Cathay Pacific 2014 Annual Report Download - page 101

ANNUAL REPORT 2014
99 Principal Accounting Policies
proportion of the net assets of subsidiaries and are treated
as a part of equity. In the consolidated statement of profit
or loss and other comprehensive income, non-controlling
interests are disclosed as an allocation of the profit or loss
and total comprehensive income for the year.
In the Company’s statement of financial position,
investments in subsidiaries are stated at cost less any
impairment loss recognised. The results of subsidiaries
are accounted for by the Company on the basis of
dividends received and receivable.
3. Associates
Associates are those companies, not being subsidiaries,
in which the Group holds a substantial long-term interest in
the equity share capital and over which the Group is in a
position to exercise significant influence.
The consolidated statement of profit or loss and other
comprehensive income includes the Group’s share of
results of associates as reported in their financial
statements made up to dates not earlier than three months
prior to 31st December. In the consolidated statement
of financial position, investments in associates represent
the Group’s share of net assets, goodwill arising on
acquisition of the associates (less any impairment) and
loans to those companies.
In the Company’s statement of financial position,
investments in associates are stated at cost less
any impairment loss recognised and loans to
those companies.
4. Foreign currencies
Foreign currency transactions entered into during the
year are translated into Hong Kong dollars at the market
rates ruling at the relevant transaction dates whilst the
following items are translated at the rates ruling at the
reporting date:
(a) foreign currency denominated financial assets
and liabilities.
(b) assets and liabilities of foreign subsidiaries
and associates.
Exchange differences arising on the translation of foreign
currencies into Hong Kong dollars are reflected in profit or
loss except that:
(a) unrealised exchange differences on foreign currency
denominated financial assets and liabilities, as
described in accounting policies 8, 9 and 10 below, that
qualify as effective cash flow hedge instruments under
HKAS 39 “Financial Instruments: Recognition and
Measurement” are recognised directly in equity via the
statement of changes in equity. These exchange
differences are included in profit or loss as an
adjustment to the hedged item in the same period or
periods during which the hedged item affects profit
or loss.
(b) unrealised exchange differences on net investments in
foreign subsidiaries and associates (including intra-
Group balances of an equity nature) and related long-
term liabilities are taken directly to equity.
5. Fixed assets and depreciation
Fixed assets are stated at cost less accumulated
depreciation and impairment.
The cost of an item of fixed assets comprises its purchase
price and any directly attributable costs of bringing the
asset to working condition for its intended use.An
acquired (owned and finance leased) aircraft reflects all
components in its full service potential excluding the
maintenance condition of its landing gears, airframe and
engines. The cost relating to the maintenance element is
identified on acquisition as a separate component and
depreciated till its next major maintenance event.
Expenditure for heavy maintenance visits on aircraft,
engine overhauls and landing gear overhauls, is capitalised
at cost and depreciated over the average expected life
between major overhauls, estimated to be 4 to 10 years.
Expenditure for engine overhaul costs covered by power-
by-hour (fixed rate charged per hour) maintenance
agreements is expensed by hours flown. Expenditure for
other maintenance and repairs is charged to the profit
or loss.
Depreciation of fixed assets is calculated on a straight line
basis to write down cost over their anticipated useful lives
to their estimated residual values as follows:
Passenger aircraft over 20 years to residual value of the
lower of 10% of cost or expected
realisable value
Freighter aircraft over 20-27 years to residual value of
between 10% to 20% of cost and
over 10 years to nil residual value
for freighters converted from
passenger aircraft
Aircraft product over 5-10 years to nil residual value
Other equipment over 3-4 years to nil residual value
Buildings over the lease term of the leasehold
land to nil residual value
Major modifications to aircraft and reconfiguration costs
are capitalised as part of aircraft cost and are depreciated
over periods of up to 10 years.
The depreciation policy and the carrying amount of fixed
assets are reviewed annually taking into consideration
factors such as changes in fleet composition, current and
forecast market values and technical factors which affect
the life expectancy of the assets. Any impairment in value
is recognised by writing down the carrying amount to
estimated recoverable amount which is the higher of the
value in use (the present value of future cash flows) and the
fair value less costs of disposal.
6. Leased assets
Fixed assets held under lease agreements that transfer
substantially all the risks and rewards of ownership are
treated as if they had been purchased outright at fair
market value and the corresponding liabilities to the lessor,
net of interest charges, are included as obligations under
finance leases. Leases which do not transfer substantially
all the risks and rewards of ownership are treated as
operating leases.