Singapore Airlines 2011 Annual Report Download - page 107

ANNUAL REPORT 2010/2011 105
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
2 Summary of Significant Accounting Policies (continued)
(g) Property, plant and equipment (continued)
The cost of an item of property, plant and equipment comprises its purchase price and any directly
attributable costs of bringing the asset to working condition for its intended use. The cost of all aircraft
is stated net of manufacturers’ credit. Aircraft and related equipment acquired on an exchange basis
are stated at amounts paid plus the fair value of the fixed asset traded-in. Expenditure for heavy
maintenance visits on aircraft and engine overhauls, is capitalised at cost. Expenditure for engine
overhaul costs covered by power-by-hour (fixed rate charged per hour) maintenance agreements is
capitalised by hours flown. Expenditure for other maintenance and repairs is charged to the profit and
loss account. When assets are sold or retired, their costs, accumulated depreciation and accumulated
impairment losses, if any, are removed from the financial statements and any gain or loss resulting
from their disposal is included in the profit and loss account.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is
included in the profit and loss account in the year the asset is derecognised.
(h) Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis at rates which are calculated to
write-down their cost to their estimated residual values at the end of their operational lives. Operational
lives, residual values and depreciation method are reviewed annually in the light of experience and
changing circumstances, and adjusted prospectively, if appropriate.
Freehold land, advance and progress payments are not depreciated.
Fully depreciated assets are retained in the financial statements until they are no longer in use.
No depreciation is charged after assets are depreciated to their residual values.
(i) Aircraft, spares and spare engines
The Group depreciates its new passenger aircraft, spares and spare engines over 15 years to 10%
residual values. For used passenger aircraft, the Group depreciates them over the remaining life
(15 years less age of aircraft) to 10% residual values.
The Group depreciates its new freighter aircraft over 15 years to 20% residual values. For used
freighter aircraft, the Group depreciates them over the remaining life (15 years less age of aircraft)
to 20% residual value.
Major inspection costs relating to landing gear overhauls, heavy maintenance visits and engine
overhauls (including inspection costs provided under power-by-hour maintenance agreements) are
capitalised and depreciated over the average expected life between major overhauls, estimated to
be 4 to 10 years.
Training aircraft are depreciated over 5 to 15 years to 10% to 20% residual value.
Flight simulators are depreciated over 5 to 10 years to nil residual value.