Ryanair 2004 Annual Report Download - page 63

(a) Significant differences
The financial statements of Ryanair Holdings plc are prepared in accordance with generally accepted accounting principles
(“GAAP”) applicable in Ireland and the United Kingdom (UK) which differ significantly in certain respects from those generally
accepted in the United States (US). These significant differences are described below:
(i) Deferred tax
Under Irish and UK GAAP, Ryanair Holdings plc provides for deferred taxation using the full liability method on all material
timing differences thathave originatedbutnot reversedatthebalance sheet date. Deferred tax assets are recognised to the
extent that they are expected to be recoverable. Under US GAAP, as set out in Statement of Financial Accounting Standards
(SFAS) No. 109 ‘Accounting for Income Taxes’ deferred taxation is provided on all temporary differences between the financial
statement carrying value of assets and liabilities and the tax value of such assets and liabilities on a full provision basis.
Deferred tax assets are recognised if their realisation is considered to be more likely than not. The differences in these
accounting treatments have not resultedinany material reconcilingitems for US GAAP purposes.
(ii) Accounting for derivatives
Under Irish and UK GAAP, unrealised gains and losses on derivative financial instruments utilised for hedging purposes are
deferred and recognised in the profit and loss account when realised, as an offset to the related income or expense being
hedged.
Ryanair accounts for derivatives under US GAAP according to SFAS No. 133, “Accounting for Derivatives Instruments and
Hedging Activities,” asamended by SFAS No137and138. SFAS No. 133 requires thatallderivative instruments are recognised
asassets orliabilitiesonthebalance sheet and measuredat fair value, regardless of thepurpose orintent forholdingthem.
Changes in the fair value of derivative instruments are recognisedperiodically either in earnings or stockholders’ equity (as
a component of other comprehensive income), depending on whether the derivative is designated as a hedge of changes in
fair valueor cash flows. Forderivatives designatedas fair valuehedges, changes inthe fair value of thehedgeditemandthe
derivative are recognisedas offsettingamountsintheprofitandloss account. Forderivatives designatedas cash flow hedges,
fair value changes of the effective portion of the hedging instrument are recognised in accumulated other comprehensive
income(US GAAPequivalent to the statement of total recognisedgainsandlosses) onthebalance sheet untilthehedgeditem
is recognisedintheprofitandloss account. Theineffective portion of the fair valuechanges are recognisedintheprofitand
loss account immediately. SFAS No. 133 also requires that certain derivative instruments embedded in host contracts be
accounted for separately asderivatives.
Ryanair qualifies for hedge accounting under SFAS No. 133 for all of its derivative financial instruments. Ryanair’s US dollar
currency forward contracts for aircraf t purchases are accounted for as fair value hedges. All other derivative financial
instruments are accounted for as cash flow hedges. There was no material ineffectiveness recorded for either cash flow or
fair value hedges during the current or preceding years. The maximum length of time over which the group is hedging its
exposure to the variability in future cash flows for forecastedtransactionsis 13 years. Ofthe 43.3m loss (net of 6.2m of
tax) recorded at March 31, 2004 in other comprehensive income, 17.0m is expected to be reclassified into earnings within
thenext12months.
(iii) Darley Investments Limited
Under Irish and UK GAAP, the acquisition of Darley Investments Limited (“Darley”) at March 31, 1996 has been treated as an
acquisition and the acquired assets and liabilities have been recorded in the consolidated financial statements of Ryanair
Limited at their fair values. Under Irish and UK GAAP, the assets acquired were recorded at their fair values and a fair value
adjustment of 844,915 arose on the headquarters building. Under US GAAP, the assets are presented at historical cost and
consequently, additional depreciation on the fair value adjustment on the headquarters building is not recorded.
Summary of differences between Irish, United Kingdom and
United States generally accepted accounting principles 63
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