Cathay Pacific 2014 Annual Report Download - page 100

Cathay Pacific Airways Limited
98 Principal Accounting Policies
1. Basis of accounting
The financial statements have been prepared in accordance
with all applicable Hong Kong Financial Reporting Standards
(“HKFRS”) (which include all applicable Hong Kong Accounting
Standards (“HKAS”), Hong Kong Financial Reporting
Standards and Interpretations) issued by the Hong Kong
Institute of Certified Public Accountants (“HKICPA”). These
financial statements also comply with the requirements of the
Hong Kong Companies Ordinance, which for this financial
year and the comparative period continue to be those of the
predecessor Hong Kong Companies Ordinance (Cap. 32), in
accordance with the transitional and saving arrangements in
Part 9 of Schedule 11 to the new Hong Kong Companies
Ordinance (Cap. 622), “Accounts and Audit”, which are set out
in sections 76 to 87 of that Schedule. These financial
statements also comply with the applicable disclosure
provisions of the Rules Governing the Listing of Securities
(the “Listing Rules”) on The Stock Exchange of Hong Kong
Limited (the “Stock Exchange”).
In addition, the requirements of Part 9 “Accounts and Audit”
of the new Hong Kong Companies Ordinance (Cap. 622)
come into operation as from the Company’s first financial
year commencing on or after 3rd March 2014 (i.e. 1st
January 2015) in accordance with section 358 of that
Ordinance.The Group is in the process of making
assessment of expected impact of the changes in the
Companies Ordinance on the consolidated financial
statements in the period of initial application of Part 9 of the
new Hong Kong Companies Ordinance (Cap. 622). So far it
has concluded that the impact is unlikely to be significant
and only the presentation and the disclosure of information
in the consolidated financial statements will be affected.
The measurement basis used is historical cost modified by
the use of fair value for certain financial assets and liabilities
as explained in accounting policies 8, 9, 10 and 12 below.
The preparation of the financial statements in conformity
with HKFRS requires management to make certain
estimates and assumptions which affect the amounts of
fixed assets, intangible assets, long-term investments,
retirement benefit obligations and taxation included in the
financial statements. These estimates and assumptions
are continually re-evaluated and are based on
management’s expectations of future events which are
considered to be reasonable.
The HKICPA has issued a number of new HKFRSs and
amendments to HKFRSs that are first effective for the
current accounting period of the Group and the Company.
Of these, the following developments are relevant to the
Group’s financial statements:
• Amendments to HKAS 32 “Offsetting Financial Assets
and Financial Liabilities”
• Amendments to HKAS 36 “Recoverable Amount
Disclosures for Non-Financial Assets”
• Amendments to HKAS 39 “Novation of Derivatives and
Continuation of Hedge Accounting”
• Amendments to HKFRS 10, HKFRS 12 and HKAS 27
(2011) “Investment Entities”
• HK (IFRIC) Interpretation 21 “Levies”
The Group has not applied any new standard or
interpretation that is not yet effective for the current
accounting period.
The amendments to HKAS 32 “Offsetting Financial Assets
and Financial Liabilities” clarify the offsetting criteria in
HKAS 32. The amendments have had no significant impact
on the Group’s financial statements.
The amendments to HKAS 36 “Recoverable Amount
Disclosures for Non-Financial Assets” modify the
disclosure requirements for impaired non-financial
assets. Among them, the amendments expand the
disclosures required for an impaired asset or CGU whose
recoverable amount is based on fair value less costs of
disposal. The Group has provided the disclosure
requirements applicable to the Group.
The amendments to HKAS 39 “Novation of Derivatives and
Continuation of Hedge Accounting” provide relief from
discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets
certain criteria. The amendments have had no significant
impact on the Group’s financial statements.
The amendments to HKFRS 10, HKFRS 12 and HKAS 27
(2011) “Investment Entities” provide consolidation relief to
those parents which qualify to be an investment entity as
defined in the amended HKFRS 10. Investment entities are
required to measure their subsidiaries at fair value through
profit or loss. The amendments have had no significant
impact on the Group’s financial statements.
The HK (IFRIC) Interpretation 21 “Levies” provides guidance
on when a liability to pay a levy imposed by a government
should be recognised. The interpretation has had no
significant impact on the Group’s financial statements.
2. Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and its subsidiaries
made up to 31st December together with the Group’s share
of the results and net assets of its associates. Subsidiaries
are entities controlled by the Group. The Group controls
an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and
has the ability to affect those returns through its power
over the entity.
The results of subsidiaries are included in the consolidated
statement of profit or loss and other comprehensive
income. Where interests have been bought or sold during
the year, only those results relating to the period of control
are included in the financial statements.
Goodwill represents the excess of the cost of subsidiaries
and associates over the fair value of the Group’s share of
the net assets at the date of acquisition. Goodwill is
recognised at cost less accumulated impairment losses.
Goodwill arising from the acquisition of subsidiaries is
allocated to cash-generating units and is tested annually
for impairment.
On disposal of a subsidiary or associate, goodwill is
included in the calculation of any gain or loss.
Non-controlling interests in the consolidated statement of
financial position comprise the outside shareholders’