Cathay Pacific 2001 Annual Report Download - page 31

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Cathay Pacific Airways Limited Annual Report 2001 29
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.
7. DEFEASANCE OF LONG-TERM LIABILITIES
Where long-term liabilities have been defeased by the placement of security deposits, those liabilities and
deposits (and income and charge arising therefrom) are netted off, in order to reflect the overall commercial
effect of the arrangements. Such netting off has been effected where a right is held to insist on net settlement
of the liability and deposit including in all situations of default and where that right is assured beyond doubt.
8. INTANGIBLE ASSETS
Intangible assets comprise goodwill and expenditure on computer system development. The accounting policy
for goodwill is outlined in accounting policy 2 on page 27.
Expenditure on computer system development 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 4 years.
9. INVESTMENTS
Long-term investments are stated at fair value and 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 transferred from the investment revaluation reserve to the profit and loss account.
10. STOCK
Stock held for consumption is valued at weighted average cost less any applicable allowance for obsolescence.
Stock held for disposal is stated at the lower of cost and net realisable value. Net realisable value represents
estimated resale price.
11. FUNDS WITH INVESTMENT MANAGERS AND OTHER LIQUID INVESTMENTS
Funds with investment managers and other liquid investments are valued on a mark to market basis and any
gain or loss arising from the revaluation is taken to the profit and loss account.
Cash deposits and notes placed in respect of certain leasing and financing arrangements are stated at cost
while other investments purchased to meet future leasing obligation repayments are stated at amortised cost.
12. FUEL PRICE DERIVATIVES
The Group uses fuel derivatives to reduce its exposure to fluctuating fuel costs. Gains and losses on these
instruments are recognised upon contract expiry as a component of fuel expense during the period the related
fuel is used.
PRINCIPAL ACCOUNTING POLICIES