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84
Singapore Airlines Annual Report 05/06
2 Accounting Policies (continued)
(u) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event,
it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be
reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the profi t and loss account net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects, where
appropriate, the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage of
time is recognised as fi nance costs.
Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longer
probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation, the provision is
reversed.
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.
(v) Revenue
Revenue earned is generated principally from the carriage of passengers, cargo and mail, the rendering of airport terminal
services, engineering services, training of pilots, air charters and tour wholesaling and related activities. Revenue for the
Group excludes dividends from subsidiary companies and inter-company transactions.
Passenger and cargo sales are recognised 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. The value of tickets are recognised as
revenue if unused after two years.
Revenue from the provision of airport terminal services is recognised upon rendering of services.
Revenue from repair and maintenance of aircraft, engine and component overhaul is recognised based on the percentage of
completion of the projects. The percentage of completion of the projects is determined based on the number of man-hours
incurred to date against the estimated man-hours needed to complete the projects.
Rental income from lease of aircraft is recognised on a straight-line basis over the lease term.
(w)
Income from investments
Dividend income from investments is recognised when the equity holders’ right to receive the payment is established.
Interest income from investments and fi xed deposits is recognised on a time proportion basis using the effective interest
method.
(x) Frequent fl yer programme
The Company operates a frequent fl yer 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 fl yer benefi ts,
estimated based on expected utilisation of these benefi ts, is deferred until they are utilised. These are included under
“deferred revenue” on the balance sheet. Any remaining unutilised benefi ts are recognised as revenue upon expiry.
(y) Training and development costs
Training and development costs, including start-up program costs, are charged to the profi t and loss account in the fi nancial
year in which they are incurred.
(z) Capitalised loan interest
Borrowing costs incurred to fi nance progress payments for aircraft and building projects are capitalised until the aircraft
are commissioned for operation or the projects are completed. All other borrowing costs are recognised as expenses in the
period in which they are incurred. $5.5 million (2004-05: $5.5 million) borrowing costs were capitalised during the year by
the Group.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2006