Singapore Airlines 2011 Annual Report Download - page 109
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ANNUAL REPORT 2010/2011 107
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
2 Summary of Significant 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 statement of financial
position 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 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 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. Where necessary, allowance is provided for damaged,
obsolete and slow moving items to adjust the carrying value of inventories to the lower of cost and net
realisable value.
Work-in-progress is stated at cost plus a proportion of estimated profit 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.