Singapore Airlines 2016 Annual Report Download - page 98

Download and view the complete annual report

Please find page 98 of the 2016 Singapore Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 232

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220
  • 221
  • 222
  • 223
  • 224
  • 225
  • 226
  • 227
  • 228
  • 229
  • 230
  • 231
  • 232

Determining the fair value of KrisFlyer miles and the miles that will expire without use
Refer to note 2(aa) ‘Revenue’ and note 3(d) ‘Frequent flyer programme’ for the relevant accounting policy and a discussion of significant accounting estimates.
The key audit matter How the matter was addressed in our audit
Cash is received by Singapore Airlines in return for the issuance of miles in
its Frequent Flyer programme. This cash is received as part of ticket sales
made by Singapore Airlines for flights flown by KrisFlyer members, or
alternatively from programme partners that purchase miles from Singapore
Airlines to issue to their own customers.
The fair value of miles issued to KrisFlyer members when flights are flown,
and the cash consideration received for miles issued to KrisFlyer members
from sales to programme partners, is recognised on the balance sheet as
deferred revenue.
Singapore Airlines uses estimates to determine the fair value of the awards
for which the miles will be redeemed. These estimates are based on
historical redemption patterns.
An estimate is made of the number of miles that will expire without use
based on historical expiry patterns and the anticipated impact of changes
to the programme.
Revenue is recognised when KrisFlyer members fly, or when it is assessed
that the miles awarded will expire without use.
The accounting and estimation for determining the fair value of miles
awarded in the Frequent Flyer programme and the proportion of miles
that will expire without being used is complex, requires judgement to be
applied and is a key focus area of our audit.
We evaluated the assumptions applied in the mathematical models used
to determine the fair value of expected KrisFlyer awards. This included
undertaking a comparison to historical redemption patterns and testing the
calculations for award values against observable inputs such as published
market air fares. We tested the controls implemented over the models.
We challenged the assumptions used to estimate the number of miles that
will expire without use, including a comparison to historical experience and
planned changes to the programme that may impact future redemption
activity.
Findings
We found the estimate for the fair value of miles to be balanced. We found the estimate of the percentage of miles that will not be used to be cautious,
reflecting scheme enhancements that are anticipated to reduce the number of miles that will expire over time.
Independent Auditors’ Report
To the members of Singapore Airlines Limited
Singapore Airlines96
FINANCIAL