Singapore Airlines 2004 Annual Report Download - page 76

74 SIA Annual Report 03/04
Notes to the Financial Statements
31 March 2004
2 Accounting Policies (continued)
(o) Aircraft maintenance and overhaul costs
The Group recognizes aircraft maintenance and overhaul expenses on an incurred basis. For engine overhaul costs
covered by “power-by-hour” (fixed rate charged per hour) third-party maintenance agreements, expenses are
accrued on the basis of hours flown in accordance to the contractual terms.
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 plans
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 13 to the financial statements.
Defined contribution plans
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 plans
The Group 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 Group’s 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.
Provision for warranty claims is made for engine overhaul, repairs and maintenance of aircraft (excluding line
maintenance) based on past experience of the level of repairs.
(r) Derivative Financial Instruments
Gains and losses arising from derivative financial instruments 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.