(a) Basis of preparation
The financial statements have been prepared in accordance with Indian
Generally Accepted Accounting Principles (GAAP) under the historical
cost convention on the accrual basis. GAAP comprises mandatory
accounting standards as specified in the Companies (Accounting
Standards) Rules, 2006, the provisions of the Companies Act, 1956 and
guidelines issued by the Securities and Exchange Board of India.
Accounting policies have been consistently applied except where a newly
issued accounting standard is initially adopted or a revision to an
existing accounting standard requires a change in the accounting policy
hitherto in use. Further, the financial statements are presented in the
general format specified in schedule VI to the Companies Act, 1956
(b) Use of estimates
In preparation of the financial statements in conformity with generally
accepted accounting principles, estimates and assumptions, where
necessary, have been made based on management''s best knowledge and
experience. Accordingly, actual results may differ from such
(c) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and revenue can be reliably
measured. Revenue from charter services is recognized based on services
provided and billed as per the terms of the contracts with the
customers provided that the collection is reasonably certain. Revenue
from sale of tickets of the airline and cargo operations is recognized
in the period, in which the service is provided, i.e. on flown /
carried basis. Such revenue is net of statutory fees to be collected
from customers as per government regulations. Unearned revenue
represents consideration on sale of passenger tickets and cargo against
which the Company has to provide services in future periods and is
included under Advances received / Forward sales. The same is released
to the Statement of Profit and Loss as the services are rendered.
Fees for passenger initiated changes and cancellations of tickets are
recognized as revenue in the period in which such changes /
cancellations are effected.
Interest income is recognized on a time proportionate method when the
right to receive income is established and that collection is
reasonably certain. Income from sale of advertisement space is
recognized on accrual basis over the period the advertisements are
The Company enters into barter arrangements with other parties for
providing services in exchange for the Company''s advertising in the
other party''s media or in exchange for other services or goods. Such
transactions are recorded at the fair value of the services / goods
received from the other party, or at the fair value of the services
provided by the Company if it is not feasible to determine the fair
value of the services / goods received.
(d) Fixed assets and Intangible assets
Fixed assets and intangible assets are stated at cost of acquisition
less accumulated depreciation / amortization and impairment losses (if
any). Cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use and
also includes cost of modification and improvements to leased assets.
Borrowing costs relating to acquisition of fixed assets are also
included to the extent they relate to the period till such assets are
ready to be put to use.
Cost of fixed assets not ready for intended use as of the balance sheet
date are disclosed under capital work-in- progress. Advance paid
towards acquisition of fixed assets are included in long term loans and
Depreciation on fixed assets, except non-compete fees, trademarks,
design - aircraft interiors, software, leasehold improvements, is
provided on a straight line basis at the rates prescribed under
schedule XIV to the Companies Act, 1956 which are estimated to be the
useful life of fixed assets by the management. Additions are
depreciated on a pro-rata basis from the date of installation till the
date the assets are sold or disposed.
1) Non Compete fees are amortized over the period of agreement (i.e.
2) Trademarks are amortized over the period of four years.
3) Design - Aircraft Interiors are amortized over the period of seven
4) Software is depreciated over a period of 1 - 4 years, based on
estimated useful life as ascertained by the management.
5) Leasehold improvements on operating leases are depreciated over the
shorter of the period of the lease and their estimated useful lives.
6) Cost of major maintenance and overhaul of the engines are amortized
over the period of estimated useful life of the repairs (3 years).
7) Movable cabins and mobile phones are depreciated over the period of
five and two years, respectively, on a straightline method.
(f) Borrowing Costs
Borrowing costs attributable to the acquisition or construction of a
qualifying asset are capitalized as a part of the cost of the assets.
Other borrowing costs are recognized as an expense in the period in
which they are incurred. Borrowing costs include amortization of
ancillary costs incurred in connection with the arrangement of
borrowings. The unamortized portion of ancillary costs incurred in
connection with the arrangement of borrowings is included under ''Loans
(g) Leases - Where the Company is a lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
and the lease term. Leases where the lessors effectively retain
substantially all the risks and benefits of ownership over the leased
term are classified as operating leases. Operating lease payments
including expenses incurred for bringing the leased asset to its
working condition for intended use are recognized as an expense in the
Statement of Profit and Loss on a straight-line basis over the lease
Profit or loss on sale and leaseback arrangements resulting in
operating leases are recognized immediately in case the transaction is
established at a fair value, else the excess over the fair value is
deferred and amortised over the period for which the asset is expected
to be used. If the sale price is below the fair value and the loss is
compensated by future lease payments at below market price, the same is
deferred and amortized in proportion to the lease payments over the
period for which the asset is expected to be used. If the fair value at
the time of sale and lease back transaction is less than the carrying
amount of the asset, a loss equal to the amount of difference between
the carrying amount and fair value is recognised immediately. In case
of sale and leaseback arrangement resulting in a finance lease, any
excess or deficiency of sales proceeds over the carrying value is
deferred and amortised over the lease term in proportion to the
depreciation of the leased asset.
