Singapore Airlines 2016 Annual Report Download - page 124

Notes to the Financial Statements
31 March 2016
2 Summary of Significant Accounting Policies (continued)
(i) Depreciation of property, plant and equipment (continued)
(ii) Land and buildings
Freehold buildings, leasehold land and buildings are depreciated to nil residual values as follows:
Company owned oice premises – according to lease period or 30 years, whichever is the shorter.
Company owned household premises – according to lease period or 10 years, whichever is the shorter.
Other premises – according to lease period or 5 years, whichever is the shorter.
Leasehold hotel properties held by
an associated company – according to lease period of 99 years, up to 2081.
(iii) Others
Plant and equipment, oice and computer equipment are depreciated over 1 to 15 years to nil residual values.
(j) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date:
whether fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset.
(i) Finance lease – as lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased asset, are
capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease
payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between finance
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged directly against the profit and loss account.
For sale and finance leasebacks, dierences between sales proceeds and net book values are taken to the statement of financial
position as deferred gain or loss on sale and leaseback transactions, included under deferred account and amortised over the
minimum lease terms.
Major improvements and modifications to leased aircra due to operational requirements are capitalised and depreciated over
the average expected life between major overhauls (estimated to be 4 to 8 years).
(ii) Operating lease – as lessee
Leases where the lessor eectively 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 aircra are determined based on fair values. Excess of sales proceeds
over 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. If the sales proceeds are below fair values, the loss is recognised in
the profit and loss account except that, if the loss is compensated for by future lease payments at below market values, the deferred
loss is included under deferred account and is amortised over the minimum lease period.
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