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85
Singapore Airlines Annual Report 05/06
2 Accounting Policies (continued)
(aa) Impairment of non-fi nancial and fi nancial assets
The carrying amounts of the Group’s non-fi nancial assets are reviewed at each balance sheet date to determine whether
there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. The impairment loss is charged to the profi t and loss account unless it reverses a previous
revaluation credited to equity, in which case it is charged to equity. An impairment loss is reversed if there has been a
change in estimates used to determine the recoverable amount.
The Group also assesses at each balance sheet date whether a fi nancial asset or a group of fi nancial assets is impaired.
Assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred,
the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial
asset’s original effective interest rate. The carrying amount of the asset shall be reduced either directly or through use of
an amortisation account. The amount of the loss shall be recognised in the profi t and loss account. If, in a subsequent
period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment is reversed. Any subsequent reversals of an
impairment loss is recognised in the profi t and loss account, to the extent that the carrying value of the asset does not
exceed its amortised cost at the reversal date.
Assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair
value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between
the asset’s carrying amount and the estimated realisable amount. Such impairment losses are not reversed in
subsequent periods.
Available-for-sale fi nancial assets
If an available-for-sale asset is impaired, an amount comprising the difference between its cost and its current fair value,
less any impairment loss previously recognised in profi t and loss account, is transferred from equity to the profi t and loss
account. Reversals in respect of equity instruments classifi ed as available-for-sale are not recognised in the profi t and
loss account. Reversals of impairment losses on debt instruments are reversed through the profi t and loss account, if the
increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was
recognised in the profi t and loss account.
(ab) Derivative fi nancial instruments and hedging
The Group uses derivative fi nancial instruments such as forward currency contracts, interest rate swap contracts, jet fuel
options and jet fuel swap contracts to hedge its risks associated with foreign currency, interest rate and jet fuel price
fl uctuations. Such derivative fi nancial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into, and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair
value is positive, and as liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken
directly to the profi t and loss account.
The fair value of forward currency contracts is determined by reference to current forward prices for contracts with similar
maturity profi les. The fair value of interest rate contracts is calculated using rates assuming these contracts are liquidated
at balance sheet date. The fair value of jet fuel swap contracts is determined by reference to market values for similar
instruments. The fair value of jet fuel option contracts is determined by reference to available market information and
option valuation methodology.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2006