduled maintenance and major overhaul of aircraft
and engines, are capitalised and depreciated over the length of period benefiting from these enhancements.
All other maintenance costs are charged to the income statement as incurred.
The cost of new aircraft comprises the invoiced price of the aircraft from the supplier less the estimated value of
other assets received by easyJet for nil consideration. These other assets principally comprise cash (recognised
as an asset) and aircraft spares and service credits.
Pre delivery and option payments made in respect of aircraft are recorded in property, plant and equipment at
cost. These amounts are not amortised.
Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are
recognised in the income statement.
Impairment of non-current assets
An impairment loss is recognised to the extent that the carrying value exceeds the higher of the asset’s fair
value less cost to sell and its value in use. Impairment losses recognised on assets other than goodwill are only
reversed where changes in the estimates used result in an increase in the recoverable amount. Impairment
losses recognised on goodwill are not reversed.
72
easyJet plc
Annual report
and accounts 2011