Cathay Pacific 2002 Annual Report Download - page 35

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32 Cathay Pacific Airways Limited Annual Report 2002
11. DEFERRED TAXATION
Provision is made for deferred taxation using the liability method for all timing differences.
In addition, where initial cash benefits have been received in respect of certain lease arrangements, provision is
made for the future obligation to make taxation payments on behalf of the lessors.
12. 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.
13. 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.
14. REVENUE RECOGNITION
Passenger and cargo ticket sales are recognised as revenue when the transportation service is provided. The
value of unflown passenger and cargo sales is recorded as unearned transportation revenue. Income from catering
and other services is recognised when the services are rendered.
15. 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.
16. MAINTENANCE AND OVERHAUL COSTS
Replacement spares and labour costs for maintenance and overhaul of aircraft are charged to the profit and loss
account on consumption and as incurred respectively.
17. FREQUENT-FLYER PROGRAMME
The Group operates a frequent-flyer programme called Asia Miles. The incremental cost of providing travel in
exchange for redemption of miles earned by members is accrued in the accounts as an operating cost and a
future liability after allowing for miles which are not expected to be redeemed. As members redeem awards the
incremental liability is reduced to reflect the release of the outstanding obligations.
18. RELATED PARTIES
For the purposes of these accounts parties are considered to be related to the Group if the Group has the ability,
directly or indirectly, to control the party or exercise significant influence over the party in making financial and
operating decisions, or vice versa, or where the Group and the party are subject to common control or common
significant influence. Related parties may be individuals or entities.
Principal Accounting Policies