EasyJet 2014 Annual Report Download - page 105

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Accounts & other information
www.easyJet.com 103
1 Significant accounting policies
Statement of compliance
Jplc h ‘C ’) i s s id (‘ s ’’ as applicable) is a low-cost airline carrier operating
principally in Euro ublic 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
London Luton Airport, Luton, Bedfordshire, LU F.
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union, taking into account IFRS Interpretations Committee (IFRSIC) interpretations and those parts of the Companies Ac
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
strategic report on pages to . Principal risks and uncertainties are described on page to Note 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 accounts have been prepared on the going concern basis. Details on going concern are provided on page .
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.
( 17)
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.
8)
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.