Shandong Airlines Co., Ltd
FINANCIAL STATEMENTS AND AUDITORS’ REPORT
FOR THE YEAR ENDED DECEMBER 31st, 2010
REANDA SHEN ZI [2011] No. 1193
To the Shareholders of Shandong Airlines Co., Ltd.:
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereafter,
the Company), which comprise the statement of financial position and the consolidated statement of
financial position as at 31 December 2010, the statement of comprehensive income and the
consolidated statement of comprehensive income, the statement of cash flows and the consolidated
statement of cash flows and the statement of changes in equity and the consolidated statement of
changes in equity for the year then ended and a summary of significant accounting policies and
other explanatory notes.
Management’s responsibility for the financial statements
The Company’s management is responsible for the preparation and fair presentation of these
financial statements in accordance with Enterprise Accounting Standards of China. The
responsibility includes: (1) designing, implementing and maintaining internal control relevant to the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error; (2) selecting and applying appropriate accounting policies; (3) and making accounting
estimates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We
conducted our audit in accordance with the Chinese Certified Public Accountants' Auditing
Standards (hereafter, the Standards). The Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance as to whether the
financial statements are free from material misstatement.
An audit involves the performance of audit procedures to obtain audit evidence relevant to the
amounts and disclosures in the financial statements. The procedures selected depend on the
auditors’ judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditors consider
internal control relevant to the entity’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statements of the Company present fairly, in all material respects, the
financial position of the Company as at 31 December 2010 and of its financial performance and its
cash flows for the year then ended in accordance with the Enterprise Accounting Standards of
China.
Reanda Certified Public Accountants Co., Ltd. Certified Public Accountant
Sun Yibin
Beijing, China Certified Public Accountant
Yang Yunhui
25 March 2011
Balance Sheet
Prepared by Shandong Airlines Co., Ltd. December 31, 2010 Unit: RMB
Balance at period-end Balance at year-begin
Items
Consolidation Parent Company Consolidation Parent Company
Current assets:
Monetary funds 333,572,647.76 328,897,146.25 194,065,742.69 179,813,989.83
Settlement provisions
Capital lent
Transaction finance asset 9,290,846.62 9,290,846.62 11,341,846.48 11,341,846.48
Notes receivable
Accounts receivable 192,444,914.49 185,873,337.88 142,545,895.96 140,731,572.47
Accounts paid in advance 28,353,455.80 28,201,391.84 22,504,262.48 22,370,882.70
Insurance receivable
Reinsurance receivables
Contract reserve of
reinsurance receivable
Interest receivable 1,409,528.13 1,409,528.13
Dividend receivable 1,617,642.00 1,617,642.00
Other receivables 224,905,440.68 225,345,428.46 160,552,013.99 160,483,475.47
Purchase restituted finance
asset
Inventories 77,787,249.46 77,787,249.46 65,267,781.10 65,267,781.10
Non-current asset due within
one year
Other current assets
Total current assets 867,764,082.94 856,804,928.64 597,895,184.70 581,627,190.05
Non-current assets:
Granted loans and advances
Finance asset available for
sales
Held-to-maturity securities
Long-term account
receivable
