Singapore Airlines 2009 Annual Report Download - page 117

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2 Accounting Policies (continued)
(ah) Derivative fi nancial instruments and hedging (continued)
At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which the Group wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge. The documentation includes identifi cation of the hedged item
or transaction, the hedging instrument, the nature of the risk being hedged and how the Group will
assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged
item’s (or transaction’s) cash fl ows attributable to the hedged risk. Such hedges are expected to be
highly effective in achieving offsetting changes in cash fl ows, and are assessed on an ongoing basis
to determine that they have been highly effective throughout the fi nancial reporting periods for which
they are designated.
Derivatives are classifi ed as fair value through profi t and loss unless they qualify for hedge accounting.
Hedges which meet the criteria for hedge accounting are accounted for as cash fl ow hedges.
For cash fl ow hedges, the effective portion of the gain or loss on the hedging instrument is recognised
directly in the fair value reserve (Note 15), while the ineffective portion is recognised in the profi t and
loss account.
Amounts taken to the fair value reserve are transferred to the profi t and loss account when the hedged
transaction affects profi t or loss, such as when a forecast sale or purchase occurs. If the hedged item is
a non-fi nancial asset or liability, the amounts taken to the fair value reserve are transferred to the initial
carrying amount of the non-fi nancial asset or liability.
(ai) Segmental reporting
(i) Business segment
The Group’s businesses are organised and managed separately according to the nature of the
services provided. The signifi cant business segments of the Group are airline operations, airport
terminal and food operations and engineering services.
(ii) Geographical segment
The analysis of revenue by area of original sale from airline operations is derived by allocating
revenue to the area in which the sale was made. Revenue from other operations, which consists
principally of airport terminal and food operations and engineering services, is derived in Singapore
and therefore, is not shown.
Assets, which consist principally of fl ight and ground equipment, support the entire worldwide
transportation system, are mainly located in Singapore. An analysis of assets and capital
expenditure of the Group by geographical distribution has therefore not been included.