Cathay Pacific 2011 Annual Report Download - page 50

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.
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 statement of comprehensive income.
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.
Principal Accounting Policies
On disposal of a subsidiary or associate, goodwill is
included in the calculation of any gain or loss.
Non-controlling interests in the consolidated
statement of financial position comprise the outside
shareholders’ proportion of the net assets of
subsidiaries and are treated as a part of equity. In the
statement of comprehensive income, non-controlling
interests are disclosed as an allocation of the profit or
loss for the year.
In the Company’s statement of financial position,
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
influence.
The consolidated statement of comprehensive
income 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 statement of financial
position, 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 statement of financial position,
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 reporting date:
(a) foreign currency denominated financial assets
and liabilities.
(b) assets and liabilities of foreign subsidiaries and
associates.
Exchange differences arising on the translation of
foreign currencies into Hong Kong dollars are
reflected in profit and loss except that:
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