12 Months Financial Report - Turkish Airlines

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TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 20092. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Cont’d)2.5 Summary of Significant Accounting Policies (Cont’d)2.5.6 Impairment on Assets (Cont’d)In the examination of whether net book values of aircrafts, spare engines and simulators exceed theirrecoverable amounts, the higher value between value in use and sale expenses deducted net selling pricesin US Dollars is used for determination of recoverable amounts. Net selling price for the aircrafts isdetermined according to second hand prices in international price guides. Net selling price for spareengines and simulators is net book values based on US Dollar acquisition costs. In the accompanyingfinancial statements, the change in the differences between net book values of these assets andrecoverable amounts are recognized as provision income/losses under income/losses from otheroperations account. Changes in value due to exchange rate changes are shown under group of financialincome/expenses.2.5.7 Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets,which are assets that necessarily take a substantial period of time to get ready for their intended use orsale, are added to the cost of those assets, until such time as the assets are substantially ready for theirintended use or sale.2.5.8 Financial InstrumentsFinancial assets and liabilities are recorded in the balance sheet when the Group is a legal party to thesefinancial instruments.a) Financial assetsFinancial investments are recognized and derecognized on a trade date where thepurchase or sale of an investment is under a contract whose terms require delivery of theinvestment within the timeframe established by the market concerned, and are initiallymeasured at fair value, net of transaction costs except for those financial assets classifiedas at fair value through profit or loss, which are initially measured at fair value.Financial assets are classified into the following specified categories: financial assets as “at fair valuethrough profit or loss” (FVTPL), “held-to-maturity investments”, “available-for-sale” (AFS) financialassets and “loans and receivables”. The classification depends on the nature and purpose of the financialassets and is determined at the time of initial recognitionFinancial assets at fair value through profit or lossFinancial assets are classified as financial assets at fair value through profit or loss where the Groupacquires the financial asset principally for the purpose of selling in the near term, the financial asset is apart of an identified portfolio of financial instruments that the Group manages together and has a recentactual pattern of short term profit taking as well as derivatives that are not designated and effectivehedging instruments.Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or lossrecognized in profit or loss incorporates any dividend or interest earned on the financial asset.17
TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 20092. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Cont’d)2.5 Summary of Significant Accounting Policies (Cont’d)2.5.8 Financial Instruments (Cont’d)a) Financial assets (cont’d)Effective interest methodThe effective interest method is a method of calculating the amortized cost of a financial asset and ofallocating interest income over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash receipts through the expected life of the financial asset, or whereappropriates a shorter period.Income is recognized on an effective interest basis for held-to-maturity investments, available-for-salefinancial assets and loans and receivables.Loans and receivablesTrade and other receivables are initially recorded at fair value. At subsequent periods, loans andreceivables are measured at amortized cost using the effective interest method.Impairment of financial assetsFinancial assets, other than those at fair value through profit or loss are assessed for indicator ofimpairment at each balance sheet date.Financial assets are impaired where there is objective evidence that as a result of one or more events thatoccurred after the initial recognition of the financial asset the estimated future cash flows of theinvestment have been impacted. For loans and receivables the amount of the impairment is the differencebetween the assets carrying amount and the present value of estimated future cash flows, discounted at theoriginal effective interest rate.The carrying amount of the financial asset is reduced by the impairment loss directly for all financialassets with the exception trade receivables where the carrying amount is reduced through the use of anallowance account. When a trade receivable is uncollectible, it is written off against the allowanceaccount. Subsequent recoveries of amounts previously recognize written of fare credited against theallowance account are recognized in profit or loss.With the exception of available for sale equity instruments, if, in a subsequent period the amount of theimpairment loss decreases and the decrease can be related objectively to an event occurring after theimpairment was recognized, the previously recognized impairment loss is reversed through profit or lossto the extent the carrying amount of the investment at the date the impairment is reversed does not exceedwhat the amortized cost would have been had the impairment not been recognized. In respect of availablefor sale equity securities, any increase in fair value subsequent to an impairment loss is recognizeddirectly in equity.18
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12 Months Financial Report - Turkish Airlines

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