Cathay Pacific 2003 Annual Report Download - page 36

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34 Cathay Pacific Airways Limited Annual Report 2003
Principal Accounting Policies
11. DEFERRED TAXATION
(continued)
Deferred tax assets relating to unused tax losses and deductible temporary differences are recognised to the
extent that it is probable that future taxable profits will be available against which these unused tax losses and
deductible temporary differences can be utilised.
In addition, where initial cash benefits have been received in respect of certain lease arrangements, provision
is made for the future obligation to make tax payments.
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 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
Fuel derivatives are used to reduce exposure to fluctuating fuel prices. 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 Company operates a frequent-flyer programme called Asia Miles. The incremental cost of providing awards
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 their
miles the liability is reduced to reflect the reduction in the outstanding obligation.
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.