Long-term equity investment 88,352,100.00 169,842,785.43 88,352,100.00 112,165,305.97
Investment property
Fixed assets 6,616,497,360.85 6,551,672,655.53 6,631,600,764.96 6,619,089,545.44
Construction in progress 937,253,250.34 925,773,327.54 422,277,445.58 422,277,445.58
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 47,146,366.53 32,299,511.53 47,895,073.21 33,013,562.26
Expense on Research and
Development
Goodwill 10,220,816.22
Long-term expenses to be
229,830,196.19 229,493,082.25 216,546,250.96 216,370,254.46
apportioned
Deferred income tax asset 126,735,195.78 126,425,389.96 91,836,911.34 91,812,136.84
Other non-current asset
Total non-current asset 8,056,035,285.91 8,035,506,752.24 7,498,508,546.05 7,494,728,250.55
Total assets 8,923,799,368.85 8,892,311,680.88 8,096,403,730.75 8,076,355,440.60
Current liabilities:
Short-term loans 1,001,269,036.73 1,001,269,036.73 739,819,020.88 739,819,020.88
Loan from central bank
1
Absorbing deposit and
interbank deposit
Capital borrowed
Transaction financial
3,865,809.52 3,865,809.52
liabilities
Notes payable 135,042,835.33 135,042,835.33 182,124,331.32 182,124,331.32
Accounts payable 1,008,600,051.49 1,009,216,769.85 812,032,950.07 810,639,584.15
Accounts received in
202,453,668.78 200,972,965.98 117,956,240.43 117,467,352.04
advance
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 236,150,660.44 236,130,188.66 135,033,537.40 135,018,545.42
Taxes payable 170,115,170.97 169,899,177.32 177,564,425.49 177,319,512.46
Interest payable 9,656,528.23 9,569,756.23 4,001,134.66 4,001,134.66
Dividend payable 11,940.00 11,940.00 11,940.00 11,940.00
Other accounts payable 140,733,981.14 141,469,803.57 124,930,463.59 124,872,192.44
Reinsurance payables
Insurance contract reserve
Security trading of agency
Security sales of agency
Non-current liabilities due
476,767,879.05 464,467,879.05 535,108,457.71 535,108,457.71
within 1 year
Other current liabilities
Total current liabilities 3,384,667,561.68 3,371,916,162.24 2,828,582,501.55 2,826,382,071.08
Non-current liabilities:
Long-term loans 3,180,283,177.55 3,180,283,177.55 3,402,752,588.39 3,402,752,588.39
Bonds payable
Long-term account payable 863,013,847.54 863,013,847.54 968,968,451.94 968,968,451.94
Special accounts payable
Projected liabilities
Deferred income tax
2,322,711.66 2,322,711.66 2,835,461.62 2,835,461.62
liabilities
Other non-current liabilities 73,390,628.74 73,390,628.74 27,718,573.00 27,718,573.00
Total non-current liabilities 4,119,010,365.49 4,119,010,365.49 4,402,275,074.95 4,402,275,074.95
Total liabilities 7,503,677,927.17 7,490,926,527.73 7,230,857,576.50 7,228,657,146.03
Owner’s equity (or
shareholders’ equity):
Paid-in capital (or share
400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
capital)
Capital public reserve 84,050,162.84 84,050,162.84 84,050,162.84 84,050,162.84
Less: Inventory shares
Reasonable reserve
Surplus public reserve 122,944,754.89 122,284,050.36 59,576,069.03 58,915,364.50
Provision of general risk
Retained profit 799,664,252.17 795,050,939.95 308,668,390.11 304,732,767.23
Balance difference of foreign
currency translation
Total owner’s equity
attributable to parent 1,406,659,169.90 1,401,385,153.15 852,294,621.98 847,698,294.57
company
Minority interests 13,462,271.78 13,251,532.27
Total owner’s equity 1,420,121,441.68 1,401,385,153.15 865,546,154.25 847,698,294.57
Total liabilities and owner’s 8,923,799,368.85 8,892,311,680.88 8,096,403,730.75 8,076,355,440.60
2
equity
Profit Statement
Prepared by Shandong Airlines Co., Ltd. January-December, 2010 Unit: RMB
