In the application of the Company's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements in applying the Company's accounting policies
In the director's opinion there are no critical judgements, apart from those involving estimations (dealt with separately below), that they have made in applying group's accounting policies and that have had a significant effect on the amounts recognised in the financial statements.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Aircraft fixed asset value:
The Company owns aircraft which are subject to significant ongoing maintenance and operating costs. The directors regularly review the estimated useful lives and residual values of the aircraft, taking into consideration factors including the condition and age of the aircraft, expected future usage, maintenance programmes, and the anticipated residual value at the end of their useful economic lives.
Changes in these estimates can have a material effect on the depreciation charge and carrying amount of the aircraft. Where the directors determine that the estimated useful life or residual value has changed, the depreciation charge is adjusted prospectively in accordance with the Company's accounting policy. The directors also consider whether changes in the condition, expected future use or recoverable amount of an aircraft indicate that an impairment review is required.
The estimation of useful lives and residual values involves judgement and is subject to uncertainty, as actual outcomes may differ from the assumptions made by the directors.
Aircraft stock value:
The Company holds aircraft as stock which are stated at the lower of cost and net realisable value. The determination of net realisable value involves significant management judgement and estimation, particularly given the nature of the aircraft and the level of ongoing maintenance and other costs associated with them.
The directors regularly review the carrying value of aircraft held in stock and assess whether their net realisable value is below cost. In making this assessment, the directors consider factors including the condition and age of the aircraft, expected future use or sale, estimated selling prices, anticipated maintenance and refurbishment costs, and other costs necessary to bring the aircraft to a saleable condition.
Where the estimated net realisable value is below the carrying value, an appropriate provision is recognised to reduce the inventory to its estimated net realisable value. The assessment is subject to estimation uncertainty, as actual selling prices, maintenance costs and other costs associated with the eventual disposal of the aircraft may differ from those estimated by the directors. Changes in these assumptions could result in a material adjustment to the carrying amount of aircraft held in stock.