Aer Lingus 2012 Annual Report Download - page 75

FINANCIAL STATEMENTS Aer Lingus Group Plc
ANNUAL REPORT 2012
73
and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value
through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective
interest method.
Gains or losses arising from changes in the fair value of the financial assets through the income statement category are presented in the income
statement within “Other (gains)/losses – net” in the period in which they arise.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between
translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The
translation differences on monetary securities are recognised in the income statement; translation differences on non-monetary securities are
recognised in other comprehensive income. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale
are recognised in other comprehensive income.
2.9 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position 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 financial assets
Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial 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 flows of the financial asset or group of financial 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 or 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 measurable 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 amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying
amount 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.
Impairment testing of trade receivables is described in note 2.14.
2.11 Emission allowances
Emission allowances received free of charge are recognised at nil value on date of grant in accordance with IAS 38 Intangible Assets. Allowances
purchased subsequently are recognised at cost if separately acquired and are accounted for as intangible assets as required by IAS 38. Purchased
allowances continue to be carried at original cost, and are not revalued. Liabilities in respect of emission obligations are measured as the best
Notes to the consolidated financial statements (continued)