Cathay Pacific 2003 Annual Report Download - page 33

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Cathay Pacific Airways Limited Annual Report 2003 31
Principal Accounting Policies
1. BASIS OF ACCOUNTING
The accounts have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards
(which include all applicable Statements of Standard Accounting Practice (“HK SSAP”) and Interpretations)
issued by the Hong Kong Society of Accountants with the exception of the recognition of certain exchange
differences as explained in accounting policy 4 below. These accounts also comply with the requirements of
the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Listing Rules of the
Stock Exchange.
The measurement basis used is historical cost modified by the revaluation of investments as explained in
accounting policies 8, 10 and 13 below.
2. BASIS OF CONSOLIDATION
The consolidated accounts 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 tax. 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. Goodwill arising on
consolidation is recognised as an intangible asset and amortised 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 and loans to those companies.
In the Company’s balance sheet, investments in associated companies are stated at cost less any impairment
loss recognised and loans to those companies.