Aer Lingus 2012 Annual Report Download - page 85

FINANCIAL STATEMENTS Aer Lingus Group Plc
ANNUAL REPORT 2012
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(b) Post employment benefits – Irish Airlines (General Employees) Superannuation Scheme and the Irish Airlines (Pilots) Superannuation
Scheme (collectively the “Irish pension schemes”)
As the provisions of the trust deeds governing the Irish Pension Schemes are such that no changes to the contribution rates are possible
without the prior consent of Aer Lingus Limited (“the Company”), the Company has concluded that it has no obligation, legal or constructive,
to increase its contributions beyond those levels. As such, it has accounted for the Irish Pension Schemes as defined contribution schemes
under the provisions of IAS 19 Employee Benefits, and, as a result, does not recognise any surplus or deficit in the schemes in the statement of
financial position. If any legal or constructive obligation to vary the Company’s contributions based on the funding status of the Irish Pension
Schemes were to arise, IAS 19 would require the Company to include any pension fund surplus or deficit on its statement of financial position
and reflect any period on period movements in its income statement or the statement of comprehensive income. Refer to Note 26 for further
detail.
(c) Impairment of non-financial assets
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Refer to Note
14 for further detail on the impairment assessment related to property, plant and equipment.
(d) Recoverability of deferred tax assets
The Group recognised tax assets where there is a reasonable expectation that those assets will be recovered. The assessment of the
recoverability of deferred tax assets involves significant judgement. The main deferred tax asset recognised by the Group relates to unused tax
losses. The Directors assess the recoverability of tax losses by reference to future profitability and tax planning, including fleet management
decisions. Refer to Note 30 for further detail.
(e) Share based payments
The determination of the fair value of awards under the long term incentive plan, and the share options and awards granted to the Chief
Executive Officer involve the use of judgement and estimates. Their fair values have been estimated using binomial lattice or Monte Carlo
simulation models reflecting the judgemental assumptions set out in Note 32.
(f) Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in active markets (for example, “over the counter” derivatives) is determined by using
valuation techniques. The Group exercises judgement in selecting a variety of methods and makes assumptions that are mainly based on
observable market data and conditions existing at each reporting date. The specific valuation techniques used to value financial instruments
are set out in Note 3.3. Further judgement is exercised by management in considering the probability of occurrence of underlying hedge
transactions, in particular the likelihood and timing of future purchases of fuel, US dollars and aircraft.
(g) Estimation of residual values of aircraft
The Group has determined the residual values of its aircraft as being 10% of their original cost. The Group periodically examines its estimate
of residual values in light of the results of actual aircraft disposals and changing market conditions.
5 Segment information
Based on the way the Group manages the network and the manner in which resource allocation decisions are made, the Group considers that its
operating segments comprise its routes on which passengers and cargo are transported. Having assessed the aggregation criteria contained in IFRS
8 Operating Segments and considering how the Group manages its business and allocates resources, the Group has determined that it has one
reportable segment. In particular the Group is managed as a single business unit that provides air transportation for passengers and cargo, which
allows the Group to benefit from an integrated revenue pricing and route network. The Group’s flight equipment is deployed through a single
route scheduling system. When making resource allocation decisions, the chief operating decision maker evaluates flight profitability data, which
considers passengers flown across the network, aircraft type and route economics.
Notes to the consolidated financial statements (continued)