Ryanair 2006 Annual Report Download - page 70

27 TRANSITION TO IFRS (Continued)
(c) IFRS 2: Share Based Payments
IFRS 2 (“Share Based Payment”) requires the group to recognise any share based payments made to employees during a
reporting period as a charge to the income statement over the vesting period of the options, together with a corresponding
increase in equity. The charge of 0.5 million for the year ended March 31, 2005 for share option grants has been computed using
the Binomial Lattice methodology.
Ryanair has availed of the transition provisions in IFRS 1 for share based payments by only applying the fair value calculation to
share option grants that were made after November 7, 2002 but which had not vested by January 1, 2005. There was no share
based payment charge in the periods prior to March 31, 2005 accordingly. Had Ryanair recognised all vested grants of shares
between November 7, 2002 and January 1, 2005, the group’s equity at March 31, 2005 would have increased by 9.4m with a
corresponding reduction in retained earnings.
(d) IAS 16: Plant, Property and Equipment
IAS 16 requires that all spare parts held by an entity are classified as Property, Plant and Equipment if they are expected to be
used for more than one period and not held for resale. This has resulted in a reclassification of the stock of spare aircraft parts
from inventories to Property, Plant and Equipment. The related depreciation expense relating to the stock of spare aircraft parts
has also been reclassified from “maintenance, materials & repairs” to “depreciation and amortisation”. This reclassification was
made following the release of our published explanation of the financial impact following the adoption of IFRS.
(e) IAS 39: Financial Instruments
IAS 39 (“Financial Instruments: Recognition and Measurement”) requires that all financial instruments are recorded at fair value
or amortised cost dependant on the nature of the financial asset or financial liability. Derivatives are measured at fair value with
changes in value arising from fluctuations in interest rates, foreign exchange rates or commodity prices. Under Irish GAAP, where
the derivatives formed part of a hedging agreement, these were not initially measured on the balance sheet and any related gains
or losses arising are deferred until the underlying hedged item impacted on the financial statements.
Ryanair has taken advantage of the exemption from the requirement to restate comparative information for IAS 39 contained in
IFRS 1. As a result of this exemption the information presented for all periods up to March 31, 2005 has been accounted for in
accordance with Irish/UK GAAP.
At April 1, 2005 Ryanair has accounted for all of its derivatives in accordance with IAS 39, with the result that an opening
unrealised loss of 146.4 million together with a related deferred tax benefit of 18.3 million has been recorded directly in the
opening cash flow hedging reserve, principally relating to the company’s interest rate swaps, which were entered into at a time
when underlying interest rates were higher than present market rates. The company also recorded the following entries in
respect of fair value hedges for firm commitments; an increase of 2.7 million in derivative financial assets held and a
corresponding increase in other creditors, with no amount of ineffectiveness recorded in the income statement. The unrealised
losses on these interest rate swaps continue to be significant and amounted to 81.7m as at March 31, 2006. These will have a
consequent impact on future operating profits until they expire for up to 12 years the from balance sheet date. Further numerical
details on these amounts are given on page 38 and in notes 3 and 15 to these financial statements.
(Continued)
Notes
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ANNUAL REPORT & FINANCIAL STATEMENTS 2006