Annual Report 2008-2009 - Emirates.com

Emirates
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2. Summary of significant accounting policies (continued)
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions that are in excess of the corridor
limits determined in accordance with IAS 19, are amortised to the consolidated income statement over a period of three years.
Frequent flyer programme
Emirates maintains a frequent flyer programme that provides a variety of awards to programme members based on a mileage credit for
flights on Emirates and other airlines that participate in the programme. Members can also accrue miles by utilising the services of nonairline
programme participants.
Miles accrued through utilising the services of programme partners is paid for by the participating partners and the resulting revenue is
recorded as other operating income.
The incremental direct cost of providing goods and services as adjusted for estimated redemption rates, is provided for as programme
members accrue miles.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial assets and financial liabilities
Financial assets are derecognised only when the contractual rights to the cash flows expire or substantially all the risks and rewards of
ownership are transferred along with the contractual rights to receive cash flows. Financial liabilities are derecognised only when it is
extinguished i.e. when the obligations specified in the contract are discharged or cancelled or expires.
Cash and cash equivalents
Cash and cash equivalents comprise cash, liquid funds with an original maturity of three months or less, and bank overdrafts. Other bank
deposits with maturity less than a year are classified as short term bank deposits. Bank overdrafts are shown within current borrowings
and lease liabilities on the consolidated balance sheet.
3. Critical accounting estimates and judgements
In the preparation of the consolidated financial statements, a number of estimates and associated assumptions have been made relating
to the application of accounting policies and reported amounts of assets, liabilities, income and expense. The estimates and associated
assumptions are assessed on an ongoing basis and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. The following discussion addresses the accounting policies that
require subjective and complex judgements, often as a result of the need to make estimates.
Depreciation of property, plant and equipment
Management assigns useful lives and residual values to property, plant and equipment based on the intended use of assets and the
economic lives of those assets. Subsequent changes in circumstances such as technological advances or prospective utilisation of the
assets concerned could result in the actual useful lives or residual values differing from initial estimates. Management has reviewed the
residual values and useful lives of major items of property, plant and equipment and determined that no adjustment is necessary.
Provision for the frequent flyer programme
The provision is based on miles outstanding valued at the incremental direct cost of providing goods and services. In arriving at the miles
outstanding, an adjustment is made for miles which are not expected to be redeemed based on current trends. Incremental direct costs
are arrived at based on the forecasted weighted average cost of the reward mix i.e. redemptions on Emirates services and on non-airline
or other member airlines. These estimates are reviewed on an annual basis and the liability adjusted as appropriate.