Qantas 2007 Annual Report Download - page 84

82 Qantas |Annual Report 2007
(Q) Property, Plant and Equipment continued
Depreciation and Amortisation
Depreciation and amortisation are provided on a straight-line basis on all
items of property, plant and equipment except for freehold and leasehold
land which are not depreciated or amortised. The depreciation and
amortisation rates of owned assets are calculated so as to allocate the cost
or valuation of an asset, less any estimated residual value, over the asset’s
estimated useful life to the Qantas Group. Assets are depreciated or
amortised from the date of acquisition or, with respect to internally
constructed assets, from the time an asset is completed and available for
use. The costs of improvements to assets are amortised over the remaining
useful life of the asset or the estimated useful life of the improvement,
whichever is the shorter. Assets under finance lease are amortised over the
term of the relevant lease or, where it is likely the Qantas Group will obtain
ownership of the asset, the life of the asset.
The principal asset depreciation and amortisation periods and estimated
residual value percentages are:
Years
Residual
Value (%)
Buildings and leasehold improvements 10 - 50 0
Plant and equipment 3 - 40 0
Aircraft and engines 2.5 - 20 0 - 20
Aircraft spare parts 15 - 20 0 - 20
Depreciation and amortisation rates and residual values are reviewed
annually and reassessed having regard to commercial and technological
developments and the estimated useful life of assets to the Qantas Group
and the long-term fleet plan.
Leased and Hire Purchase Assets
Leased assets under which the Qantas Group assumes substantially
all the risks and benefits of ownership are classified as finance leases.
Other leases are classified as operating leases.
Linked transactions involving the legal form of a lease are accounted
for as one transaction when a series of transactions are negotiated
as one or take place concurrently or in sequence and cannot be
understood economically alone.
Finance leases are capitalised. A lease asset and a lease liability equal
to the present value of the minimum lease payments and guaranteed
residual value are recorded at the inception of the lease. Any gains and
losses arising under sale and leaseback arrangements are deferred
and amortised over the lease term where the sale is not at fair value.
Capitalised leased assets are amortised on a straight-line basis over
the period in which benefits are expected to arise from the use of
those assets. Lease payments are allocated between the reduction
in the principal component of the lease liability and the interest element.
The interest element is charged to the Income Statement over the lease
term so as to produce a constant periodic rate of interest on the remaining
balance of the lease liability.
Fully prepaid leases are classified in the Balance Sheet as hire purchase
assets, to recognise that the financing structures impose certain
obligations, commitments and/or restrictions on the Qantas Group,
which differentiate these aircraft from owned assets.
Leases are deemed to be non-cancellable if significant financial penalties
associated with termination are anticipated.
Operating Leases
Rental payments under operating leases are charged to the Income
Statement on a straight-line basis over the period of the lease.
With respect to any premises rented under long-term operating leases,
which are subject to sub-tenancy agreements, provision is made for any
shortfall between primary payments to the head lessor less any recoveries
from sub-tenants. These provisions are determined on a discounted cash
flow basis, using a rate reflecting the cost of funds.
Manufacturers’ Credits
The Qantas Group receives credits from manufacturers in connection with
the acquisition of certain aircraft and engines. These credits are recorded
as a reduction to the cost of the related aircraft and engines. Where the
aircraft are held under operating leases, the credits are deferred and
reduced from the operating lease rentals on a straight-line basis over the
period of the related lease as deferred credits.
Capital Projects
Capital projects are stated at cost. When the asset is ready for its intended
use, it is capitalised and depreciated.
(R) Intangible Assets
Goodwill
All business combinations since transition to A-IFRS are accounted for
by applying the purchase method. Goodwill represents the difference
between the cost of the acquisition and the fair value of the net
identifiable assets acquired. Goodwill acquired before transition
to A-IFRS is carried at deemed cost utilising transition relief available.
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to CGUs and is tested annually for impairment. With
respect to associates and jointly controlled entities, the carrying amount of
goodwill is included in the carrying amount of the investment in the
associate or the jointly controlled entity.
Negative goodwill arising on an acquisition is recognised directly in the
Income Statement.
Airport Landing Slots
Airport landing slots are stated at cost less any accumulated impairment
losses. Airport landing slots are allocated to the Qantas CGU and are not
amortised as they are considered to have an indefinite useful life and are
tested annually for impairment.
Software
Software is stated at cost less accumulated amortisation and impairment
losses. Software development expenditure, including the cost of materials,
direct labour and other direct costs, is only recognised as an asset when
the Qantas Group controls future economic benefits as a result of the
costs incurred, it is probable that those future economic benefits will
eventuate and the costs can be measured reliably. Amortisation is charged
to the Income Statement on a straight-line basis over the estimated useful
life of three to five years.
(S) Payables
Liabilities for trade creditors and other amounts are carried at cost.
(T) Frequent Flyer
The Qantas Group receives revenue from the sale to third parties of
rights to have Qantas award points allocated to members of the Qantas
Frequent Flyer Program. This revenue is deferred net of points which it
considers will not be redeemed (breakage) and recognised in the Income
Statement as net passenger revenue when the points are redeemed and
passengers uplifted. Revenue in relation to points which it is considered
will not be redeemed are recognised as net passenger revenue on the sale
of the points.
Notes to the Financial Statements
for the year ended 30 June 2007
1. Statement of Significant Accounting Policies continued