Singapore Airlines 2006 Annual Report Download - page 85

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Singapore Airlines Annual Report 05/06
2 Accounting Policies (continued)
(r) Aircraft maintenance and overhaul costs
The Group recognises aircraft maintenance and overhaul expenses (except heavy maintenance visits and engine overhaul
expenses) on an incurred basis. For engine rectifi cation costs covered by “power-by-hour” (fi xed rate charged per hour) third-
party maintenance agreements, expenses are accrued on the basis of hours fl own in accordance to the contractual terms.
Provision for aircraft maintenance and overhaul expenses to meet contractual return conditions for sale and leaseback aircraft
are accrued equally over the lease terms.
(s) Employee benefi ts
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. 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 fi nancial statements.
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which the
share options are granted. In valuing the share options, no account is taken of any performance conditions, other than
conditions linked to the price of the shares of the Company.
The cost of equity-settled transactions is recognised, together with a corresponding increase in the employee share option
reserve, over the period in which the service conditions are fulfi lled, ending on the date on which the relevant employees
become fully entitled to the award (“the vesting date”). The cumulative expense recognised for equity-settled transactions
at each reporting date until the vesting date refl ects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments that will ultimately vest.
The Group has taken advantage of the transitional provisions of FRS 102 in respect of equity-settled awards and has applied
FRS 102 only to equity-settled awards granted after 22 November 2002 that had not vested on or before 1 January 2005.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not
recognised for the award is recognised immediately.
Defi ned 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 recognised as compensation expenses in the same period as the
employment that gave rise to the contributions.
Defi ned benefi t plans
The Group contributes to several defi ned benefi t pension and other post-employment benefi t plans for employees stationed
in certain overseas countries. The cost of providing benefi ts 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.
(t) Trade creditors
Trade creditors and amounts owing to subsidiary and associated companies are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in the profi t and loss account when the liabilities are derecognised as well as through the
amortisation process.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2006