Ryanair 2006 Annual Report Download - page 34

(Continued)
Statement of Accounting Policies
34
ANNUAL REPORT & FINANCIAL STATEMENTS 2006
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on invoiced price on an average basis for
all stock categories. Net realisable value is calculated as
estimated selling price net of estimated selling costs.
Interest Bearing Loans & Borrowings
All loans and borrowings are initially recorded at fair value,
being the fair value of the consideration received, net of
attributable transaction costs. Subsequent to initial
recognition, non-current interest bearing loans are measured
at amortised cost, using the effective interest yield
methodology.
Business Combinations
The purchase method of accounting is employed in accounting
for the acquisition of businesses. In accordance with IFRS 3,
the cost of a business combination is measured as the
aggregate of the fair values at the date of exchange of assets
given and liabilities incurred or assumed in exchange for
control, together with any directly attributable expenses. The
assets and liabilities and contingent liabilities of the acquired
entity are measured at their fair values at the date of
acquisition. When the initial accounting for a business
combination is determined provisionally, any adjustments to
the provisional values allocated are made within twelve
months of the acquisition date and are effected prospectively
from that date.
Trade and Other Receivables and
Payables
Trade and other receivables and payables are stated at cost
less impairment losses, which approximates to fair value given
the short dated nature of these assets and liabilities.
Guarantees
The company occasionally guarantees certain liabilities of
subsidiary companies. These are considered to be insurance
arrangements and are accounted for as such i.e. are treated as
a contingent liability until such time as it becomes probable
that the company will be required to make a payment under
the guarantee.
2005 Accounting Policies
The 2005 comparatives do not reflect the provisions of the
IFRS standards in respect of IAS 32 and 39. The policies in
respect of the 2005 comparative information have been set
out below.
These policies are in addition to those previously identified
where the 2006 policy has been applied consistently to both
periods presented in the accounts.
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 aviation fuel prices,
foreign exchange and interest rates. Derivative financial
instruments are utilised to fix aircraft fuel prices, foreign
exchange and interest rate exposures. Gains and losses on
derivative financial instruments were recognised in the
Income Statement when realised as an offset to the related
income or expense, and the group does not enter into any
such transactions for speculative purposes.
Financial Assets
Financial assets are shown at cost less provisions for
impairments if any.