Cathay Pacific 2006 Annual Report Download - page 47

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45
Cathay Pacific Airways Limited Annual Report 2006
Principal Accounting Policies
1. Basis of accounting
The accounts have been prepared in accordance
with all applicable Hong Kong Financial Reporting
Standards (“HKFRS”) (which include all applicable
Hong Kong Accounting Standards (“HKAS”),
Hong Kong Financial Reporting Standards and
Interpretations) issued by the Hong Kong Institute
of Certified Public Accountants (“HKICPA”). These
accounts also comply with the requirements of
the Hong Kong Companies Ordinance and the
applicable disclosure provisions of the Rules
Governing the Listing of Securities (the “Listing
Rules”) of The Stock Exchange of Hong Kong
Limited (the “Stock Exchange”).
The measurement basis used is historical cost
modified by the use of fair value for certain
financial assets and liabilities as explained in
accounting policies 8, 10 and 12 below.
The preparation of financial statements in
conformity with HKFRS requires management to
make certain estimates and assumptions which
affect the amounts of fixed assets, intangible
assets, long-term investments, retirement benefit
obligations and taxation included in the financial
statements. These estimates and assumptions
are continually re-evaluated and are based on
management’s expectations of future events
which are considered to be reasonable.
2. Basis of consolidation
The consolidated accounts incorporate the
accounts of the Company and its subsidiaries
made up to 31st December together with the
Group’s share of the results and net assets of its
associates. Subsidiaries are entities controlled
by the Group. Subsidiaries are considered to
be controlled if the Company has the power,
directly or indirectly, to govern the financial and
operating policies, so as to obtain benefits from
their activities.
The results of subsidiaries are included in the
consolidated profit and loss account. Where
interests have been bought or sold during the
year, only those results relating to the period of
control are included in the accounts.
Goodwill represents the excess of the cost of
subsidiaries and associates over the fair value of
the Group’s share of the net assets at the date
of acquisition. Goodwill is recognised at cost less
accumulated impairment losses. Goodwill arising
from the acquisition of subsidiaries is allocated
to cash-generating units and is tested annually
for impairment.
On disposal of a subsidiary or associate, goodwill
is included in the calculation of any gain or loss.
Minority interests in the consolidated balance
sheet comprise the outside shareholders’
proportion of the net assets of subsidiaries and
are treated as a part of equity. In the profit and
loss account, minority interests are disclosed as
an allocation of the profit for the year.
In the Company’s balance sheet investments
in subsidiaries are stated at cost less any
impairment loss recognised. The results of
subsidiaries are accounted for by the Company on
the basis of dividends received and receivable.