Cathay Pacific 2003 Annual Report Download - page 35

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Cathay Pacific Airways Limited Annual Report 2003 33
Principal Accounting Policies
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. 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 31.
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 four years.
8. 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.
9. 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 by the Group to insist on
net settlement of the liability and deposit including in all situations of default and where that right is assured
beyond doubt.
10. RETIREMENT BENEFITS
Arrangements for staff retirement benefits vary from country to country and are made in accordance with
local regulations and customs.
The retirement benefit obligation in respect of defined benefit retirement plans refers to the obligation less
the fair value of plan assets where the obligation is calculated by estimating the present value of the expected
future payments required to settle the benefit that employees have earned using the projected unit credit
method. Actuarial gains and losses are not recognised unless their cumulative amounts exceeds either 10% of
the present value of the defined benefit obligation or 10% of the fair value of plan assets whichever is greater.
The amount exceeding this corridor is recognised on a straight line basis over the expected average remaining
working lives of the employees participating in the plans.
11. DEFERRED TAXATION
With the introduction of HK SSAP 12 (revised), “Income taxes”, provision for deferred tax is now made on all
temporary differences.