12 Months Financial Report - Turkish Airlines

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)2.5.18 Share Capital and DividendsCommon shares are classified as equity. Dividends on common shares are recognized in equity in theperiod in which they are approved and declared.2.5.19 Manufacturers' CreditsManufacturers' credits are received against acquisition or lease of aircraft and engines. The Group recordsthese credits as a reduction to the cost of the owned and amortizes them over the related asset’s remainingeconomic life. Manufacturers’ credits related to operating leases are recorded as deferred revenue andamortized over the lease term.2.5.20 Maintenance and Repair CostsRegular maintenance and repair costs for owned and leased assets are charged to operating expense asincurred. Overhaul maintenance checks for owned and finance leased aircraft are expensed as incurredand delivery maintenance checks of operating leased aircraft are accrued on a periodical basis.2.5.21 Frequent Flyer ProgramThe Group provides a frequent flyer program named “Miles and Smiles” in the form of free travel awardto its members on accumulated mileage. Miles earned by flights are recognized as a separatelyidentifiable component of the sales transaction(s). A portion of the fair value of the consideration receivedin respect of the initial sale shall be allocated to the award credits and the consideration allocated to awardcredits should be recognized as revenue when awards credits are redeemed.The Group also sells mileage credits to participating partners in “Shop and Miles” program. A portion ofsuch revenue is deferred and amortized as transportation is provided.2.6 Important Accounting Estimates and AssumptionsPreparation of the financial statements requires the amounts of assets and liabilities being reported,explanations of contingent liabilities and assets and the uses of accounting estimates and assumptionswhich would affect revenue and expense accounts reported during the accounting period. Group makesestimates and assumptions about the future periods. Actual results could differ from those estimations.Accounting estimates and assumptions which might cause material adjustments on the book values ofassets and liabilities in future financial reporting period were given below:The Determination of Impairment on Long Term AssetsBasic assumptions and calculation methods of the Group relating to impairment on assets are explained inDisclosure 2.5.6.25