Cathay Pacific 2009 Annual Report Download - page 54

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 on consumption and as
incurred respectively.
17. Frequent-flyer programme
The Company operates a frequent-flyer programme
called Asia Miles (the “programme”). As members
accumulate miles by travelling on Cathay Pacific or
Dragonair flights, part of the revenue from the initial
sales transaction equal to the programme awards at
their fair value is deferred. The Company sells miles to
participating partners in the programme. The revenue
earned from miles sold is also deferred. The deferred
revenue and breakage revenue are recognised when
the awards are redeemed by members. For
redemption on the Group’s flights, this is deemed to
occur when the transportation service is provided
which represents the miles. The breakage expectation
is determined by a variety of assumptions including
historical experience, future redemption pattern and
programme design.
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
(including close members of their families) are also
considered to be related parties of the Group.
19. Provisions and contingent liabilities
Provisions are recognised when the Group or the
Company has a legal or constructive obligation arising
as a result of a past event, it is probable that an
outflow of economic benefits will be required to
settle the obligation and a reliable estimate can be
made. Where it is not probable that an outflow of
economic benefits is required, or the amount cannot
be estimated reliably, the obligation is disclosed as a
contingent liability, unless the probability of outflow
of economic benefits is remote.
Principal Accounting Policies
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