Annual Report 2019

2. Summary of significant accounting policies (cont’d.) 2.23 Revenue and other income (cont’d.) 2.23.2 Aircraft operating leases Revenue from aircraft operating leases is recorded on a straight-line basis over the term of the lease. 2.23.3 Freight services Freight revenue is a distinct performance obligation and recognised upon the completion of services rendered net of discounts. 2.23.4 Rental income and brand license Rental income and brand license fees are recognised on an accrual basis in ‘other income’. 2.23.5 Interest income Interest income is recognised using the effective interest method. 2.23.6 Sale of loyalty points The Group operates a frequent flyer programme where members accumulate points for purchases made which entitle them to discounts on future purchases. Revenue from the award points is recognised as deferred revenue (included in trade and other payables) upon issuing the points, and recognised upon redemption of loyalty points by members. The amount of revenue recognised is computed based on the number of points redeemed and the redemption value of each point which is calculated on a weighted average basis. Award points issued before 1 June 2019 will expire by 36 months upon date of issuance and points issued after 1 June 2019 will expire 24 months upon date of issuance. Revenue associated with the sale of points to merchant partners under the customer loyalty programme is recognised when the obligation is completed. Included in trade and other payables is the deferred breakage. Breakage represents the estimated loyalty points that are not expected to be redeemed by members. The amount of revenue recognised related to deferred breakage is based on the number of loyalty points redeemed in a period in relation to the total number expected to be redeemed, which factors in the Group estimate for the breakage. Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns, as adjusted for changes to any terms and conditions that may affect members’ redemption practices. 2.24 Foreign currencies 2.24.1 Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency. NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 (CONT’D.) 252 MORE THAN JUST AN AIRLINE >