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AirAsia X Berhad • Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d)
Basis of consolidation (continued)
(iii)
Joint arrangements (continued)
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have
been changed where necessary to ensure consistency with the policies adopted by the Group.
(e)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and
equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it
to be capable of operating in the manner intended by management. Costs also include borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset (refer to accounting policy Note 2(p) on borrowing costs).
Where significant parts of an item of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts in the carrying amount of
the property, plant and equipment as a replacement when it is probable that future economic benefits associated with the parts will flow to the Group and the cost of
the parts can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as expenses in profit
or loss during the period in which they are incurred.
Significant parts of an item of property, plant and property are depreciated separately over their estimated useful lives in accordance with the principle in MFRS
116 “Property, Plant and Equipment”. Depreciation is calculated using the straight-line method to write-off the cost of the assets to their residual values over their
estimated useful lives.
The useful lives for this purpose are as follows:
Aircraft
- engines and airframe excluding service potential
25 years
- service potential of engines and airframe
6 or 12 years
Aircraft spares
10 years
Aircraft fixtures and fittings
Useful life of aircraft or remaining lease term of aircraft, whichever is shorter
Motor vehicles
5 years
Office equipment, furniture and fittings
5 years
Service potential of 6 years represents the period over which the expected cost of the first major aircraft engine overhaul is depreciated. Subsequent to the engine
overhaul, the actual cost incurred is capitalised and depreciated over the subsequent 6 years.
Certain elements of the cost of an airframe are attributed on acquisition to 6 years interval check or 12 years interval check, reflecting its maintenance conditions. This
cost is amortised over the shorter of the period to the next scheduled heavy maintenance or the remaining life of the aircraft.
Assets not yet in operation are stated at cost and are not depreciated until the assets are ready for their intended use. Useful lives of assets are reviewed and adjusted
if appropriate, at the balance sheet date.
Residual values, where applicable, are reviewed annually against prevailing market values at the balance sheet date for equivalent aged assets, and depreciation rates
are adjusted accordingly on a prospective basis. For the current financial year ended 31 December 2014, the estimated residual value for aircraft airframes and engines
is 10% of their cost (2013: 10% of their cost).
The costs of upgrades to leased assets are capitalised and amortised over the shorter of the expected useful life of the upgrades or the remaining life of the aircraft.
Deposits on aircraft purchase are included as part of the cost of the aircraft and are depreciated from the date that the aircraft is ready for its intended use.
