Ryanair 2012 Annual Report Download - page 143

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loans and receivables and are carried initially at fair value and then subsequently at amortised cost, using the
effective-interest method.
Interest-bearing loans and borrowings
All loans and borrowings are initially recorded at fair value, being the fair value of the consideration
received, net of attributable transaction costs. Subsequent to initial recognition, non-current interest-bearing
loans are measured at amortised cost, using the effective interest yield methodology.
Leases
Leases under which the Company assumes substantially all of the risks and rewards of ownership are
classified as finance leases. Assets held under finance leases are capitalised in the balance sheet, at an amount
equal to the lower of their fair value and the present value of the minimum lease payments, and are depreciated
over their estimated useful lives. The present values of the future lease payments are recorded as obligations
under finance leases and the interest element of a lease obligation is charged to the income statement over the
period of the lease in proportion to the balances outstanding.
Other leases are operating leases and the associated leased assets are not recognised on the Company‘s
balance sheet. Expenditure arising under operating leases is charged to the income statement as incurred. The
Company also enters into sale-and-leaseback transactions whereby it sells the rights to an aircraft to an external
party and subsequently leases the aircraft back, by way of an operating lease. Any profit or loss on the disposal
where the price achieved is not considered to be at fair value is spread over the period during which the asset is
expected to be used. The profit or loss amount deferred is included within ―other creditors‖ and divided into
components of greater than and less than one year.
Provisions and contingencies
A provision is recognised in the balance sheet when there is a present legal or constructive obligation
as a result of a past event, and it is probable that an outflow of economic benefit will be required to settle the
obligation. If the effect is material, provisions are determined by discounting the expected future outflow at a
pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks
specific to the liability.
The Company assesses the likelihood of any adverse outcomes to contingencies, including legal
matters, as well as probable losses. We record provisions for such contingencies when it is probable that a
liability will be incurred and the amount of the loss can be reasonably estimated. A contingent liability is
disclosed where the existence of the obligation will only be confirmed by future events, or where the amount of
the obligation cannot be measured with reasonable reliability. Provisions are re-measured at each balance sheet
date based on the best estimate of the settlement amount.
In relation to legal matters, we develop estimates in consultation with internal and external legal
counsel using the current facts and circumstances known to us. The factors that we consider in developing our
legal provisions include the merits and jurisdiction of the litigation, the nature and number of other similar
current and past litigation cases, the nature of the subject matter of the litigation, the likelihood of settlement and
current state of settlement discussions, if any.
Segment reporting
Operating segments are reported in a manner consistent with the internal organisational and
management structure and the internal reporting information provided to the chief operating decision maker,
who is responsible for allocating resources and assessing performance of operating segments. The Company is
managed as a single business unit that provides low fares airline-related services, including scheduled services,
and ancillary services including car hire services, and internet and other related services to third parties, across a
European route network.