Ryanair 2004 Annual Report Download - page 27

Foreign Currency
Transactions arising in currencies other than the Euro are
translated into Euro at the rates of exchange ruling at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are generally stated at
the rates of exchange prevailing at the year end and all
exchange gains or losses are accounted for through the
profit and loss account.
Derivative Financial Instruments
The group enters into transactions in the normal course of
business using a variety of financial instruments in order to
hedge against exposures to fluctuating aircraft fuel prices,
foreign exchange and interest rates. Derivative financial
instruments are utilised to cap aircraft fuel prices, foreign
exchange and interest rate exposures. Gains and losses on
derivative financial instruments are recognised in the profit
and loss account when realised as an offset to the related
income or expense, and the group does not enter into any
such transactions for speculative purposes.
Taxation
Corporation tax is provided on taxable profits at current
rates. Full provision is made for all timing differences at the
balance sheet date in accordance with Financial Reporting
Standard No. 19 “Deferred Tax”. Provision is made at tax
rates that are expected to apply in the periods in which the
timing differences are expected to reverse.
Leases
Assets held under finance leases are capitalised in the
balance sheet and are depreciated over their estimated
useful lives. The present values of the future lease payments
are recorded as obligations under finance leases and the
interest element of the lease obligation is charged to the
profit and loss account over the period of the lease in
proportion to the balances outstanding.
Expenditure arising under operating leases is charged to the
profit and loss account as incurred. The group also enters
into sale and leaseback transactions whereby it sells the
rights to acquire an aircraft to a third party and subsequently
leases the aircraft back, by way of operatinglease, Any profit
or loss on the disposal is spread over the lease term. The
profit or loss amount deferred is included within other
creditors and analysed into its components of greater or less
than one year.
Aircraft Maintenance Costs
The accounting for the cost of providing major airframe and
certain engine maintenance checks for owned aircraft is
described in the accounting policy for tangible fixed assets
and depreciation.
With respect to the group’s operating lease agreements,
where the grouphas a commitment to maintainthe aircraft,
provision is made during the lease term for the obligation
based on estimated future costs of major airframe and
certain engine maintenace checks by making appropriate
c h a rg es to the profit and loss account ca l cu l a ted by
reference to the number of hours or cycles operated during
the year.
All other maintenance costs are expensed as incurred.
Pension Costs
The group opera tes both defined benefit and d ef i n e d
contribution schemes.
In relation to the defined benefit scheme the cost of
providing pensions to employees is charged to the profit and
loss account on a systematic basis over the service lives of
t h ose employe es. Pension costs are determined by an
a c tu a ry by refe re n ce to a funding plan and funding
assumptions. The regular pension cost is expressed as a
substantially level proportion of current and expected future
pensionable payroll. Variations from regular cost are spread
over the remaining service lives of the current employees.
To the extent that the pension cost is different from the cash
contribution to the pension sc h e m e, a provision or
prepayment is recognised in the balance sheet.
The cost of providing the defined contribution benefit plan is
expensed as incurred.
(Continued)
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