Ryanair 2010 Annual Report Download - page 148

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The Company assesses 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 re-measured 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 internal and external legal
counsel using the current facts and circumstances known to us. The factors that we consider in developing our
legal 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 matter of the litigation, the likelihood of settlement and
current state of settlement discussions, if any.
Segment reporting
Operating segments are reported in a manner consistent with the internal organisational and
management structure and the internal reporting information provided to the chief operating decision maker,
who is responsible for allocating resources and assessing performance of operating segments. The Company is
managed as a single business unit that provides low fares airline-related services, including scheduled services,
and ancillary services including car hire services, and internet and other related services to third parties, across a
European route network.
Income statement classification and presentation
Individual income statement captions have been presented on the face of the income statement, together
with additional line items, headings and sub-totals, where it is determined that such presentation is relevant to an
understanding of our financial performance, in accordance with IAS 1, “Presentation of Financial Statements”.
Expenses are classified and presented in accordance with the nature-of-expenses method. We disclose
separately on the face of the income statement, within other income and expense, losses on the impairment of
available-for-sale financial assets and gains or losses on disposal of property, plant and equipment. The nature
of the Company’s available-for-sale asset is that of a financial investment; accordingly any impairment of the
investment is categorised as finance expense and included in other income/(expense) as a separate line item. The
presentation of gains or losses on the disposal of property, plant and equipment within other income/(expense)
accords with industry practice.
Revenues
Scheduled revenues comprise the invoiced value of airline and other services, net of government taxes.
Revenue from the sale of flight seats is recognised in the period in which the service is provided. Unearned
revenue represents flight seats sold but not yet flown and is included in accrued expenses and other liabilities. It
is released to the income statement as passengers fly. Unused tickets are recognised as revenue on a systematic
basis. Miscellaneous fees charged for any changes to flight tickets are recognised in revenue immediately.
Ancillary revenues are recognised in the income statement in the period the ancillary services are
provided.
Share-based payments
The Company engages in equity-settled, share-based payment transactions in respect of services
received from certain of its employees. The fair value of the services received is measured by reference to the
fair value of the share options on the date of the grant. The grant measurement date is the date that a shared
understanding of the terms of the award is established between the Company and the employee. The cost of the
employee services received in respect of the share options granted is recognised in the income statement over
the period that the services are received, which is the vesting period, with a corresponding increase in equity. To
the extent that service is provided prior to the grant measurement date, the fair value of the share options is
initially estimated and re-measured at each balance sheet date until the grant measurement date is achieved. The
fair value of the options granted is determined using a binomial lattice option-pricing model, which takes into
account the exercise price of the option, the current share price, the risk-free interest rate, the expected volatility
of the Ryanair Holdings plc share price over the life of the option and other relevant factors. Non-market vesting