Qantas 2014 Annual Report Download - page 118

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116
QANTAS ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2014
36. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(M) PROPERTY, PLANT AND EQUIPMENT continued
Operating Leases
Rental payments under operating leases are charged to the Consolidated Income Statement on a straight-line basis over the term
ofthe lease.
Any gains and losses arising under sale and leaseback arrangements where the sale price is at fair value are recognised in the
Consolidated Income Statement as incurred. Where the sale price is below fair value, any gains and losses are immediately
recognised in the Consolidated Income Statement, except where the loss is compensated for by future lease payments at below
market price when it is deferred and amortised in proportion to the lease payments over the period for which the asset is expected
to be used. Where the sale price is above fair value, the excess over fair value is deferred and amortised over the period for which the
asset is expected to be used.
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.
Maintenance and Overhaul Costs
An element of the cost of an acquired aircraft (owned and finance leased aircraft) is attributed to its service potential, reflecting
the maintenance condition of its engines and airframe. This cost is depreciated over the shorter of the period to the next major
inspection event or the remaining life of the asset or remaining lease term.
The costs of subsequent major cyclical maintenance checks for owned and leased aircraft (including operating leases) are
recognised and depreciated over the shorter of the scheduled usage period to the next major inspection event or the remaining life
ofthe aircraft or lease term (as appropriate).
Maintenance checks, which are covered by the third party maintenance agreements where there is a transfer of risk and legal
obligation, are expensed on the basis of hours flown.
All other maintenance costs are expensed as incurred.
Modifications that enhance the operating performance or extend the useful lives of aircraft are capitalised and depreciated over the
remaining estimated useful life of the asset or remaining lease term (as appropriate). Manpower costs in relation to employees who
are dedicated to major modifications to aircraft are capitalised as part of the cost of the modification to which they relate.
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.
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 disclosed within the categories to which they relate and are stated at cost. When the asset is ready for its
intended use, it is capitalised and depreciated.
(N) INTANGIBLE ASSETS
Goodwill
All business combinations are accounted for by applying the acquisition 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 IFRS is carried
at deemed cost.
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 Consolidated Income Statement.
Airport Landing Slots
Airport landing slots are stated at cost less any accumulated impairment losses. Airport landing slots are allocated to the relevant
CGU and are not amortised as they are considered to have an indefinite useful life and are tested annually for impairment.