Singapore Airlines 2006 Annual Report Download - page 81

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Singapore Airlines Annual Report 05/06
2 Accounting Policies (continued)
(h) Fixed assets
Fixed assets are stated at cost less accumulated depreciation and any impairment in value. The cost of an asset comprises its
purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. The cost of
all aircraft is stated net of manufacturers’ credit. Aircraft and related equipment acquired on an exchange basis are stated
at amounts paid plus the fair value of the fi xed asset traded-in. Expenditure for heavy maintenance visits on aircraft and
engine overhauls, is capitalised at cost. Expenditure for engine overhaul costs covered by “power-by-hour” is capitalised by
hours fl own when the engine overhaul is carried out. Expenditure for other maintenance and repairs is charged to the profi t
and loss account. When assets are sold or retired, their costs and accumulated depreciation are removed from the fi nancial
statements and any gain or loss resulting from their disposal is included in the profi t and loss account.
(i) Depreciation of fi xed assets
Fixed assets are depreciated on a straight-line basis at rates which are calculated to write-down their cost to their estimated
residual values at the end of their operational lives. Operational lives and residual values are reviewed annually in the light of
experience and changing circumstances, and adjusted as appropriate at each balance sheet date.
Fully depreciated assets are retained in the fi nancial statements until they are no longer in use. No depreciation is charged
after assets are depreciated to their residual values.
Aircraft fl eet
The Group depreciates its new passenger aircraft, spares and spare engines over 15 years to 10% residual values. For used
passenger aircraft, the Group depreciates them over the remaining life (15 years less age of aircraft) to 10% residual values.
The Group depreciates its new freighter aircraft over 15 years to 20% residual values. For used freighter aircraft, the Group
depreciates them over the remaining life (15 years less age of aircraft) to 20% residual value.
Major inspection costs relating to heavy maintenance visits and engine overhauls are capitalised and depreciated over
4 – 6 years. Prior to the current fi nancial year, such costs have been charged to the profi t and loss account on an
incurred basis.
Land and buildings
Buildings on freehold land and leasehold land and buildings are depreciated to nil residual values as follows:
Company owned offi ce premises – according to lease period or 30 years, whichever is the shorter.
Company owned household premises – according to lease period or 10 years, whichever is the shorter.
Other premises – according to lease period or 5 years, whichever is the shorter.
Flight training equipment
Flight simulators and training aircraft are depreciated over 10 years to nil residual values, and 5 years to 20% residual values
respectively.
Other fi xed assets
Other fi xed assets are depreciated over 1 – 12 years to nil residual values.
(j) Leased assets
Finance lease – as lessee
Finance leases, which effectively transfer to the Group substantially all the risks and benefi ts incidental to ownership of the
leased asset, are capitalised at the present value of the minimum lease payments at the inception of the lease term and
disclosed as leased fi xed assets and the corresponding lease commitments are included under liabilities. Lease payments are
apportioned between fi nance 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 profi t and loss account. Depreciation on
the relevant assets is charged to the profi t and loss account.
For sale and fi nance leaseback, differences between sales proceeds and net book values are deferred and amortised over the
minimum lease terms.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2006