Annual report and accounts 2016

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Notes to the consolidated financial statements continued
2 Significant accounting policies continued
In respect of customer loyalty programmes the fair value attributed to awarded points is deferred as a liability and is recognised as
revenue on redemption of the points and provision of service to the participants to whom the points are issued. The fair value of
the award credits is estimated by reference to the fair value of the awards for which the points could be redeemed and is reduced
to take into account the proportion of award credits that are not expected to be redeemed by customers. The Group exercises
its judgement in determining the assumptions to be adopted in respect of the number of points not expected to be redeemed
through the use of statistical modelling and historical trends and in determining the mix and fair value of the award credits.
At December 31, 2016 the Group recognised €4,145 million in respect of deferred revenue on ticket sales (2015: €4,374 million) of
which €1,287 million (2015: €1,545 million) related to customer loyalty programmes.
c Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain.
The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
current and deferred income tax assets and liabilities in the period in which such determination is made.
The Group recognises deferred income tax assets only to the extent that it is probable that the taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Management consider
the operating performance in the current year and the future projections of performance laid out in the approved business plan in
order to assess the probability of recoverability. The Business plan relies on the use of assumptions, estimates and judgements in
respect of future performance and economics.
d Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and
intangible assets with indefinite economic lives are tested for impairment annually and at other times when such indicators exist.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of estimates and assumptions as disclosed in note 16.
Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.
e Residual values and useful lives of assets
The Group exercises judgement to determine useful lives and residual values of property, plant and equipment, including fleet
assets. Useful lives and residual values are reassessed annually, taking into consideration the latest fleet plans and other business
plan information. The assets are depreciated to their residual values over their estimated useful lives.
f Lease classification
A lease is classified as a finance lease when substantially all the risks and rewards of ownership are transferred to the Group. In
determining the appropriate classification, the substance of the transaction rather than the form is considered. Factors considered
include but are not limited to the following: whether the lease transfers ownership of the asset to the lessee by the end of the lease
term; the lessee has the option to purchase the asset at the price that is sufficiently lower than the fair value on exercise date; the
lease term is for the major part of the economic life of the asset; and the present value of the minimum lease payments amounts
to at least substantially all of the fair value of the leased asset. Details of the Group’s operating lease commitments are disclosed in
note 24.
g Maintenance provision
The Group has a number of contracts with service providers to replace or repair engine parts and other maintenance checks. These
agreements are complex and the Group exercises judgement in determining the assumptions used to match the consumption of
replacement spares and other costs associated with fleet maintenance with the appropriate income statement charge.
Changes in accounting policy and disclosures
a New and amended standards adopted by the Group
The Group has adopted a number of amendments to accounting standards for the first time in the year to December 31, 2016.
None of these amendments has resulted in a significant change to the financial position or performance of the Group, or
presentation and disclosures in the Group’s financial statements.
b New standards, amendments and interpretations not yet effective
The IASB and IFRIC issued the following standards, amendments and interpretations with an effective date after the year end
of these financial statements which management believe could impact the Group in future periods. Unless otherwise stated, the
Group plans to adopt the following standards, interpretations and amendments:
IFRS 15 ‘Revenue from contracts with customers’; effective for periods beginning on or after January 1, 2018. The standard
establishes a five-step model that will apply to revenue arising from contracts with customers. Revenue is recognised at an amount
that reflects the consideration to which an entity expects to be entitled in exchange for goods and services and at a point when
the performance obligations associated with these goods and services have been satisfied.
INTERNATIONAL AIRLINES GROUP
Annual Report and Accounts 2016