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2.
Summary of significant accounting policies (cont’d.)
2.8 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually, or as and when
events or circumstances occur indicating that an impairment may exist. Assets that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing
impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (CGUs). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal at each reporting date.
Any impairment loss is charged to profit or loss unless it reverses a previous revaluation in which case it is charged to the
revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in
recoverable amount is recognised in profit or loss unless it reverses an impairment loss on a revalued asset in which case it is
taken to revaluation surplus.
2.9 Maintenance and overhaul
Owned aircraft
The accounting for the cost of providing major airframe and certain engine maintenance checks for owned aircraft is described
in accounting policy Note 2.5 on property, plant and equipment.
Leased aircraft
Where the Group has a commitment to maintain aircraft held under operating leases, provision is made during the lease term
for the rectification obligations contained within the lease agreements. The provisions are based on estimated future costs of
major airframe, certain engine maintenance checks and one-off costs incurred at the end of the lease by making appropriate
charges to the income statement calculated by reference to the number of hours or cycles operated during the financial year.
2.10 Leases
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to
use an asset for an agreed period of time.
Lessee
Finance leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the
leased property and the present value of the minimum lease payment.
Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest
on the remaining balance of the liability. The corresponding rental obligations, net of finance charges, are included in payables.
The interest element of the finance cost is charged to profit or loss over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under
finance leases is depreciated over the shorter of the useful life of the asset and the lease term.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the
leased assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease expense.
NOTES TO THE
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
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AirAsia Berhad
REPORTS AND FINANCIAL STATEMENTS
258