Ryanair 2011 Annual Report Download - page 139

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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.
For aircraft held under operating lease agreements, Ryanair is contractually committed to either return
the aircraft in a certain condition or to compensate the lessor based on the actual condition of the airframe,
engines and life-limited parts upon return. In order to fulfill such conditions of the lease, maintenance, in the
form of major airframe overhaul, engine maintenance checks, and restitution of major life-limited parts, is
required to be performed during the period of the lease and upon return of the aircraft to the lessor. The
estimated airframe and engine maintenance costs and the costs associated with the restitution of major life-
limited parts, are accrued and charged to profit or loss over the lease term for this contractual obligation, based
on the present value of the estimated future cost of the major airframe overhaul, engine maintenance checks, and
restitution of major life-limited parts, calculated by reference to the number of hours flown or cycles operated
during the year.
Ryanair’s aircraft operating lease agreements typically have a term of seven years, which closely
correlates with the timing of heavy maintenance checks. The contractual obligation to maintain and replenish
aircraft held under operating lease exists independently of any future actions within the control of Ryanair.
While Ryanair may, in very limited circumstances, sub-lease its aircraft, it remains fully liable to perform all of
its contractual obligations under the ‘head lease’ notwithstanding any such sub-leasing.
All other maintenance costs, other than major airframe overhaul, engine maintenance checks, and
restitution of major life-limited parts costs associated with leased aircraft, are expensed as incurred.
Intangible assets - landing rights
Intangible assets acquired are recognised to the extent it is considered probable that expected future
benefits will flow to the Company and the associated costs can be measured reliably. Landing rights acquired as
part of a business combination are capitalised at fair value at that date and are not amortised, where those rights
are considered to be indefinite. The carrying values of those rights are reviewed for impairment at each
reporting date and are subject to impairment testing when events or changes in circumstances indicate that
carrying values may not be recoverable. No impairment to the carrying values of the Company’s intangible
assets has been recorded to date.
Available-for-sale securities
The Company holds certain equity securities, which are classified as available-for-sale, and are
measured at fair value, less incremental direct costs, on initial recognition. Such securities are classified as
available-for-sale, rather than as an investment in an associate if the Company does not have the power to
exercise significant influence over the investee. Subsequent to initial recognition they are measured at fair value
and changes therein, other than impairment losses, are recognised in other comprehensive income and reflected
in the shareholders equity in the consolidated balance sheet. The fair values of available-for-sale securities are
determined by reference to quoted prices at each reporting date. When an investment is de-recognised the
cumulative gain or loss in other comprehensive income is transferred to the income statement.
Such securities are considered to be impaired if there is objective evidence which indicates that events
have occurred that can reasonably be expected to adversely affect the future cash flows of the securities, such
that the future cash flows do not support the current fair value of the securities. This includes where there is a
significant or prolonged decline in the fair value below its cost. All impairment losses are recognised in the
income statement and any cumulative loss in respect of an available-for-sale asset recognised previously in other
comprehensive income is also transferred to the income statement.
Other financial assets
Other financial assets (other than available-for-sale financial assets) comprise cash deposits of greater
than three months’ maturity. All amounts are categorised as loans and receivables and are carried initially at fair
value and then subsequently at amortised cost, using the effective interest method in the balance sheet.