Singapore Airlines 2008 Annual Report Download - page 92

Singapore Airlines Annual Report 2007-08
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2 Accounting Policies (continued)
(d) Subsidiary, associated and joint venture companies
In the Company’s separate financial statements, investment in subsidiary and associated companies are accounted for
at cost less impairment losses.
A subsidiary company is defined as an entity over which the Group has the power to govern the financial and
operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to
the majority of the voting rights.
An associated company is defined as an entity, not being a subsidiary company or joint venture company, in which the
Group has significant influence, but not control, generally accompanied by a shareholding giving rise to not less than
20% of the voting rights. A list of the Group’s associated companies is shown in Note 23 to the financial statements.
The Group’s investments in associated companies are accounted for using the equity method. Under the equity
method, the investment in associated company is measured in the balance sheet at cost plus post-acquisition changes
in the Group’s share of net assets of the associated company. Goodwill relating to an associated company is included
in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associated
company’s identifiable assets, liabilities and contingent liabilities over the cost of investment is deducted from the
carrying amount of the investment and is recognised as income as part of the Group’s share of profit or loss of the
associated company in the period in which the investment is acquired.
When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company,
the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associated company.
A joint venture company is a contractual arrangement whereby two or more parties undertake an economic activity
that is subject to joint control, where the strategic financial and operating decisions relating to the activity require the
unanimous consent of the parties sharing control. A list of the Group’s joint venture companies is shown in Note 24 to
the financial statements.
The Group’s share of the results of the joint venture companies is recognised in the consolidated financial statements
under the equity method on the same basis as associated companies.
The most recently available audited financial statements of the associated and joint venture companies are used by the
Group in applying the equity method. Where the dates of the audited financial statements used are not co-terminous
with those of the Group, the share of results is arrived at from the last audited financial statements available and
unaudited management financial statements to the end of the accounting period. Where necessary, adjustments are
made to bring the accounting policies in line with those of the Group.
(e) Intangible assets
(i) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment, at least annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to
benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are
assigned to those units or groups of units.
The cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for
impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by
comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable
amount of the cash-generation unit. Where the recoverable amount of the cash-generating unit (or group of cash-
generating units) is less than the carrying amount, an impairment loss is recognised in the profit and loss account.
Impairment losses recognised for goodwill are not reversed in subsequent periods.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2008