Singapore Airlines 2003 Annual Report Download - page 77

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75
SIA Annual Report 02/03
Notes to the Financial Statements
31 March 2003
2 Accounting Policies (continued)
(n) Loans and borrowings
Loans, notes payable and other borrowings are recognized at cost.
(o) Aircraft maintenance and overhaul costs
The Company recognizes aircraft maintenance and overhaul expenses on an incurred basis.
Aircraft maintenance and overhaul expenses incurred to meet contractual return conditions for sale and leaseback
aircraft are accrued equally over the remaining lease terms.
(p) Employee Benefits
Equity compensation plan
The Group has in place the Singapore Airlines Limited Employee Share Option Plan, the Singapore Airport Terminal
Services Limited Employee Share Option Plan and the SIA Engineering Company Limited Employee Share Option
Plan for granting of share options to senior executives and all other employees. There are no charges to the profit
and loss account upon the grant or exercise of the options. The exercise price approximates the market value of
the shares at the date of grant. Details of the plans are disclosed in Note 14 to the financial statements.
Defined contribution plan
As required by law, the companies in Singapore make contributions to the state pension scheme, the Central
Provident Fund ("CPF"). Certain of the Group’s companies and overseas stations outside Singapore make
contributions to their respective countries’ pension schemes. Such contributions are recognized as compensation
expenses in the same period as the employment that gave rise to the contributions.
Defined benefit plan
The Company contributes to several defined benefit pension and other post employment benefit plans for
employees stationed in certain overseas countries. The cost of providing benefits includes the company
contribution for the year plus any unfunded liabilities under the plans, which is determined separately for each
plan. Contributions to the plans over the expected average remaining working lives of the employees participating
in the plans are expensed as incurred.
(q) Trade creditors
Trade creditors and amounts owing to subsidiary and associated companies are carried at cost.
(r) Forward contracts
Gains and losses arising from forward contracts on foreign currencies and jet fuel are recognized at dates of
maturity.
(s) Revenue
Passenger and cargo sales are recognized as operating revenue when the transportation is provided. The value of
unused tickets and air waybills is included in current liabilities as sales in advance of carriage and recognized as
revenue if unused after two years.
Revenue from the provision of airport terminal services is recognized upon services rendered.
Revenue from engine overhaul, repair and maintenance of aircraft is recognized based on the percentage of
completion of the projects.
(t) Income from investments
Dividend income from investments is recognized when the shareholders’ right to receive the payment is
established.
Interest income from investments and fixed deposits is recognized on an accrual basis.
(u) Frequent flyer programme
The Company operates a frequent flyer programme called "KrisFlyer" that provides travel awards to programme
members based on accumulated mileage. A portion of passenger revenue attributable to the award of frequent
flyer benefits is estimated and deferred until they are utilized. These are included under "Deferred revenue" on the
balance sheet. Such unutilized benefits are recognized as revenue upon expiry.
(v) Training and development costs
Training and development costs, including start-up programme costs, are charged to the profit and loss account in
the financial year in which they are incurred.
(w) Capitalized loan interest
Borrowing costs incurred to finance progress payments for aircraft and building projects are capitalized until the
aircraft are commissioned for operation or the projects are completed. All other borrowing costs are recognized as
expenses in the period in which they are incurred. $2.9 million (2001-02: $1.3 million) of the Company’s borrowing
costs were capitalized during the year.