Ryanair 2016 Annual Report Download - page 157

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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 taking
into account the relevant 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 hotel, travel
insurance and internet and other related services to third parties, across a European route network.
Income statement classification and presentation
Individual income statement captions have been presented on the face of the income statement, together with
additional line items, headings and sub-totals, where it is determined that such presentation is relevant to an understanding
of our financial performance, in accordance with IAS 1, “Presentation of Financial Statements”.
Expenses are classified and presented in accordance with the nature-of-expenses method. We disclose separately
on the face of the income statement, within other income and expense, losses on the impairment of available-for-sale
financial assets and gains or losses on disposal of property, plant and equipment. The nature of the Company’s available-
for-sale asset is that of a financial investment; accordingly, the gain on disposal of and/or any impairment of the investment
is categorised as finance expense and included in other income/(expense) as a separate line item. The presentation of gains
or losses on the disposal of property, plant and equipment within other income/(expense) accords with industry practice.
Revenues
Scheduled revenues comprise the invoiced value of airline and other services, net of government taxes. Revenue
from the sale of flight seats is recognised in the period in which the service is provided. Unearned revenue represents flight
seats sold but not yet flown and a provision for government tax refund claims attributable to unused tickets, and is included
in accrued expenses and other liabilities. Revenue, net of government taxes, is released to the income statement as
passengers fly. Unused tickets are recognised as revenue on a systematic basis, such that twelve months of time expired
revenues are recognised in revenue in each fiscal year. Miscellaneous fees charged for any changes to flight tickets are
recognised in revenue immediately.
Ancillary revenues are recognised in the income statement in the period the ancillary services are provided.