Singapore Airlines 2012 Annual Report Download - page 116

114 SINGAPORE AIRLINES
Notes to the Financial Statements
31 March 2012
2 Summary of Significant Accounting Policies (continued)
(s) 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.
(t) 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.
(u) 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.
(v) 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.
(w) 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. Voting rights related to treasury shares are nullified
for the Group and no dividends are allocated to them respectively.