Cathay Pacific 2006 Annual Report Download - page 51

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49
Cathay Pacific Airways Limited Annual Report 2006
Principal Accounting Policies
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.
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 the Group’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 party has the ability, directly
or indirectly, to control the Group or exercise
significant influence over the Group in making
financial and operating decisions or where the
Group and the party are subject to common
control. The Group’s associates, joint ventures and
key management personnel are also considered
to be related parties of the Group.