Singapore Airlines 2008 Annual Report Download - page 98

Singapore Airlines Annual Report 2007-08
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2 Accounting Policies (continued)
(t) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the
obligation can be estimated reliably. 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 profit and loss account net of any reimbursement.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer
probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If
the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
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.
Provision for aircraft maintenance and overhaul expenses to meet contractual return conditions for sale and leaseback
aircraft are accrued equally over the lease terms.
(u) Share capital and share issue expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly
attributable to the issuance of ordinary shares are deducted against share capital.
(v) Treasury shares
When shares recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity.
Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is
recognised in the profit and loss account on the purchase, sale, issue or cancellation of treasury shares.
(w) Frequent flyer programme
The Company operates a frequent flyer 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
flyer benefits, estimated based on expected utilisation of these benefits, is deferred until they are utilised. These are
included under “deferred revenue” on the balance sheet. Any remaining unutilised benefits are recognised as revenue
upon expiry.
(x) Taxation
(i) Current tax
Tax recoverable and tax liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantially enacted by the balance sheet date.
Current taxes are recognised in the profit and loss account except that tax relating to items recognised directly in
equity is recognised directly in equity.
(ii) Deferred tax
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets and liabilities are recognised for all temporary differences, except:
•฀ Where฀the฀deferred฀tax฀arises฀from฀the฀initial฀recognition฀of฀an฀asset฀or฀liability฀in฀a฀transaction฀that฀is฀not฀a฀
business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit
or loss;
•฀ In฀respect฀of฀temporary฀differences฀associated฀with฀investments฀in฀subsidiary,฀associated฀and฀joint฀venture฀
companies, where the timing of the reversal of the temporary differences can be controlled by the Group and
it is probable that the temporary differences will not reverse in the foreseeable future; and
NOTES TO THE FINANCIAL STATEMENTS
31 March 2008