Air New Zealand 2008 Annual Report Download - page 10

AIR NEW ZEALAND
STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
Other revenue
Other revenue is recognised at the time the service is provided.
Loyalty programmes
The fair value of revenues associated with the award of Airpoints Dollars to Airpoints members as part of the initial sales transaction is deferred, net
of estimated expiry (non-redeemed Airpoints Dollars), until the Airpoints member has redeemed their points. The fair value of consideration received
in respect of sales of Airpoints Dollars to third parties is deferred, net of estimated expiry, until such time as the Airpoints member has redeemed their
points.
The estimate of expiry is based upon historical experience and is recognised in net passenger revenue at the time of the initial sales transaction.
Deferred Airpoints revenue is recorded within revenue in advance in the Statement of Financial Position.
Investment revenue
Dividend revenue is recognised when the right to receive payment is established.
Interest revenue from investments and fixed deposits is recognised as it accrues, using the effective interest method where appropriate.
CASH FLOWS
Cash flows are included in the Statement of Cash Flows net of Goods and Services Tax.
BORROWING COSTS
Borrowing costs directly attributable to the acquisition of qualifying assets, such as aircraft, are added to the cost of those assets until such time as the
assets are substantially ready for their intended use or sale. Qualifying assets are assets which necessarily take a substantial period of time to get ready
for their intended use. All other borrowing costs are recognised in the Statement of Financial Performance in the period in which they are incurred.
LEASE PAYMENTS
Operating leases
Leases under which a significant proportion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received) are recognised as an expense in the Statement of Financial Performance on a straight-line
basis over the term of the lease.
Finance leases
Payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is
allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
MAINTENANCE COSTS
The cost of major airframe inspections and engine overhauls for aircraft owned by the Group is capitalised and depreciated over the period to the next
expected inspection or overhaul.
Where there is a commitment to maintain aircraft held under operating lease arrangements, a provision is made during the lease term for the lease return
obligations specified within those lease agreements. The provision is based upon historical experience, manufacturers’ advice and, where appropriate,
contractual obligations in determining the present value of the estimated future costs of major airframe inspections and engine overhauls by making
appropriate charges to the Statement of Financial Performance, calculated by reference to the number of hours or cycles operated during the year.
All other maintenance costs are expensed as incurred.
FINANCIAL INSTRUMENTS
Non-derivative financial instruments
Non-derivative financial instruments include cash and cash equivalents, other deposits, trade and other receivables, interest-bearing liabilities and trade
and other payables. These are recognised initially at fair value plus any attributable transaction costs. Subsequent to initial recognition, non-derivative
financial instruments are recognised as described below.
Loans and receivables:
Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits, current accounts in banks net of overdrafts and other short-term highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
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