Singapore Airlines 2011 Annual Report Download - page 114

SINGAPORE AIRLINES
112
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
2 Summary of Significant Accounting Policies (continued)
(t) Trade and other creditors
Trade and other creditors and amounts owing to subsidiary and associated companies are initially
recognised at fair value and subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as
well as through the amortisation process.
(u) 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 the end of each reporting period 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 return costs to meet contractual return aircraft minimum conditions, at the end of the
lease terms for the aircraft under operating leases, are recorded equally over the lease terms.
(v) Maintenance reserve
Maintenance reserve relates to payments made by the lessee for maintenance activities undertaken
during the lease period. The Group will reimburse the lessee for agreed maintenance work done as
and when incurred. The Group records the amounts received as maintenance reserve. At the expiry of
the lease term, excess maintenance reserve is recognised in the profit and loss account.
(w) 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.
(x) Treasury shares
When shares are reacquired by the Company, 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. When treasury shares are subsequently sold or reissued pursuant to equity compensation
plans, the cost of treasury shares is reversed from the treasury share account and the realised gain or
loss on sale or reissue, net of any directly attributable incremental transaction costs, is recognised in
the capital reserve.