Cathay Pacific 2006 Annual Report Download - page 48

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Cathay Pacific Airways Limited Annual Report 2006
46
Principal Accounting Policies
3. Associates
Associates are those companies, not being
subsidiaries, in which the Group holds a
substantial long-term interest in the equity share
capital and over which the Group is in a position to
exercise significant management influence.
The consolidated profit and loss account includes
the Group’s share of results of associates as
reported in their accounts made up to dates not
earlier than three months prior to 31st December.
In the consolidated balance sheet investments
in associates represent the Group’s share of net
assets, goodwill arising on acquisition of the
associates (less any impairment) and loans to
those companies.
In the Company’s balance sheet, investments in
associates are stated at cost less any impairment
loss recognised and loans to those companies.
4. Foreign currencies
Foreign currency transactions entered into during
the year are translated into Hong Kong dollars at
the market rates ruling at the relevant transaction
dates whilst the following items are translated at
the rates ruling at the balance sheet date:
(a) foreign currency denominated financial assets
and liabilities.
(b) the balance sheets of foreign subsidiaries
and associates.
Exchange differences arising on the translation
of foreign currencies into Hong Kong dollars are
reflected in the profit and loss account except that:
(a) unrealised exchange differences on foreign
currency denominated financial assets and
liabilities, as described in accounting policies
8, 9 and 10 below, that qualify as effective
cash flow hedge instruments under HKAS
39 “Financial Instruments: Recognition and
Measurement” are recognised directly in
equity via the Statement of Changes in Equity.
These exchange differences are included in
the profit and loss account as an adjustment
to revenue in the same period or periods
during which the hedged item affects the
profit and loss.
(b) unrealised differences on net investments in
foreign subsidiaries and associates (including
intra-Group balances of an equity nature) and
related long-term liabilities are taken directly
to equity.
5. Fixed assets and depreciation
Fixed assets are stated at cost less accumulated
depreciation and impairment.
Depreciation of fixed assets is calculated on
a straight line basis to write down cost over
anticipated useful lives to estimated residual value
as follows:
Passenger aircraft over 20 years to residual value
of between 0% to 10% of cost
Freighter aircraft over 20-27 years to residual
value of between 0% to 20%
of cost
Other equipment over 3-7 years to nil
residual value
Buildings over the lease term of the
leasehold land to nil
residual value