Aer Lingus 2010 Annual Report Download - page 58

Financial Statements Aer Lingus Group Plc – Annual Report 2010
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2 Summary of signifi cant accounting policies (continued)
When securities classifi ed as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included
in the income statement as ‘gains and losses from investment securities’.
Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other
income. Dividends on available-for sale equity instruments are recognised in the income statement as part of other income when the group’s
right to receive payments is established.
2.9 Offsetting fi nancial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
2.10 Impairment of fi nancial assets
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a fi nancial asset or group of fi nancial assets
is impaired. A fi nancial asset or a group of fi nancial assets is impaired and impairment losses are incurred only if there is objective evidence
of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or
events) has an impact on the estimated future cash fl ows of the fi nancial asset or group of fi nancial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:
• Significant financial difficulty of the issuer or obligor;
• A breach of contract, such as default or delinquency in interest or principal payments;
• The Group, for economic of legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the
lender would not otherwise consider;
• It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
• The disappearance of an active market for that financial asset because of financial difficulties; or
• Observable data indicating that there is a measureable decrease in the estimated future cash flows from a portfolio of financial assets
since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the
portfolio, including:
(i) Adverse changes in the payment status of borrowers in the portfolio; and
(ii) National or local economic conditions that correlate with defaults on the assets in the portfolio.
The Group fi rst assess whether objective evidence of impairment exists.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash
fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial asset’s original effective interest rate. The
asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or
held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest
rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value
using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in the consolidated income statement.
Notes to the consolidated fi nancial statements (continued)