| (i) | Property and equipment |
| (i) | Recognition and measurement |
Flight equipment, property and other equipment are measured at cost less accumulated depreciation and accumulated impairment losses in accordance with IAS 16 “Property, Plant and Equipment”.
Property, operating equipment, and improvements that are being built or developed for future use by the Company are recorded at cost as under–construction assets. When under–construction assets are ready for use, the accumulated cost is reclassified to the respective property and equipment category.
An
item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or
disposal. Gain and losses on disposal of an item of flight equipment, property and equipment are determined by comparing the proceeds
from disposal with the carrying amount.
| (ii) | Subsequent costs |
The
costs incurred for major maintenance of an aircraft’s fuselage and engines are capitalized and depreciated over the shorter
period to the next scheduled maintenance or return of the asset. The depreciation rate is determined according to the asset’s
expected useful life based on projected cycles and flight hours. Routine maintenance expenses of aircraft and engines are charged
to income as incurred.
| (iii) | Depreciation |
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.
Depreciation is recognized in the Consolidated Statement of Comprehensive Income on a straight–line basis over the estimated useful lives of flight equipment, property and other equipment, since this method most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Rotable spare parts for flight equipment are depreciated on the straight–line method, using rates that allocate the cost of these assets over the estimated useful life of the related aircraft. Land is not depreciated.
Estimated
useful lives are as follows:
| Estimated useful life (years) | ||
| Flight equipment: | ||
| Aircraft | 10 – 30 | |
| Aircraft components and engines | Useful life of fleet associated with component or engines | |
| Aircraft major repairs | 4 – 12 | |
| Leasehold improvements | Lesser of remaining lease term and estimated useful life of the leasehold improvement | |
| Property | 20 – 50 | |
| Administrative buildings | 20 – 50 | |
| Vehicles | 2 – 10 | |
| Machinery and equipment | 2 – 15 |
Residual values, amortization methods and useful lives of the assets are reviewed and adjusted, if appropriate, at each reporting date.
The carrying value of flight equipment, property and other equipment is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable and the carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
The Company receives credits from manufacturers on acquisition of certain aircraft and engines that may be used for the payment of maintenance services, training, acquisition of spare parts and others. These credits are recorded as a reduction of the cost of acquisition of the related aircraft and engines and against other accounts receivable. These amounts are then charged to expense or recorded as an asset, when the credits are used to purchase additional goods or services. These credits are recorded within other liabilities in the Consolidated Statement of Financial Position when awarded by manufacturers.
| (iv) | Revaluation and other reserves |
Administrative property in Bogota, Medellín, El Salvador, and San Jose is recorded at fair value less accumulated depreciation on buildings and impairment losses recognized at the date of revaluation. Valuations are performed with sufficient frequency to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. A revaluation reserve is recorded in other comprehensive income and credited to the asset revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognized in profit or loss, the increase is recognized in profit and loss. A revaluation deficit is recognized in the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.