Cathay Pacific 2004 Annual Report Download - page 41

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Cathay Pacific Airways Limited 2004 Annual Report 37
Principal Accounting Policies
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 programme”).
The incremental cost of providing awards in
exchange for redemption of miles earned by
members is accrued as an operating cost and
a 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.
The Company sells miles to participating partners
in the programme. In the past, revenue earned
from selling miles was recognised immediately.
That portion of revenue earned from miles sold
which is expected to be redeemed on Cathay
Pacific’s flights is now deferred and amortised
to the profit and loss account over the expected
redemption period. As a result of this change,
the retained earnings as at 1st January 2004 and
the attributable profit to shareholders in 2004 are
reduced by HK$250 million and HK$58 million
respectively. Comparative figures have not
been restated as the impact is immaterial.
18. RELATED PARTIES
Related parties were previously considered
to be related to the Group if the Group had 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
were subject to common control or common
significant influence. Related parties may be
individuals or entities. With the introduction of
HKAS 24, parties that are subject to significant
influence by shareholders of Cathay Pacific
are no longer defined as related parties.
Comparatives have been restated to comply
with this new definition.