Cathay Pacific 2011 Annual Report Download - page 51

(a) unrealised exchange differences on foreign
currency denominated financial assets and
liabilities, as described in accounting policies 8, 9
and 10 below, that qualify as effective cash flow
hedge instruments under HKAS 39 “Financial
Instruments: Recognition and Measurement” are
recognised directly in equity via the Statement of
Changes in Equity. These exchange differences
are included in profit and loss as an adjustment
to revenue in the same period or periods during
which the hedged item affects profit and loss.
(b) unrealised differences on net investments in
foreign subsidiaries and associates (including
intra-Group balances of an equity nature) and
related long-term liabilities are taken directly
to equity.
5. Fixed assets and depreciation
Fixed assets are stated at cost less accumulated
depreciation and impairment.
Depreciation of fixed assets is calculated on a straight
line basis to write down cost over anticipated useful
lives to estimated residual value as follows:
Passenger aircraft over 20 years to residual value
of the lower of 10% of cost or
expected realisable value
Freighter aircraft over 20-27 years to residual
value of between 10% to 20%
of cost and over 10 years to nil
residual value for freighters
converted from passenger
aircraft
Aircraft product over 5-10 years to nil residual
value
Other equipment over 4 years to nil residual value
Buildings over the lease term of the
leasehold land to nil residual
value
Major modifications to aircraft and reconfiguration
costs are capitalised as part of aircraft cost and are
depreciated over periods of up to 10 years.
The depreciation policy and the carrying amount of
fixed assets are reviewed annually taking into
consideration factors such as changes in fleet
composition, current and forecast market values and
technical factors which affect the life expectancy of
the assets. Any impairment in value is recognised by
writing down the carrying amount to estimated
recoverable amount which is the higher of the value
in use (the present value of future cash flows) and
the fair value less costs to sell.
6. Leased assets
Fixed assets held under lease agreements that give
rights equivalent to ownership are treated as if they
had been purchased outright at fair market value and
the corresponding liabilities to the lessor, net of
interest charges, are included as obligations under
finance leases. Leases which do not give rights
equivalent to ownership are treated as operating
leases.
Amounts payable in respect of finance leases are
apportioned between interest charges and reductions
of obligations based on the interest rates implicit in
the leases.
Operating lease payments and income are charged
and credited respectively to profit and loss on a
straight line basis over the life of the related lease.
7. Intangible assets
Intangible assets comprise goodwill arising on
consolidation and expenditure on computer system
development. The accounting policy for goodwill is
outlined in accounting policy 2 on page 48.
Expenditure on computer system development which
gives rise to economic benefits is capitalised as part
of intangible assets and is amortised on a straight line
basis over its useful life not exceeding a period of
four years.
8. Financial assets
Other long-term receivables, bank and security
deposits, trade and other short-term receivables are
categorised as loans and receivables and are stated
at amortised cost less impairment loss.
Where long-term investments held by the Group are
designated as available-for-sale financial assets, these
investments are stated at fair value. Fair value is
based on quoted market prices at the end of the
reporting period without any deduction for transaction
costs. Fair values for the unquoted equity
investments are estimated using an appropriate
valuation model. Any change in fair value is
recognised in the investment revaluation reserve. On
disposal or if there is evidence that the investment is
impaired, the cumulative gain or loss on the
investment is reclassified from the investment
revaluation reserve to profit and loss.
Principal Accounting Policies
Cathay Pacific Airways Limited Annual Report 2011 49