EasyJet 2013 Annual Report Download - page 102

 easyJet plc Annual report and accounts 2013
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Notes to the accounts continued
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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.
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The consolidated accounts incorporate those of easyJet plc and its subsidiaries for the years ended 30 September 2012
and 2013.
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.
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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 shareholders’ equity until all or part
of the interest is sold, when the relevant portion of the accumulated exchange gain or loss 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.
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Revenue comprises seat revenue, being the value of airline services (net of air passenger duty, VAT and discounts),
and non-seat revenue.
Seat revenue arises from the sale of flight seats, including the provision of checked baggage, speedy (priority) boarding
services and allocated seating, administration, credit card and change fees. Seat revenue is recognised when the service
is provided. This is generally when the flight takes place, but in the following cases, this is at the time of booking:
Administration and credit card fees as they are contractually non-refundable,
Change fees as the service provided is that of allowing customers to change bookings.
Amounts paid by ‘no-show’ customers are recognised as seat revenue when the booked service is provided as such
customers are not generally entitled to change flights or seek refunds once a flight has departed.
Unearned revenue represents flight seats, including the provision of checked baggage and allocated seating, 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.
Non-seat revenue arises from commissions earned from services sold on behalf of partners and is recognised when
the service is provided. This is generally when the related flight takes place. In the case of commission earned from
travel insurance, revenue is recognised at the time of booking as easyJet acts solely as appointed representative
of the insurance company.
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Business combinations in prior years were accounted for by applying the purchase method. The cost of the acquisition
is 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
are 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.
100 easyJet plc Annual report and accounts 2013