EasyJet 2012 Annual Report Download - page 72

Accounts & other information
Notes to the accounts
1 Accounting policies
Statement of compliance
easyJet plc (the “Company”) and its subsidiaries (“easyJet” or the “Group” as applicable) is a low cost airline carrier operating principally in
Europe. The Company is a public limited company whose shares are listed on the London Stock Exchange under the ticker symbol EZJ
and is incorporated and domiciled in the United Kingdom. The address of its registered office is Hangar 89, London Luton Airport, Luton,
Bedfordshire LU2 9PF.
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union,
taking into account International Financial Reporting Interpretations Committee (IFRIC) interpretations and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
Basis of preparation
The accounts are prepared based on the historical cost convention except for certain financial assets and liabilities including derivative
financial instruments that are measured at fair value.
The accounting policies set out below have been applied consistently to all years presented in these accounts.
easyJet’s business activities, together with factors likely to affect its future development and performance, are described in the business
review on pages 8 to 17. Principal risks and uncertainties are described on pages 26 to 30. Note 22 to the accounts sets out the Group’s
objectives, policies and procedures for managing its capital and gives details of the risks related to financial instruments held by
the Group.
The Group holds cash and cash equivalents of £645 million as at 30 September 2012. Total debt of £957 million is free from financial
covenants, with £129 million due for repayment in the year to 30 September 2013.
The business is exposed to fluctuations in fuel prices and US dollar and euro exchange rates. The Group’s policy is to hedge between
65% and 85% of estimated exposures 12 months in advance, and 45% and 65% of estimated exposures from 13 up to 24 months in
advance. The Group was compliant with this policy at the date of this Annual report and accounts.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group will be able to operate within the
level of available facilities and cash for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing
the accounts.
Significant judgements, estimates and critical accounting policies
The preparation of accounts in conformity with generally accepted accounting principles requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of income and
expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or
actions may mean that actual results ultimately differ from those estimates, and these differences may be material. The estimates and
the underlying assumptions are reviewed regularly.
The following two accounting policies are considered critical accounting policies as they require a significant amount of management
judgement and the results are material to easyJet’s accounts.
Goodwill and landing rights (note 7)
Goodwill and landing rights are tested for impairment at least annually. easyJet has one cash-generating unit, being its route network.
In making this assessment, easyJet has considered the manner in which the business is managed including the centralised nature of
its operations and the ability to open or close routes and redeploy aircraft and crew across the whole route network.
The value in use of the cash-generating unit is determined by discounting future cash flows to their present value. When applying this
method, easyJet relies on a number of estimates including its strategic plans, fuel prices, exchange rates, long-term economic growth
rates for the principal countries in which it operates and its pre-tax weighted average cost of capital.
Aircraft maintenance provisions (note 16)
easyJet incurs liabilities for maintenance costs in respect of aircraft leased under operating leases during the term of the lease.
These arise from legal and constructive contractual obligations relating to the condition of the aircraft when it is returned to the lessor.
To discharge these obligations, easyJet will also normally need to carry out one heavy maintenance check on each of the engines and
the airframe during the lease term.
A charge is made in the income statement based on hours or cycles flown to provide for the cost of these obligations. Estimates
required include the likely utilisation of the aircraft, the expected cost of the heavy maintenance check at the time it is expected to
occur, the condition of the aircraft and the lifespan of life-limited parts.
The bases of all estimates are reviewed annually, and also when information becomes available that is capable of causing a material
change to an estimate, such as renegotiation of end of lease return conditions, increased or decreased utilisation, or changes in the cost
of heavy maintenance services.
easyJet plc
Annual report and accounts 2012
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