Cathay Pacific 2000 Annual Report Download - page 38

36 CATHAY PACIFIC AIRWAYS LIMITED ANNUAL REPORT 2000
4. Foreign currencies (continued)
The treatment of exchange differences on foreign currency operating cash flow hedges is
supported by that element of International Accounting Standards which deals with accounting
for hedge transactions. In the opinion of the Directors, this treatment fairly reflects the effects of
the Group’s foreign currency cash flow hedge arrangements. The matching of foreign currency
cash flows is a key risk management tool for the Group’s airline operations. The appropriateness
of continuing this treatment is assessed regularly, taking into consideration the latest operating
cash flow projections of each currency. The Directors consider that the immediate recognition of
all such exchange fluctuations in the profit and loss account could materially distort year on year
results and conclude that the adopted treatment gives a true and fair view of the financial
position, financial performance and cash flow of the Group.
5. Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation.
Depreciation of fixed assets is calculated on a straight line basis to write down their cost over
their anticipated useful lives to estimated residual values as follows:
Aircraft and related equipment over 15 to 20 years to residual value of between 0% to
15% of cost
Other equipment over 3 to 7 years to nil residual value
Leasehold land and buildings over the period of the lease 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 ten years.
The Group’s depreciation policy and carrying amount of fixed assets is reviewed regularly, taking
into consideration factors such as changes in fleet composition, current and forecast market
prices, and technical factors which affect the life expectancy of the assets. Any impairment in
value is recognised by writing down carrying value to estimated net recoverable amount.
6. Leased assets
Fixed assets held under lease agreements that give rights equivalent to 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.
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 the profit and
loss account on a straight line basis over the life of the related lease.
Principal Accounting Policies