Aer Lingus 2010 Annual Report Download - page 62

Financial Statements Aer Lingus Group Plc – Annual Report 2010
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2 Summary of signifi cant accounting policies (continued)
2.20 Share-based payment
The Group operate an equity-settled, share-based compensation plan, under which the entity receives services from employees as
consideration for equity instruments (share awards) of the Group. The fair value of the employee services received in exchange for the grant
of the share awards is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the share
awards granted:
• Including any market performance conditions;
• Excluding the impact of any service and non-market performance vesting conditions; and
• Excluding the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of share awards that are expected to vest. The total expense is
recognised over the vesting period, which is the period over which all of the specifi ed vesting conditions are to be satisfi ed. At the end of
each reporting period, the entity revises its estimates of the number of share awards that are expected to vest based on the non-marketing
vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding
adjustment to equity.
The proceeds received, net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
2.21 Provisions
Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an
outfl ow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are measured at the
present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that refl ects current market
assessments of the time value of money and the risks specifi c to the obligation. The increase in the provision due to passage of time is
recognised as interest expense.
Provisions are made on a monthly basis for aircraft maintenance costs, which the Group incurs in connection with major airframe and engine
overhauls on operating leased aircraft, where the terms of the lease impose obligations on the lessee to have these overhauls carried out.
Provisions for costs to meet the contractual return conditions are also included. The actual cash outfl ow of the overhauls is charged against
the provision when incurred. Any residual balance is transferred to the income statement.
A provision for business repositioning costs is recognised when a constructive obligation exists. The amount of the provision is based on the
terms of business repositioning measures, including employee severance and early retirement measures which have been communicated to
employees. They represent the Directors’ best estimate of the cost of these measures, having regard to the current status of negotiations.
2.22 Revenue recognition
The Group recognises revenue when the amount of revenue can be reliably measured , it is probable that the future economic benefi ts will
fl ow to the entity and when specifi c criteria have been met for each of the Group’s activities as described below.
Revenue comprises the fair value of the consideration received or receivable for the sale of the Group’s services in the ordinary course of the
Group’s activities, and can be divided into scheduled passenger, cargo and ancillary revenue. Scheduled passenger revenue is shown inclusive
of passenger charges and other fees to the extent that these are recovered directly from customers at the point of sale. Revenue is
recognised as follows:
Notes to the consolidated fi nancial statements (continued)