Ryanair 2010 Annual Report Download - page 147

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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 the estimated selling price arising
in the ordinary course of business, net of estimated selling costs.
Trade and other receivables and payables
Trade and other receivables and payables are stated at cost, less impairment losses, which approximates
fair value given the short-dated nature of these assets and liabilities.
Cash and cash equivalents
Cash represents cash held at banks and available on demand, and is categorised as “loans and
receivables.”
Cash equivalents are current asset investments (other than cash) that are readily convertible into known
amounts of cash, typically cash deposits of more than one day but less than three months. Deposits with
maturities greater than three months are recognised as short-term investments, are categorised as loans and
receivables and are carried initially at fair value and then subsequently at amortised cost, using the effective-
interest method.
Interest-bearing loans and 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.
Leases
Leases under which the Company assumes substantially all of the risks and rewards of ownership are
classified as finance leases. Assets held under finance leases are capitalised in the balance sheet, at an amount
equal to the lower of their fair value and the present value of the minimum lease payments, 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 a lease obligation is charged to the income statement over the
period of the lease in proportion to the balances outstanding.
Other leases are operating leases and the associated leased assets are not recognised on the Company’s
balance sheet. Expenditure arising under operating leases is charged to the income statement as incurred. The
Company also enters into sale-and-leaseback transactions whereby it sells the rights to acquire an aircraft to an
external party and subsequently leases the aircraft back, by way of an operating lease. Any profit or loss on the
disposal where the price achieved is not considered to be at fair value is spread over the period during which the
asset is expected to be used. The profit or loss amount deferred is included within “other creditors” and divided
into components of greater or less than one year.
Provisions and contingencies
A provision is recognised in the balance sheet when there is 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.