Aer Lingus 2012 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 of the 2012 Aer Lingus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

FINANCIAL STATEMENTS Aer Lingus Group Plc
ANNUAL REPORT 2012
77
2.21 Share-based payment
The Group operates 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; and
• Excluding the impact of any service and non-market performance 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 specified vesting conditions are to be satisfied. 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-market 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. Treasury
shares are used to satisy vested share-based compensation awards. On exercise of vested awards, treasury shares are credited with an offsetting
entry to share based payment reserve and/or share premium.
2.22 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 outflow
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 discount rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance 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 outflow 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.
2.23 Frequent Flyer Programme
The Group maintains a loyalty points programme, the Gold Circle Club, which allows customers to accumulate points when they purchase flights.
The points can be redeemed for free flights, products and services with Aer Lingus and its partners, subject to a minimum number of points
being obtained. In accounting for this programme, consideration received is allocated between the flights sold and the points issued, with the
consideration allocated to the points equal to their fair value. Fair value of the points is determined by applying statistical analysis. The fair value
of the points issued is deferred and recognised as revenue when the points are redeemed. Unclaimed loyalty points are recognised in the Income
Statement on their expiration.
2.24 Revenue recognition
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that the future economic benefits will flow
to the entity and when specific 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, ancillary revenue and other 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, but
exclusive of applicable government taxes including taxes levied by governments for travel to and from their respective countries and sales taxes
such as VAT. The point of recognition in accordance with IAS 18 Revenue paragraph 14 differs according to the various revenue streams as set
out below:
Notes to the consolidated financial statements (continued)