Cathay Pacific 2008 Annual Report Download - page 93

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Notes to the Accounts SUPPLEMENTARY INFORMATION
31. Financial risk management (continued)
(e) Fair values
The fair values of the following financial instruments differ from their carrying amounts shown in the statement of
financial position:
Carrying
amount
2008
HK$M
Fair
value
2008
HK$M
Carrying
amount
2007
HK$M
Fair
value
2007
HK$M
Group
Long-term loans (18,468) (18,858) (16,963) (17,315)
Obligations under finance leases (29,309) (31,561) (28,148) (28,608)
Pledged security deposits 7,497 8,690 8,743 9,496
Carrying
amount
2008
HK$M
Fair
value
2008
HK$M
Carrying
amount
2007
HK$M
Fair
value
2007
HK$M
Company
Long-term loans (12,971) (13,213) (12,908) (13,174)
Obligations under finance leases (28,654) (32,654) (25,841) (28,320)
Pledged security deposits 1,932 2,433 2,501 2,935
The carrying amounts of other financial assets and liabilities are considered to be reasonable approximations to
their fair values.
32. Capital risk management
The Group’s objectives when managing capital are to ensure a sufficient level of liquid funds and to establish an
optimal capital structure which maximises shareholders’ value.
The Group regards the net debt/equity ratio as the key measurement of capital risk management. The definition of
net debt/equity ratio is shown on page 99 and a ten year history is included on pages 94 and 95 of the annual report.
33. Impact of further new accounting standards
HKICPA has issued new and revised HKFRS which become effective for accounting periods beginning on or after 1st
January 2009 and which are not adopted in the accounts. The following new accounting standards are relevant to the
Group:
(a) Hong Kong (IFRIC) Interpretation 13 “Customer Loyalty Programmes” is relevant to the Group and becomes
effective for accounting periods beginning on or after 1st July 2008. The interpretation requires that revenue from
the initial sales transaction is allocated to free or discounted goods or services offered as awards at their fair
value and that this is deferred until the awards are redeemed. The interpretation will be adopted on 1st January
2009. The Group currently estimates that the adoption of IFRIC 13 would result in a reduction of the opening
retained earnings as at 1st January 2009 by about HK$1.5 billion and the full year result of 2009 by about HK$150
million. These estimates are arrived at after making assumptions on a number of key factors, including but not
limited to the estimated fair value of awards, the future passenger travel demand, the future redemption demand
and the estimated proportion of award miles which are expected to be redeemed.
(b) HKAS 23 (revised) “Borrowing Costs” is relevant to the Group and becomes effective for accounting periods
beginning on or after 1st January 2009. The amendment requires an entity to capitalise borrowing costs directly
attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
The Group is in the process of assessing the impact of this interpretation on both the results and the financial
position of the Group.
Cathay Pacific Airways Limited Annual Report 2008 91