Cathay Pacific 2015 Annual Report Download - page 104

Cathay Pacific Airways Limited
102
Depreciation of property, plant and equipment 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 3-25 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
property, plant and equipment 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
Property, plant and equipment held under lease
agreements that transfers substantially all the risks and
rewards of ownership is treated as if it had been
purchased outright at fair market value and the
corresponding liabilities to the lessor, net of interest
charges, is included as obligations under finance
leases. Leases which do not transfer substantially all
the risks and rewards of ownership are treated as
operating leases.
Amounts payable in respect of finance leases are
apportioned between interest charges and reductions
of obligations based on the interest rates implicit in
the leases.
Operating lease payments and income are charged and
credited respectively to profit or loss on a straight line
basis over the life of the related lease.
With respect to operating lease agreements, where the
Group is required to return the aircraft with adherence
to certain maintenance conditions, provision is made
during the lease term. This provision is based on the
present value of the expected future cost of meeting
the maintenance and non-maintenance return
condition, having regard to the current fleet plan and
long-term maintenance schedules.
7. Intangible assets
Intangible assets comprise goodwill arising on
consolidation, acquisition of computer software
licences and others. The accounting policy for goodwill
is outlined in accounting policy 2 on pages 100-101.
Expenditureoncomputersoftwarelicencesandothers
which gives rise to economic benefits is capitalised as
part of intangible assets and is amortised on a straight
line basis over its useful life not exceeding a period of
four to ten years.
8. Financial assets
Other long-term receivables, bank and security
deposits, trade and other short-term receivables are
categorised as loans and receivables and are stated at
amortised cost less impairment loss.
Where long-term investments held by the Group are
designated as available-for-sale financial assets, these
investments are stated at fair value. Fair value is based
on quoted market prices at the end of the reporting
period without any deduction for transaction costs. Fair
values for the unquoted equity investments are
estimated using an appropriate valuation model. Any
change in fair value is recognised in the investment
revaluation reserve. On disposal or if there is evidence
that the investment is impaired, the cumulative gain or
loss on the investment is reclassified from the
investment revaluation reserve to profit or loss.
Cash and cash equivalents comprise cash at bank and
on hand, demand deposits with banks and other
financial institutions, and short-term, highly liquid
investments that are readily convertible into known
amounts of cash and which are subject to an
insignificant risk of changes in value, having been within
three months of maturity at acquisition.
Principal Accounting Policies