Company: AYR
Filing Date: 2025-04-23
Form Type: 10-K
Source: 0001628280-25-019189
Chunk: 47

Company: Aircastle LTD
Filing Date: 2025-04-23
Form: 10-K
Item: Item 16
Chunk 47
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idiariesNotes to Consolidated Financial Statements(Dollars in thousands, except per share amounts)

judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other customers or aircraft variants that are more susceptible to value deterioration.For assets with indicators of impairment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceed its net book value.  The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge.Our assumptions are based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors, such as the location of the aircraft and accessibility to records and technical documentation.If our estimates or assumptions change, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in our recoverability assessments are appropriate, actual results could differ from those estimates.Net Investment in LeasesIf a lease meets specific criteria at lease commencement or at the effective date of a lease modification, we recognize the lease as a direct financing or sales-type lease.  The net investment in direct financing and sales-type leases consists of the lease receivable, estimated unguaranteed residual value of the leased flight equipment at lease-end and, for direct financing leases, deferred selling profit.  For sales-type leases, we recognize the difference between the net book value of the aircraft and the net investment in the lease as a gain or loss on sale of flight equipment.  Selling profit on a direct financing lease is deferred and amortized over the lease term, and a selling loss is recognized at lease commencement.  Interest income on our net investment in leases is recognized as direct financing and sales-type leases revenue over the lease term in a manner that produces a constant rate of return on the net investment in the lease.The net investment in leases is recorded net of an allowance for credit losses.  The allowance for credit losses is recorded