Singapore Airlines 2011 Annual Report Download - page 118

SINGAPORE AIRLINES
116
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
2 Summary of Significant Accounting Policies (continued)
(ac) Employee benefits (continued)
(iii) Defined benefit plans
The Group contributes to several defined benefit pension and other post-employment benefit
plans for employees stationed in certain overseas countries. The cost of providing benefits
includes the Group’s contribution for the year plus any unfunded liabilities under the plans, which
is determined separately for each plan. Contributions to the plans over the expected average
remaining working lives of the employees participating in the plans are expensed on accrual basis.
(ad) Aircraft maintenance and overhaul costs
The Group recognises aircraft maintenance and overhaul expenses (except heavy maintenance visits,
engine overhaul and landing gear overhaul expenses) on an incurred basis. For engine overhaul costs
covered by power-by-hour third-party maintenance agreements, a portion of the cost is expensed at a
fixed rate per hour during the terms of the agreements.
(ae) Training and development costs
Training and development costs, including start-up programme costs, are charged to the profit and loss
account in the financial year in which they are incurred.
(af) Borrowing costs
Borrowing costs incurred to finance advance and progress payments for aircraft are capitalised as part
of advance and progress payments until the aircraft are commissioned for operation or the projects
are completed. All other borrowing costs are recognised as finance charges in the period in which
they are incurred.
(ag) Claims and liquidated damages
Claims for liquidated damages, in relation to a loss of income, are recognised in the profit and loss
account when a contractual entitlement exists, the amount can be reliably measured and receipt is
virtually certain. When the claims do not relate to a compensation for loss of income, the amounts
are taken to the statement of financial position as deferred credit, included under deferred account,
as a reduction to the cost of the assets when the assets are capitalised and also for future reduction of
operating lease expenses.
(ah) Derivative financial instruments and hedging
The Group uses derivative financial instruments such as forward currency contracts, foreign currency
option contracts, cross currency swap contracts, interest rate swap contracts, interest rate cap contracts,
jet fuel option contracts, jet fuel swap contracts, gasoil swap contracts and regrade swap contracts
to hedge its risks associated with foreign currency, interest rate and jet fuel price fluctuations. Such
derivative financial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into, and are subsequently re-measured at fair value.
Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge
accounting are taken directly to the profit and loss account.