Amount in this period Amount in last period
Items
Consolidation Parent Company Consolidation Parent Company
I. Total operating income 7,292,615,957.10 7,284,474,069.23 5,366,113,363.68 5,362,673,481.18
Including: Operating income 7,292,615,957.10 7,284,474,069.23 5,366,113,363.68 5,362,673,481.18
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 6,461,293,024.92 6,454,275,861.75 5,095,949,275.87 5,094,605,991.37
Including: Operating cost 5,487,590,890.83 5,484,462,677.17 4,110,033,275.19 4,111,698,242.88
Interest expense
Commission charge and
commission expense
Cash surrender value
Net amount of expense of
compensation
Net amount of withdrawal of
insurance contract reserve
Bonus expense of guarantee
slip
Reinsurance expense
Operating tax and extras 205,209,128.98 204,810,196.58 158,797,763.77 158,446,999.40
Sales expenses 480,347,949.12 480,347,949.12 346,387,720.51 346,387,720.51
Administration expenses 136,465,813.62 133,056,074.42 228,619,847.42 225,696,583.77
Financial expenses 150,515,922.36 150,659,261.66 251,871,219.83 252,180,082.66
Losses of devaluation of
1,163,320.01 939,702.80 239,449.15 196,362.15
asset
Add: Changing income of
fair value(Loss is listed with -5,916,809.38 -5,916,809.38 -12,118,965.63 -12,118,965.63
“-”)
Investment income (Loss is
-1,720,112.18 -1,720,112.18 3,715,867.94 3,715,867.94
listed with “-”)
Including: Investment
income on affiliated
company and joint venture
Exchange income (Loss is
listed with “-”)
III. Operating profit (Loss
823,686,010.62 822,561,285.92 261,760,990.12 259,664,392.12
is listed with “-”)
Add: Non-operating income 29,012,243.89 29,012,243.84 155,122,260.87 155,122,260.87
Less: Non-operating expense 8,153,807.83 8,068,071.01 13,521,945.17 13,520,445.27
Including: Disposal loss of
7,708,562.86 7,622,991.01 13,495,868.42 13,494,368.52
non-current asset
IV. Total Profit (Loss is
844,544,446.68 843,505,458.75 403,361,305.82 401,266,207.72
listed with “-”)
Less: Income tax 209,969,159.25 209,818,600.17 100,618,103.42 100,412,795.16
V. Net profit (Net loss is
634,575,287.43 633,686,858.58 302,743,202.40 300,853,412.56
listed with “-”)
Net profit attributable to
owner’s equity of parent 634,364,547.92 633,686,858.58 302,282,325.68 300,853,412.56
company
Minority shareholders’ gains
210,739.51 0.00 460,876.72 0.00
and losses
3
VI. Earnings per share
i. Basic earnings per share 1.59 0.76
ii. Diluted earnings per share 1.59 0.76
VII. Other consolidated
income
VIII. Total consolidated
634,575,287.43 633,686,858.58 302,743,202.40 300,853,412.56
income
Total consolidated income
attributable to owners of 634,364,547.92 633,686,858.58 302,282,325.68 300,853,412.56
parent company
Total consolidated income
attributable to minority 210,739.51 0.00 460,876.72 0.00
shareholders
Cash Flow Statement
Prepared by Shandong Airlines Co., Ltd. January-December, 2010 Unit: RMB
Amount in this period Amount in last period
Items
Consolidation Parent Company Consolidation Parent Company
I. Cash flows arising from
7,352,842,476.95 7,338,125,353.04 5,372,538,176.19 5,371,074,050.51
operating activities:
Cash received from selling
commodities and providing
labor services
Net increase of
customer deposit and
interbank deposit
Net increase of loan
from central bank
Net increase of capital
borrowed from other
financial institution
Cash received from original
insurance contract fee
Net cash received from
reinsurance business
Insured savings and net
increase of investment
Net increase of disposal
of transaction financial asset
Cash received from interest,
