Cathay Pacific 2007 Annual Report Download - page 44

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, 9, 10 and 12 below.
The preparation of the accounts 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 accounts. These estimates
and assumptions are continually re-evaluated and
are based on management’s expectations of future
events which are considered to be reasonable.
There have been no significant changes to the
accounting policies applied in these accounts for the
years presented. However, as a result of the adoption
of HKFRS 7 “Financial Instruments: Disclosures” and
the early adoption of HKFRS 8 “Operating Segments”,
there are additional disclosures provided in notes 2, 3,
17 and 28 to the accounts.
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.
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.
Principal Accounting Policies
Cathay Pacific Airways Limited Annual Report 2007
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