Singapore Airlines 2011 Annual Report Download - page 119

ANNUAL REPORT 2010/2011 117
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
2 Summary of Significant Accounting Policies (continued)
(ah) Derivative financial instruments and hedging (continued)
The Group also sets aside USD deposits to match forecast capital expenditure requirements. To create
a USD denominated asset in the statement of financial position to match against the expected USD
liability for capital expenditure, the Group accumulates USD over a period of 10 months in advance of
forecast aircraft payments. The exchange gains and losses of the USD held would be recognised in the
carrying value of the aircraft.
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 identification 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 flows attributable to the hedged risk. Such hedges are expected to be
highly effective in achieving offsetting changes in cash flows, and are assessed on an ongoing basis
to determine that they have been highly effective throughout the financial reporting periods for which
they are designated.
Derivatives are classified as fair value through profit and loss unless they qualify for hedge accounting.
Hedges which meet the criteria for hedge accounting are accounted for as cash flow hedges.
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised
directly in the fair value reserve [Note 16(d)], while the ineffective portion is recognised in the profit
and loss account.
Amounts taken to the fair value reserve are transferred to the profit and loss account when the hedged
transaction affects profit or loss, such as when a forecast sale or purchase occurs. If the hedged item
is a non-financial asset or liability, the amounts taken to the fair value reserve are transferred to the
initial carrying amount of the non-financial asset or liability.
(ai) Segment reporting
(i) Business segment
For management purposes, the Group is organised into operating segments based on the nature
of the services provided which are independently managed by the respective segment managers
responsible for the performance of the respective segments under their charge. The segment
managers report directly to the management of the Company who regularly review the segment
results in order to allocate resources to the segments and to assess the segment performance.
Additional disclosures on each of these segments are shown in Note 4, including the factors used to
identify the reportable segments and the measurement basis of segment information. The significant
business segments of the Group are airline operations, engineering services and cargo operations.
(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 engineering services and cargo operations, is derived in East Asia and therefore, is
not shown.
Assets, which consist principally of flight 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.