Cathay Pacific 1998 Annual Report Download - page 35

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33
CATHAY PACIFIC AIRWAYS LIMITED ANNUAL REPORT 1998
Principal Accounting Policies
1. Basis of accounting
The accounts have been prepared in accordance with the Hong Kong Society of Accountants’
Statements of Standard Accounting Practice (HK SSAPs) with the exception of the recognition of
exchange differences on certain long-term liabilities which is explained in full in accounting policy 4
below.
2. Basis of consolidation
The consolidated accounts of the Group incorporate the accounts of the Company and its
subsidiary companies made up to 31st December, together with the Group’s share of the results and
retained post acquisition reserves of its associated companies.
The results of subsidiary companies are included in the consolidated profit and loss account, and
the share attributable to minority interests is deducted from consolidated profit after taxation. Where
interests have been bought or sold during the year, only those results relating to the period of
ownership are included in the accounts.
Goodwill arising on consolidation, representing the excess of the cost of subsidiary and
associated companies over the fair value of the Group’s share of the separable net assets at the date
of acquisition, is written off to reserves in the year in which it arises.
On the sale of a subsidiary or associated company, goodwill previously eliminated against
reserves is written back.
Minority interests in the consolidated balance sheet comprise the outside shareholders’ proportion
of the net assets of subsidiary companies.
3. Associated companies
Associated companies are those companies, not being subsidiary companies, 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 management influence.
The consolidated profit and loss account includes the Group’s share of results of associated
companies as reported in their accounts made up to 31st December. In the consolidated balance
sheet, investment in associated companies represents the Group’s share of net assets other than
goodwill.
In the Company’s balance sheet, investment in associated companies is stated at cost less
provision for permanent diminution in value, and loans to those companies.
4. Foreign currencies
Foreign currencies are translated into Hong Kong dollars on the following basis:
(a) for foreign currency denominated monetary assets and liabilities (including currency swaps),
and the balance sheets of subsidiary and associated companies, at the rates ruling at the
balance sheet date; and
(b) for foreign currency transactions entered into during the year, at the market rates ruling at the
relevant transaction dates.