IAS 16 para 51, residual values reviewed annually, IAS 8 para 39, disclosure of current year effect of change in estimate

Air New Zealand Limited – Annual report – 30 June 2020

Industry: airlines

10. Property, Plant and Equipment (extract)

Residual values

Estimates and judgements are applied by management to determine the expected useful life of aircraft related assets. The useful lives are determined based on the expected service potential of the asset and lease term. The residual value, at the expected date of disposal, is estimated by reference to external projected values and are influenced by external changes to economic conditions, demand, competition and new technology. Residual values are denominated in United States dollars and are therefore sensitive to exchange fluctuations as well as movements in projected values. Residual values and useful lives are reviewed each year to ensure they remain appropriate. During the year ended 30 June 2020 the residual values of the aircraft were reassessed and depreciation expense was reduced by $3 million (30 June 2019: decreased by $3 million for owned aircraft and $1 million for finance leased aircraft).