commission charge and
commission
Net increase of capital
borrowed
Net increase of returned
business capital
Write-back of tax received 97,024,882.28 100,423,221.27 144,094,051.53 143,549,876.83
Other cash received
concerning operating 7,449,867,359.23 7,438,548,574.31 5,516,632,227.72 5,514,623,927.34
activities
Subtotal of cash inflow
arising from operating 4,295,519,127.79 4,291,454,969.98 3,288,589,954.21 3,290,761,891.91
activities
Cash paid for purchasing
commodities and receiving
labor service
Net increase of customer
4
loans and advances
Net increase of deposits
in central bank and interbank
Cash paid for original
insurance contract
compensation
Cash paid for interest,
commission charge and
commission
Cash paid for bonus of
827,331,854.08 824,315,034.77 614,147,622.35 612,051,079.62
guarantee slip
Cash paid to/for staff and
497,696,065.27 496,457,992.65 199,428,230.46 198,501,653.16
workers
Taxes paid 154,241,682.28 154,456,869.48 97,119,270.28 96,311,963.23
Other cash paid concerning
5,774,788,729.42 5,766,684,866.88 4,199,285,077.30 4,197,626,587.92
operating activities
Subtotal of cash outflow
arising from operating 1,675,078,629.81 1,671,863,707.43 1,317,347,150.42 1,316,997,339.42
activities
Net cash flows arising from
operating activities
II. Cash flows arising from
investing activities:
Cash received from
2,853,033.15 2,853,033.15 2,098,225.94 2,098,225.94
recovering investment
Cash received from
26,880.00 26,880.00 327,572,914.09 327,572,914.09
investment income
Net cash received from
disposal of fixed, intangible
and other long-term assets
Net cash received from
disposal of subsidiaries and
other units
Other cash received
concerning investing 2,879,913.15 2,879,913.15 329,671,140.03 329,671,140.03
activities
Subtotal of cash inflow from
1,085,247,694.21 1,073,446,055.08 1,002,204,067.04 1,001,881,192.04
investing activities
Cash paid for purchasing
fixed, intangible and other
long-term assets
Cash paid for investment
Net increase of
43,095,223.17 50,740,053.00
mortgaged loans
Net cash received from
15,902,881.83 15,902,881.83
subsidiaries and other units
Other cash paid concerning
1,144,245,799.21 1,140,088,989.91 1,002,204,067.04 1,001,881,192.04
investing activities
Subtotal of cash outflow
-1,141,365,886.06 -1,137,209,076.76 -672,532,927.01 -672,210,052.01
from investing activities
Net cash flows arising from
investing activities
III. Cash flows arising from
financing activities
Cash received from
absorbing investment
5
Including: Cash
received from absorbing
1,619,256,428.26 1,619,256,428.26 2,228,373,619.53 2,228,373,619.53
minority shareholders’
investment by subsidiaries
Cash received from loans
Cash received from
11,459,417.00 11,459,417.00
issuing bonds
Other cash received
concerning financing 1,630,715,845.26 1,630,715,845.26 2,228,373,619.53 2,228,373,619.53
activities
Subtotal of cash inflow from
1,543,956,930.32 1,535,656,930.32 2,345,081,757.10 2,345,081,757.10
financing activities
Cash paid for settling debts 228,396,529.91 228,062,165.48 195,890,585.87 195,890,585.87
Cash paid for dividend and
profit distributing or interest
paying
Including: Dividend and
profit of minority
292,679,544.51 292,679,544.51 327,783,543.29 327,783,543.29
shareholder paid by
subsidiaries
Other cash paid concerning
2,065,033,004.74 2,056,398,640.31 2,868,755,886.26 2,868,755,886.26
financing activities
Subtotal of cash outflow
-434,317,159.48 -425,682,795.05 -640,382,266.73 -640,382,266.73
from financing activities
Net cash flows arising from
-122,729.57 -122,729.57 -35,585.75 -35,585.75
