EasyJet 2013 Annual Report Download - page 101

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Notes to the accounts
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easyJet plc (the ‘Company’) and its subsidiaries (‘easyJet’ or the ‘Group’ as applicable) is a low-cost airline carrier
operating principally in Europe. The Company is a public limited company whose shares are listed on the London Stock
Exchange under the ticker symbol EZJ and is incorporated and domiciled in the United Kingdom. The address of its
registered office is Hangar 89, London Luton Airport, Luton, Bedfordshire LU2 9PF.
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the
European Union, taking into account International Financial Reporting Interpretations Committee (IFRIC) interpretations
and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
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The accounts are prepared based on the historical cost convention except for certain financial assets and liabilities
including derivative financial instruments that are measured at fair value.
The accounting policies set out below have been applied consistently to all years presented in these accounts.
easyJet’s business activities, together with factors likely to affect its future development and performance, are described
in the strategic report on pages 2 to 57. Principal risks and uncertainties are described on pages 38 to 43. Note 22 to the
accounts sets out the Group’s objectives, policies and procedures for managing its capital and gives details of the risks
related to financial instruments held by the Group.
The accounts have been prepared on a going concern basis. Details on going concern are provided on page 36.
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The preparation of accounts in conformity with generally accepted accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the accounts and the reported
amounts of income and expenses during the reporting period. Although these estimates are based on management’s
best knowledge of the amount, events or actions may mean that actual results ultimately differ from those estimates,
and these differences may be material. The estimates and the underlying assumptions are reviewed regularly.
The following two accounting policies are considered critical accounting policies as they require a significant amount
of management judgment and the results are material to easyJet’s accounts.
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Goodwill and landing rights are tested for impairment at least annually. easyJet has one cash-generating unit, being
its route network. In making this assessment, easyJet has considered the manner in which the business is managed
including the centralised nature of its operations and the ability to open or close routes and redeploy aircraft and crew
across the whole route network.
The value in use of the cash-generating unit is determined by discounting future cash flows to their present value. When
applying this method, easyJet relies on a number of estimates including its strategic plans, fuel prices, exchange rates,
long-term economic growth rates for the principal countries in which it operates and its pre-tax weighted average cost
of capital.
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easyJet incurs liabilities for maintenance costs in respect of aircraft leased under operating leases during the term
of the lease. These arise from legal and constructive contractual obligations relating to the condition of the aircraft
when it is returned to the lessor. To discharge these obligations, easyJet will also normally need to carry out one heavy
maintenance check on each of the engines and the airframe during the lease term.
A charge is made in the income statement based on hours or cycles flown to provide for the cost of these obligations.
Estimates required include the likely utilisation of the aircraft, the expected cost of the heavy maintenance check at the
time it is expected to occur, the condition of the aircraft and the lifespan of life-limited parts.
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