Ryanair 2005 Annual Report Download - page 86

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(c) IFRS 2: Share Based Payments (recurring change)
IFRS 2 (“Share Based Payment”) requires the Group to recognise any share based payments made to employees during a
reporting period as a charge to the income statement over the vesting period of the options, together with a corresponding
increase in equity. The charge of 0.5 million for the year ended 31 March 2005 for share option grants has been computed
using the Binomial Lattice methodology. A similar charge will recur quarterly over the vesting period of the existing options
and there may be additional charges as further share options are granted.
Ryanair has availed of the transition provisions in IFRS 1 for share based payments by only applying the fair value calculation
to share option grants that were made after 7 November 2002 but which had not vested by 1 January 2005 . Had Ryanair
recognised all vested grants of shares between 7 November 2002 and 1 January 2005, the Group’s equity at 31 March 2005
would have increased by 9.4m with a corresponding reduction in retained earnings.
(d) IAS 39: Derivative Financial Instruments (recurring change)
IAS 39 (“Financial Instruments: Recognition and Measurement”) requires that all financial instruments are recorded at
fair value or amortised cost dependant on the nature of the financial asset or financial liability. Derivatives are always
measured at fair value with changes in value arising from fluctuations in interest rates, foreign exchange rates or
commodity prices. Under Irish GAAP, where the derivatives form part of a hedging agreement, these are not initially
measured on the balance sheet and any related gains or losses arising are deferred until the underlying hedged item
impacts on the financial statements.
Ryanair has taken advantage of the exemption from the requirement to restate comparative information for IAS 39
contained in IFRS 1. As a result of this exemption the information presented for all periods up to 31 March 2005 has been
accounted for in accordance with Irish/UK GAAP.
At 1 April 2005 Ryanair has accounted for all of its derivatives in accordance with IAS 39, with the result that an opening
charge of 146.4 million together with a related deferred tax benefit of 18.3 million has been recorded directly in
opening reserves, principally relating to the company’s interest rate swaps, which were entered into at a time when
underlying interest rates were higher than present market rates. The company also recorded the following entries in
respect of fair value hedges for firm commitments; an increase of 2.7 million in derivative financial assets held and a
corresponding decrease in other creditors, with no amount of ineffectiveness recorded in the income statement.
Principal Changes under IFRS
76
ANNUAL REPORT & FINANCIAL STATEMENTS 2005