Ryanair 2011 Annual Report Download - page 157

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155
Estimation of fair values
Fair value is the amount at which a financial instrument could be exchanged in an arm’s length
transaction between informed and willing parties, other than as part of a forced liquidation sale. The following
methods and assumptions were used to estimate the fair value of each material class of the Company’s financial
instruments:
Cash and liquid resources: Carrying amount approximates fair value due to the short-term nature of
these instruments. Cash and cash resources comprise cash and cash equivalents, short-term investments and
restricted cash.
Fixed-rate long-term debt: The repayments which Ryanair is committed to make have been
discounted at the relevant market rates of interest applicable (including credit spreads) at March 31, 2011, 2010,
and 2009 which would be payable to a third party to assume the obligations.
Derivatives – interest rate swaps: Discounted cash-flow analyses have been used to determine the
estimated amount Ryanair would receive or pay to terminate the contracts. Discounted cash-flow analyses are
based on forward interest rates.
Derivatives – currency forwards and aircraft fuel contracts: A comparison of the contracted rate to
the market rate for contracts providing a similar risk management profile at March 31, 2011, 2010 and 2009 has
been made.
The table below analyses financial instruments carried at fair value in the balance sheet categorised by
the type of valuation method used. The different valuation levels are defined as follows:
• Level 1: Inputs are based on unadjusted quoted prices in active markets for identical instruments.
• Level 2: Inputs are based on quoted prices for identical or similar instruments in markets that are not
active, quoted prices for similar instruments in active markets, and model-based valuation techniques for
which all significant assumptions are observable in the market or can be corroborated by observable
market data for substantially the full term of the asset or liability.
• Level 3: Inputs for the asset or liability are not based on observable market data.
Level 1 Level 2 Level 3 Total
1M 1M 1M 1M
At March 31, 2011
Assets measured at fair value
Available-for-sale financial asset ................................
................................
114.0 -
-
114.0
Cash-flow hedges – jet fuel derivative contracts
................................
- 383.8 - 383.8
Cash-flow hedges – interest rate swaps ................................
................................
- 23.9 - 23.9
114.0 407.7 - 521.7
Liabilities measured at fair value
Cash-flow hedges – US dollar currency forward contracts
................................
-
(72.0)
-
(72.0)
Cash-flow hedges – interest rate swaps ................................
................................
- (61.7) - (61.7)
- (133.7) - (133.7)
During the year ended March 31, 2011, there were no transfers between Level 1 and Level 2 fair-value
measurements, and no transfers into or out of Level 3 fair-value measurement.