(h) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life. A previously recognized
impairment loss is increased or reversed depending on changes in
circumstances. However, the carrying value after reversal is not
increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
(i) Maintenance costs
In respect of aircraft, aircraft engines and helicopters, the Company
has entered into maintenance arrangements. Payments made to lessors
for major maintenance expenditure as per the related maintenance
agreements, comprising fixed period-based amounts and variable
activity-based amounts are initially considered as maintenance deposits
and expensed as and when maintenance expenditure is
incurred/termination of agreements.
Inventories are valued at lower of cost or net realizable value. Cost
of engineering inventories is determined on first in first out basis
except at one of the divisions where the weighted average basis was
followed till December 31, 2008. In respect of reusable items such as
rotables, special tools etc, provision for amortization / obsolescence
is made based on the estimated useful life of the aircraft as derived
from schedule XIV to the Companies Act, 1956. In-flight inventory is
valued on weighted average basis, while inventory of fuel is valued on
the basis of last fuel uplifted rates in respective aircrafts.
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize
a decline other than temporary in the value of the investments.
(l) Employee Benefits
(i) Defined Contribution Plan
The Company contributes on a defined contribution basis to employees''
provident fund and pension scheme towards post employment benefits, all
of which are administered by the respective government authorities.
The Company also contributes to social security schemes in respect of
its employees at certain overseas offices. It has no further
obligation beyond making its contribution which is expected in the year
in which it pertains.
(ii) Defined Benefit Plan
The Company has a defined benefit plan namely gratuity for all its
employees. The liability for the defined benefit plan of gratuity is
determined on the basis of an actuarial valuation by an independent
actuary at the year-end, which is calculated using Projected Unit
Credit Method. Actuarial gains and losses are adjusted in the Statement
of Profit and Loss.
(iii) Other long-term employee benefits
The employees of the Company are entitled to leave as per the leave
policy of the Company. The liability in respect of unutilized leave
balances is provided based on an actuarial valuation carried out by an
independent actuary as at the year-end and charged to the Statement of
Profit and Loss. Actuarial gains and losses are adjusted in the
Statement of Profit and Loss.
(m) Income taxes
Tax expense comprises current, deferred and fringe benefit taxes.
Current income tax and fringe benefit tax are measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income-tax Act, 1961. Deferred income taxes reflects the impact
of current period timing differences between taxable and accounting
income for the period and reversal of timing differences of earlier
years. Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted as at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. Deferred tax
assets are recognized on carry forward of unabsorbed depreciation and
tax losses only if there is virtual certainty that such deferred tax
assets can be realized against future taxable profits. Unrecognized
deferred tax assets of earlier years are re-assessed and recognized to
the extent that it has become reasonably certain that future taxable
income will be available against which such deferred tax assets can be
(n) Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting and foreign currencies at the date of the transaction.
Foreign currency monetary items are reported at rate prevailing on the
balance sheet date. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction; and non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the period, or reported in
previous financial statements, are recognized as income or as expenses
in the period in which they arise except that the Company had availed
the option provided by notification (No. G.S.R. 225(E), dated March 31,
2009) issued by the Ministry of Corporate Affairs read with accounting
standard 11 in respect of foreign exchange differences in respect of
long term monetary assets and liabilities. The Company has not availed
the option of the relevant notification after March 31, 2010.
(iv) Forward exchange contracts
The Company uses forward exchange contracts to hedge its exposure to
movements in foreign exchange rates. The Company does not use the
forward exchange contracts for trading or speculation purposes. In
respect of foreign currency monetary assets or liabilities in respect
of which forward exchange contract is taken, the premium or discount
arising at the inception of forward exchange contracts is amortized as
expense or income over the life of the contract. Exchange differences
on such contracts are recognized in the statement of profit and loss in
the period in which the exchange rates change. Any profit or loss
arising on cancellation or renewal of forward exchange contract is
recognized as income or as expense for the period. Pursuant to The
Institute of Chartered Accountants of India''s announcement ''Accounting
for Derivatives'', the Company marks-to-market all such outstanding
derivative contracts at the end of the period and the resulting
mark-to-market losses, if any, are recognized in the Statement of
Profit and Loss.
(o) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and relevant taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events of bonus issue, bonus element in a rights issue to
existing shareholders, share split, and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
A provision is recognized when an enterprise has a present obligation
as a result of past event; and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted
to their present value and are determined based on best estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
(q) Stock option compensation expense
The Company accounts for stock option compensation expense based on the
intrinsic value of the options granted which is the difference between
the fair value of the share underlying the option and the exercise
price of the option determined at the grant date. Compensation expense
is amortized over the period of vesting on a straight-line basis. The
accounting value of the options net of deferred compensation expense is
reflected as Employee stock option outstanding.
(r) Initial costs on leased aircrafts
Expenses directly attributable and incurred in relation to aircrafts
acquired on operating lease arrangement are deferred and amortized over
the period of lease of aircrafts. Such expenses interalia include
initial borrowing costs incurred on pre delivery payments for aircrafts
till the Company novates / assigns the right to acquire the aircrafts
in favor of the lessors.
(s) Incentives from aircraft manufacturers
Incentives from aircraft manufacturers are credited to statement of
Profit and Loss in the year when such incentives are made available to
the Company as per the terms of aircraft purchase agreements. This
includes incentives granted for the purpose of meeting certain revenue
Commission to travel agents is recognized when the corresponding
revenues are recognized as income on flown / carried basis.