Singapore Airlines 2008 Annual Report Download - page 95

Singapore Airlines Annual Report 2007-08
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2 Accounting Policies (continued)
(i) Leases (continued)
(ii) Operating lease – as lessee
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets
are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss
account on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is
recognised as a reduction of rental expense over the lease term on a straight-line basis.
Gains or losses arising from sale and operating leaseback of aircraft are determined based on fair values.
Differences between sales proceeds and fair values are taken to the balance sheet as deferred gain on sale and
leaseback transactions, included under “deferred account” and amortised over the minimum lease terms.
Major improvements and modifications to leased aircraft due to operational requirements are capitalised and
depreciated over the average expected life between major overhauls (estimated to be 4 to 6 years).
(iii) Operating lease – as lessor
Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as
operating leases. Aircraft leased out under operating leases are included under property, plant and equipment
and are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Rental income is
recognised on a straight-line basis over the lease term.
(j) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs necessary to
make the sale.
Work-in-progress is stated at cost plus estimated attributable profit.
(k) Financial assets
Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the
contractual provisions of the financial instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not
at fair value through profit and loss, directly attributable transaction costs.
A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On
derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the
consideration received and any cumulative gain or loss that has been recognised directly in equity is recognised in the
profit and loss account.
All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, i.e., the
date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of
financial assets that require delivery of assets within the period generally established by regulation or convention in
the marketplace concerned.
(i) Financial assets at fair value through profit and loss
There are two sub-categories: financial assets held for trading, and those designated as fair value through profit
or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling
in the short term. Derivatives are also classified under this category unless they are designated as hedging
derivatives. Gains or losses on financial assets held at fair value through profit and loss are recognised in the profit
and loss account.
Assets in this category are classified as current assets if they are either held for trading or are expected to be
realised within 12 months after the balance sheet date.
(ii) Loans and receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method.
Gains and losses are recognised in the profit and loss account when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
NOTES TO THE FINANCIAL STATEMENTS
31 March 2008