Aer Lingus 2012 Annual Report Download - page 77

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FINANCIAL STATEMENTS Aer Lingus Group Plc
ANNUAL REPORT 2012
75
2.13 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.
2.14 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. Trade receivables are classified as current assets if they are expected to be recovered within 1 year or
less. If not, they are classified as non-current assets.
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 delinquencies 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 cash flows, discounted at the effective interest rate.
The carrying amount of the assets is reduced through the use of an allowance account and the amount of the loss is recognised in the income
statement within “ground operating, 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.
2.15 Cash and 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 current liabilities on the statement of financial position.
Deposits comprise short and medium term deposits. Given that the maturities of these investments fall outside the 3 month timeframe for
classification as cash and cash equivalents under IAS 7 Statement of Cash Flows, the related balances have been classified as “deposits”.
2.16 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental
transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
2.17 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts
payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If
not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
2.18 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried 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 end of the reporting period.
Notes to the consolidated financial statements (continued)