Singapore Airlines 2002 Annual Report Download - page 68

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68
Notes to the Financial Statements
31 March 2002
SIA Annual Report 01/02
2 Accounting Policies (continued)
(h) Leased assets
As lessee
Finance leases, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the leased
asset, are capitalized at the present value of the minimum lease payments at the inception of the lease term and disclosed as
leased fixed assets and the corresponding lease commitments are included under liabilities. Lease payments are apportioned
between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against the profit and loss accounts. Depreciation on the relevant assets is
charged to the profit and loss accounts.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified
as operating leases. Operating lease payments are recognized as an expense in the profit and loss accounts on a straight–line
basis over the lease term.
Gains arising from sale and operating leaseback of aircraft are determined based on fair values. Sale proceeds in excess of fair
values are deferred and amortized over the minimum lease terms.
Major improvements and modifications to leased aircraft due to operational requirements are capitalized and depreciated over the
lease-term period.
(i) Investments
Investments held on a long-term basis are stated at cost and provisions are made for diminution in value which is considered to
be permanent. Short-term investments are stated at the lower of cost and net realisable value on a portfolio basis.
(j) Stocks
Stocks are stated at the lower of cost and net realisable value. Cost is determined on either a first-in-first-out basis or weighted
average depending on the nature of the stocks.
Work-in-progress is stated at cost plus estimated attributable profit.
(k) Trade debtors
Trade debtors, which generally have 30-90 day terms, are recognized and carried at original invoiced amount less an allowance
for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable.
Bad debts are written-off as incurred.
Amounts owing by subsidiary and associated companies are recognized and carried at cost less provisions for any uncollectible
amounts.
(l) Cash and bank balances
Cash and bank balances are defined as cash on hand, demand deposits and short-term, highly liquid investments readily
convertible to known amounts of cash and subject to insignificant risk of changes in value.
Cash on hand and in banks, demand deposits and short–term deposits which are held to maturity are carried at cost.
For the purposes of the Cash Flow Statements, cash and cash equivalents consist of cash on hand and deposits in banks, net of
outstanding bank overdrafts.