Ryanair 2016 Annual Report Download - page 154

154
cost, is amortised over the shorter of the period to the next maintenance check (usually between 8 and 12 years for Boeing
737-800 aircraft) or the remaining life of the aircraft. The costs of subsequent major airframe and engine maintenance
checks are capitalised and amortised over the shorter of the period to the next check or the remaining life of the aircraft.
Advance and option payments made in respect of aircraft purchase commitments and options to acquire aircraft
are recorded at cost and separately disclosed within property, plant and equipment. On acquisition of the related aircraft,
these payments are included as part of the cost of aircraft and are depreciated from that date.
Rotable spare parts held by the Company are classified as property, plant and equipment if they are expected to
be used over more than one period.
Gains and losses on disposal of items of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment, and are recognised on a net basis within other
income/(expenses) in profit or loss.
Aircraft maintenance costs
The accounting for the cost of providing major airframe and certain engine maintenance checks for owned aircraft
is described in the accounting policy for property, plant and equipment.
For aircraft held under operating lease agreements, Ryanair is contractually committed to either return the aircraft
in a certain condition or to compensate the lessor based on the actual condition of the airframe, engines and life-limited
parts upon return. In order to fulfill such conditions of the lease, maintenance, in the form of major airframe overhaul,
engine maintenance checks, and restitution of major life-limited parts, is required to be performed during the period of the
lease and upon return of the aircraft to the lessor. The estimated airframe and engine maintenance costs and the costs
associated with the restitution of major life-limited parts, are accrued and charged to profit or loss over the lease term for
this contractual obligation, based on the present value of the estimated future cost of the major airframe overhaul, engine
maintenance checks, and restitution of major life-limited parts, calculated by reference to the number of hours flown or
cycles operated during the year.
Ryanair’s aircraft operating lease agreements typically have a term of seven years, which closely correlates with
the timing of heavy maintenance checks. The contractual obligation to maintain and replenish aircraft held under operating
lease exists independently of any future actions within the control of Ryanair. While Ryanair may, in very limited
circumstances, sub-lease its aircraft, it remains fully liable to perform all of its contractual obligations under the ‘head
lease’ notwithstanding any such sub-leasing.
All other maintenance costs, other than major airframe overhaul, engine maintenance checks, and restitution of
major life-limited parts costs associated with leased aircraft, are expensed as incurred.
Intangible assets - landing rights
Intangible assets acquired are recognised to the extent it is considered probable that expected future benefits will
flow to the Company and the associated costs can be measured reliably. Landing rights acquired as part of a business
combination are capitalised at fair value at that date and are not amortised, where those rights are considered to be
indefinite. The carrying values of those rights are reviewed for impairment at each reporting date and are subject to
impairment testing when events or changes in circumstances indicate that carrying values may not be recoverable. No
impairment to the carrying values of the Company’s intangible assets has been recorded to date.
Available-for-sale securities
The Company holds certain equity securities, which are classified as available-for-sale, and are measured at fair
value, less incremental direct costs, on initial recognition. Such securities are classified as available-for-sale, rather than
as an investment in an associate if the Company does not have the power to exercise significant influence over the investee.
Subsequent to initial recognition they are measured at fair value and changes therein, other than impairment losses, are
recognised in other comprehensive income and reflected in shareholders’ equity in the consolidated balance sheet. Fair