Cathay Pacific 2005 Annual Report Download - page 47

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Cathay Pacific Airways Limited Annual Report 2005
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.
13. Deferred taxation
Provision for deferred tax is made on all
temporary differences.
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.
14. Stock
Stock held for consumption is valued either at cost
or 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.
15. 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.
Recoveries arising from surcharges or incidental
activities are now treated as revenue rather than
as a deduction from expenses. This change
has been applied retrospectively and 2004
comparatives have been restated accordingly.
Please refer to note 28 to the accounts for impact
by line items.
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. That portion of revenue earned
from miles sold which is expected to be redeemed
on Cathay Pacific’s flights is deferred and
amortised to the profit and loss account over the
expected redemption period.
18. Related parties
Related 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. Related parties may be
individuals or entities.
Principal Accounting Policies