Ryanair 2016 Annual Report Download - page 93

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Risks related to the Airline Industry— Terrorism in Europe, the United States or Elsewhere Could Have a Material
Detrimental Effect on the Company.”
RECENT OPERATING RESULTS
The Company’s profit after tax for the quarter ended June 30, 2016 (the first quarter of the Company’s 2017 fiscal
year) was €255.5 million, as compared to €245.1 million for the corresponding period of the previous year. The Company
recorded an increase in operating profit, from €288.4 million in the first quarter of the 2016 fiscal year to €306.8 million
in the recently completed quarter. Total operating revenues increased from €1,652.7 million in the first quarter of fiscal
2016 to €1,687.4 million in the first quarter of fiscal 2017. The increase in operating profit was primarily due to an 11%
increase in traffic and a stronger load factor (up 2 points to 94%). Operating expenses increased from €1,364.3 million in
the first quarter of fiscal 2016 to €1,380.6 million in the first quarter of fiscal 2017, due primarily to the increased costs
associated with the growth of the airline. The Company’s cash and cash equivalents, restricted cash and financial assets
with terms of less than three months amounted to €4,103.8 million at June 30, 2016 as compared with €4,881.2 million at
June 30, 2015.
CRITICAL ACCOUNTING POLICIES
The following discussion and analysis of Ryanair’s financial condition and results of operations is based on its
consolidated financial statements, which are included in Item 18 and prepared in accordance with IFRS.
The preparation of the Company’s financial statements requires the use of estimates, judgments, and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. Actual results may differ from these estimates.
The Company believes that its critical accounting policies, which are those that require management’s most
difficult, subjective and complex judgments, are those described in this section. These critical accounting policies, the
judgments and other uncertainties affecting application of these policies and the sensitivity of reported results to changes
in conditions and assumptions are factors to be considered in reviewing the consolidated financial statements included in
Item 18 and the discussion and analysis below. For additional detail on these policies, see Note 1, “Basis of preparation
and significant accounting policies,” to the consolidated financial statements included in Item 18.
Long-lived Assets
As of March 31, 2016, Ryanair had €6.3 billion of long-lived assets, virtually all of which were aircraft. In
accounting for long-lived assets, Ryanair must make estimates about the expected useful lives of the assets, the expected
residual values of the assets, and the potential for impairment based on the fair value of the assets and the cash flows they
generate.
In estimating the lives and expected residual values of its aircraft, Ryanair has primarily relied on its own and
industry experience, recommendations from Boeing, the manufacturer of all of the Company’s aircraft, valuations from
appraisers and other available marketplace information. Subsequent revisions to these estimates, which can be significant,
could be caused by changes to Ryanair’s maintenance program, changes in utilization of the aircraft, governmental
regulations on aging of aircraft, changes in new aircraft technology, changes in governmental and environmental taxes,
changes in new aircraft fuel efficiency and changing market prices for new and used aircraft of the same or similar types.
Ryanair evaluates its estimates and assumptions in each reporting period, and, when warranted, adjusts these assumptions.
Generally, these adjustments are accounted for on a prospective basis, through depreciation expense.
Ryanair periodically evaluates its long-lived assets for impairment. Factors that would indicate potential
impairment would include, but are not limited to, significant decreases in the market value of an aircraft, a significant
change in an aircraft’s physical condition and operating or cash flow losses associated with the use of the aircraft. While
the airline industry as a whole has experienced many of these factors from time to time, Ryanair has not yet been seriously
impacted and continues to record positive cash flows from these long-lived assets. Consequently, Ryanair has not yet
identified any impairments related to its existing aircraft fleet. The Company will continue to monitor its long-lived assets
and the general airline operating environment.