Singapore Airlines 2009 Annual Report Download - page 105

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2 Accounting Policies (continued)
(j) Leases (continued)
(ii) Operating lease – as lessee (continued)
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 modifi cations to leased aircraft due to operational requirements are
capitalised and depreciated over the remaining lease term period or the average expected life
between major overhauls (estimated to be 4 to 10 years).
(iii) Operating lease – as lessor
Leases where the Group retains substantially all the risks and rewards of ownership of the
asset are classifi ed 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.
(k) 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 a proportion of estimated profi t earned to-date, based on the
percentage of completion of the projects. Cost comprises direct materials, direct labour and other direct
overheads. Anticipated losses, if any, are provided for in full as and when they are determined.
(l) 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 fi nancial instrument.
When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of
fi nancial assets not at fair value through profi t and loss, directly attributable transaction costs.
A fi nancial asset is derecognised when the contractual right to receive cash fl ows from the asset
has expired. On derecognition of a fi nancial 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 profi t and loss account.