Aer Lingus 2013 Annual Report Download - page 105

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As this assessment involves long term projects which may not be realised, this is an area of judgement for management. Refer to Note 14
for further detail.
(d) Recoverability of deferred tax assets
The Group recognises 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 29 for further detail.
(e) Share based payments
The determination of the fair value of awards under the long term incentive plan, and of the share options and awards granted to the CEO
involve the use of judgement and estimates. Their fair values have been estimated using binomial lattice or Monte Carlo simulation models.
Refer to Note 31 for further detail.
(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 valuation 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 fuel, US dollar and aircraft purchases.
(g) Estimation of residual values of aircraft
The Group has determined the residual values of its aircraft as being 10% of original cost. The Group periodically examines its estimate of
residual values in light of results of actual aircraft disposals and changing market conditions.
5 Segment information
Based on the way in which the Group manages the network and the manner in which resource allocation decisions are made, the Group
considers that its operating segments comprise the 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 (the Group’s CEO) evaluates route profitability data, which considers passengers flown across the network,
aircraft type and route economics.
Total segment assets exclude investment in joint venture, deferred tax, loans and receivables, deposits and cash and cash equivalents, all of
which are managed on a central basis. These are part of the reconciliation to total assets reported in the statement of financial position.
Segment revenue of €1,425.1 million (2012: €1,393.3 million) is wholly derived from external customers. Of this figure, the amount
attributable to customers within Ireland was €782.9 million (2012: €781.0 million). Depreciation and amortisation of €82.9 million (2012:
€76.1 million) is included in the operating profit reviewed by the chief operating decision maker.
The chief operating decision maker assesses operating segment performance based on a measure of adjusted operating profit before net
exceptional items. This measure excludes franchise results and post close adjustments arising from the finalisation of the financial
statements. These are aggregated in the ‘miscellaneous group level adjustments’ caption below. Interest income and expense are not
included in the segmental results reviewed by the chief operating decision maker.
A reconciliation of the reportable segment's operating result as reviewed by the chief operating decision maker to the Group's results as
reported in the Income Statement is as follows:
2013
2012
as restated
€’000
€’000
Adjusted operating profit before net exceptional items, interest and tax for the reportable Segment
54,785
65,842
Miscellaneous group level adjustments
6,359
3,212
Net exceptional items
(17,354)
(26,466)
Operating profit after net exceptional items
43,790
42,588
Finance income
10,837
14,661
Finance expense
(15,075)
(16,664)
Share of profits/(losses) of joint venture
6
(190)
Profit before tax
39,558
40,395
The reportable segment’s assets are reconciled to total assets as below. Substantially all of the Group’s non-current assets are located in
Ireland.