Qantas 2009 Annual Report Download - page 94

92 Qantas Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
1. Statement of Significant Accounting Policies continued
(G) REVENUE RECOGNITION
Passenger, Freight and Tours and Travel Revenue
Passenger and freight revenue is included in the Income Statement at the
fair value of the consideration received net of sales discount, passenger
and freight interline/IATA commission and GST. Tours and travel revenue is
included in the Income Statement as the net amount of commission
retained by Qantas. Passenger recoveries (including fuel surcharge on
passenger tickets) are disclosed as part of net passenger revenue. Freight
fuel surcharge is disclosed as part of net freight revenue. Other sales
commissions paid by Qantas are included in expenditure.
Passenger, freight and tours and travel sales are credited to revenue
received in advance and subsequently transferred to revenue when
passengers or freight are uplifted or when tours and travel air tickets and
land content are utilised. Unused tickets are recognised as revenue using
estimates regarding the timing of recognition based on the terms and
conditions of the ticket. Changes in these estimation methods could have
a material impact on the financial statements of Qantas.
Frequent Flyer Revenue
Redemption Revenue
Redemption revenue received for the issuance of points is deferred as a
liability (revenue received in advance) until the points are redeemed or the
passenger is uplifted in the case of flight redemptions.
Redemption revenue is measured based on management’s estimate of the
fair value of the expected awards for which the points will be redeemed.
The fair value of the awards are reduced to take into account the
proportion of points that are expected to expire (breakage).
Marketing Revenue
Marketing revenue associated with the issuance of points is recognised
when the service is performed (typically on the issuance of the point).
Marketing revenue is measured as the difference between the cash
received on issuance of a point and the fair value attributed to the award
component (which is deferred and recognised on point redemption as
described above).
Membership Fee Revenue
Membership fee revenue results from an initial joining fee charged to
members. This fee is refundable for a two week period after membership
is granted. Revenue is recognised on expiry of the refundable period.
Contract Work Revenue
Revenue from the rendering of services associated with contracts is
included in contract work revenue.
Where services performed are in accordance with contractually agreed
terms over a short period and are task specific, revenue is recognised when
the service has been performed or when the resulting ownership of the
goods passes to the customer.
Revenue on long-term contracts to provide goods or services is recognised
in proportion to the stage of completion of the contract when the stage of
contract completion can be reliably measured and otherwise on
completion of the contract.
Other Income
Income resulting from claims for liquidated damages is recognised as
other income when all performance obligations are met, including when
a contractual entitlement exists, it can be reliably measured (including the
impact of the receipt, if any, on the underlying assets’ carrying value) and
it is probable that the economic benefits will accrue to the Qantas Group.
Revenue from aircraft charter and leases, property income, Qantas Club
membership fees, freight terminal and service fees, commission revenue,
age availed surplus revenue and other miscellaneous income is recognised
as other income at the time service is provided.
Asset Disposals
The gain or loss on the disposal of assets is recognised at the date the
significant risks and rewards of ownership of the asset passes to the buyer,
usually when the purchaser takes delivery of the asset. The gain or loss on
disposal is calculated as the difference between the carrying amount of the
asset at the time of disposal and the net proceeds on disposal.
Aircraft Financing Fees
Fees relating to linked transactions involving the legal form of a lease are
recognised as revenue only when there are no significant obligations to
perform, or refrain from performing, significant activities, management
determines there are no significant limitations on use of the underlying
asset and the possibility of reimbursement is considered remote. Where
these criteria are not met, fees are brought to account as revenue or
expenditure over the period of the respective lease or on a basis which
is representative of the pattern of benefits derived from the leasing
transactions, with the unamortised balance being held as a deferred
lease benefit.
Dividend Revenue
Dividends are recognised as revenue when the right to receive payment
is established. Dividend revenue is recognised net of any franking credits or
withholding tax.
(H) GOODS AND SERVICES TAX
Revenues, expenses and assets are recognised net of GST, except where
the amount of GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense. Receivables and payables
are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation
authority is included as a current asset or liability in the Balance Sheet.
Cash flows are included in the Cash Flow Statement on a gross basis.
The GST components of cash flows arising from investing and financing
activities which are recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
(I) MAINTENANCE AND OVERHAUL COSTS
Accounting for the cost of providing major airframe and certain engine
maintenance checks for owned aircraft is described in the accounting
policy for property, plant and equipment in Note 1(P). With respect to
operating lease agreements, where the Qantas Group is required to return
the aircraft with adherence to certain maintenance conditions, provision is
made during the lease term. This provision is based on the present value of
the expected future cost of meeting the maintenance return condition
having regard to the current fleet plan and long-term maintenance
schedules. The present value of non-maintenance return conditions is
provided for at the inception of the lease.
All other maintenance costs are expensed as incurred, except engine
overhaul costs covered by third party maintenance agreements, which are
expensed on the basis of hours flown as there is a transfer of risk and legal
obligation to the third party maintenance provider. Modifications that
enhance the operating performance or extend the useful lives of airframes
or engines are capitalised and depreciated over the remaining estimated
useful life of the asset.