Ryanair 2006 Annual Report Download - page 32

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 property, plant and
equipment.
With respect to the group’s operating lease agreements,
where the group has a contractual obligation to maintain the
aircraft, provision is made during the lease term for the
obligation based on estimated future costs of major airframe
and certain engine maintenance checks by making
appropriate charges to the income statement calculated by
reference to the number of hours or cycles operated during
the year.
All other maintenance costs are expensed as incurred.
Pensions and other Post Retirement
Obligations
The group provides employees with post retirement benefits
in the form of pensions. The group operates a number of
defined contribution and defined benefit pension schemes.
Costs arising in respect of the group's defined contribution
pension schemes are charged to the income statement in the
period in which they are incurred. Any contributions unpaid
at the balance sheet date are included as a liability.
The liabilities and costs associated with the group's defined
benefit pension schemes are assessed on the basis of the
projected unit credit method by professionally qualified
actuaries and are arrived at using actuarial assumptions
based on market expectations at the balance sheet date.
The discount rates employed in determining the present
value of each scheme's liabilities are determined by
reference to market yields at the balance sheet date of high
quality corporate bonds in the same currency and term that
is consistent with those of the associated pension
obligations. The net surplus or deficit arising on the group's
defined benefit schemes is shown within non-current assets
or liabilities on the balance sheet. The deferred tax impact
of any such amount is disclosed separately within deferred
tax.
The group separately recognises the operating and financing
costs of defined benefit pensions (and similarly funded
employee benefits) in the income statement. The standard
permits a number of options for the recognition of actuarial
gains and losses. All cumulative actuarial gains and losses as
at the transition date (April 1, 2004) were accordingly
recognised in retained earnings at that date.
Provisions and Contingencies
A provision is recognised in the balance sheet when we have
a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic
benefit will be required to settle the obligation. If the effect
is material, provisions are determined by discounting the
expected future outflow at a pre- tax rate that reflects
current market assessments of the time value of money and,
when appropriate, the risks specific to the liability.
We assess the likelihood of any adverse outcomes to
contingencies, including legal matters, as well as probable
losses. We record provisions for such contingencies when it
is probable that a liability will be incurred and the amount of
the loss can be reasonably estimated. A contingent liability
is disclosed where the existence of the obligation will only be
confirmed by future events, or where the amount of the
obligation cannot be measured with reasonable reliability.
Provisions are remeasured at each balance sheet date based
on the best estimate of the settlement amount.
In relation to legal matters, we develop estimates in
consultation with outside counsel handling our defence in
these matters using the current facts and circumstances
known to us. The factors that we consider in developing our
legal contingencies and provisions include the merits and
jurisdiction of the litigation, the nature and number of other
similar current and past litigation cases, the nature of the
subject to the litigation, and the likelihood of settlement and
current state of settlement discussions, if any.
Continued
Statement of Accounting policies
32
ANNUAL REPORT & FINANCIAL STATEMENTS 2006