Cathay Pacific 2001 Annual Report Download - page 29

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Cathay Pacific Airways Limited Annual Report 2001 27
1. BASIS OF ACCOUNTING
The accounts have been prepared in accordance with Statements of Standard Accounting Practice (“HK SSAPs”)
and Interpretations issued by the Hong Kong Society of Accountants (“HKSA”) with the exception of the
recognition of certain exchange differences as explained 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 net assets 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 represents the excess of the cost of subsidiary and associated companies
over the fair value of the Group’s share of the net assets at the date of acquisition. The Group recognises
goodwill arising on consolidation as an intangible asset and amortises it on a straight line basis over its estimated
useful economic life not exceeding a period of 20 years.
The carrying amount of goodwill is reviewed annually and is written down if any impairment arises. On disposal
of a subsidiary or associated company, the unamortised goodwill is included in the calculation of any gain or loss.
Minority interests in the consolidated balance sheet comprise the outside shareholders’ proportion of the net
assets of subsidiary companies.
In the Company’s balance sheet investments in subsidiary companies are stated at cost less any impairment
loss recognised. The results of subsidiary companies are accounted for by the Company on the basis of dividends
received and receivable.
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 investments in
associated companies represent the Group’s share of net assets.
In the Company’s balance sheet investments in associated companies 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
balance sheet date:
(i) foreign currency denominated monetary assets and liabilities (including currency derivatives).
(ii) the balance sheets of foreign subsidiary and associated companies.
PRINCIPAL ACCOUNTING POLICIES