Aer Lingus 2008 Annual Report Download - page 59

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AER LINGUS GROUP PLC - ANNUAL REPORT 2008
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised
in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the income statement.
(c) Derivatives that do not qualify for hedge accounting
Some derivatives, while being hedges from a commercial perspective, do not meet the detailed hedge accounting criteria under
IFRS. Changes in the fair value of these instruments are recognised immediately in the income statement.
2.9 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using weighted average cost. Net realisable
value is the estimated selling price in the ordinary course of business, less applicable disposal costs.
2.10 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, where appropriate, less provision for impairment. A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will reject charges and default or delinquency in payments
are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount
of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised within the income
statement within “ground operations, catering and other operating costs”. When a trade receivable is uncollectible, it is written off
against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against
the same account in the income statement.
2.11 Cash, cash equivalents and deposits
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities
on the balance sheet.
Deposits comprise short and medium term deposits. Given that the maturities of these investments fall outside the three months
timeframe for classification as cash and cash equivalents under IAS 7 Statement of Cash Flows, the related balances have been
classified as deposits.
2.12 Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
2.13 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
2.14 Taxation
Current tax payable on profits, based on the applicable tax law in each jurisdiction, is recognised as an expense in the period
in which profits arise.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to
the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.