Cathay Pacific 2005 Annual Report Download - page 45

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Cathay Pacific Airways Limited Annual Report 2005
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.
With the adoption of HKAS 17 “Leases”, leasehold
land is now considered as being held under an
operating lease rather than as a finance lease and
this has resulted in a reclassification of leasehold
land from fixed assets to other long-term
receivables and investments and trade and other
receivables. This change which has no impact on
the profit and loss account of the Group has been
applied retrospectively and 2004 comparatives
have been restated accordingly. As at 31st
December 2005, HK$1,513 million (2004:
HK$1,549 million) of unamortised payments for
leasehold land were included in other long-term
receivables and investments and trade and
other receivables.
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 41.
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. Financial assets
Other long-term receivables, bank and security
deposits, trade and other short-term receivables
are categorised as loans and receivables and are
stated at amortised cost less impairment loss.
Where long-term investments held by the Group
are designated as available-for-sale financial assets,
these investments are stated at fair value. 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.
Funds with investment managers and other liquid
investments are designated as at fair value through
profit and loss.
The accounting policy for derivative financial assets
is outlined in accounting policy 10.
Financial assets are recognised or derecognised by
the Group on the date when the purchase or sale
of the assets occurs.
Interest income from financial assets is recognised
as it accrues while dividend income is recognised
when the right to receive payment is established.
9. Financial liabilities
Long-term loans, finance lease obligations and trade
and other payables are stated at amortised cost.
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 occurs where there is a current
legally enforceable right to set off the liability and
the deposit and the Group intends either to settle
on a net basis or to realise the deposit and settle
the liability simultaneously. For transactions
Principal Accounting Policies