financing activities
IV. Influence on cash due to
99,272,854.70 108,849,106.05 4,396,370.93 4,369,434.93
fluctuation in exchange rate
V. Net increase of cash and
49,333,429.81 35,081,676.95 44,937,058.88 30,712,242.02
cash equivalents
Add: Balance of cash and
cash equivalents at the period 148,606,284.51 143,930,783.00 49,333,429.81 35,081,676.95
-begin
VI. Balance of cash and cash
7,352,842,476.95 7,338,125,353.04 5,372,538,176.19 5,371,074,050.51
equivalents at the period -end
6
Consolidated Statement on Changes of Owners’ Equity
Prepared by Shandong Airlines Co., Ltd. 2010 Unit: RMB
Amount in this report period Amount in last year
Owners’ equity attributable to the parent company Owners’ equity attributable to the parent company
Total Total
Paid-up Reaso Surplu Gener Minor Paid-up Reaso Surplu Gener Minor
Items Capital Less: Retain owner Less:nable Retain owner
capital nable s al risk ity’s capitalCapital s al risk ity’s
(Share
reserve Treasur ed Others s’ Treasuryreserv reserv provis ed Others equity s’
s y Stock reserv reserv provis profit equity (Sharereserves
capital) equity Stock e profit equity
e es ion capital) es ion
400,0 84,05 59,57 308,6 13,25 865,5 400,0 84,05 29,49 36,47 12,79 562,8
I. Balance at the end of
00,00 0,162. 6,069. 68,39 1,532. 46,15 00,00 0,162. 0,727. 1,405. 0,655. 02,95
the last year
0.00 84 03 0.11 27 4.25 0.00 84 77 69 55 1.85
Add: Changes of
accounting policy
Error correction of the
last period
Others
400,0 84,05 59,57 308,6 13,25 865,5 400,0 84,05 29,49 36,47 12,79 562,8
II. Balance at the
00,00 0,162. 6,069. 68,39 1,532. 46,15 00,00 0,162. 0,727. 1,405. 0,655. 02,95
beginning of this year
0.00 84 03 0.11 27 4.25 0.00 84 77 69 55 1.85
III. Increase/ Decrease in 63,36 490,9 554,5 30,08 272,1 302,7
210,7 460,8
this year (Decrease is 8,685. 95,86 75,28 5,341. 96,98 43,20
39.51 76.72
listed with “-”) 86 2.06 7.43 26 4.42 2.40
634,3 634,5 302,2 302,7
210,7 460,8
(I) Net profit 64,54 75,28 82,32 43,20
39.51 76.72
7.92 7.43 5.68 2.40
(II) Other consolidated
income
634,3 634,5 302,2 302,7
210,7 460,8
Subtotal of (I) and (II) 64,54 75,28 82,32 43,20
39.51 76.72
7.92 7.43 5.68 2.40
(III) Owners’ devoted and
decreased capital
1. Owners’ devoted
7
capital
2. Amount calculated into
owners’ equity paid in
shares
3. Others
63,36 -143,3 -80,00 30,08 -30,08
(IV) Profit distribution 8,685. 68,68 0,000. 5,341. 5,341.
86 5.86 00 26 26
63,36 -63,36 30,08 -30,08
1. Withdrawal of surplus
8,685. 8,685. 5,341. 5,341.
reserves
86 86 26 26
2. Withdrawal of general
risk provisions
-80,00 -80,00
3. Distribution for
0,000. 0,000.
owners (shareholders)
00 00
4. Others
(V) Carrying forward
internal owners’ equity
1. Capital reserves
conversed to capital
(share capital)
2. Surplus reserves
conversed to capital
(share capital)
3. Remedying loss with
surplus reserve
4. Others
(VI) Reasonable reserve
1. Withdrawal in the
report period
2. Usage in the report
period
(VII) Other
IV. Balance at the end of 400,0 84,05 122,9 799,6 13,46 1,420, 400,0 84,05 59,57 308,6 13,25 865,5
8
the report period 00,00 0,162. 44,75 64,25 2,271. 121,4 00,00 0,162. 6,069. 68,39 1,532. 46,15
0.00 84 4.89 2.17 78 41.68 0.00 84 03 0.11 27 4.25
Statement on Changes of Owners’ Equity of Parent Company
Prepared by Shandong Airlines Co., Ltd. 2010 Unit: RMB
Amount in this report period Amount in last year
Paid-up General Paid-up General
Less: Reasona Total capital Capital Less: Reasona Total
Items capital Capital Surplus risk Retaine Surplus risk Retaine
(Share reserves
Treasury ble owners’ (Share reserve Treasur ble owners’
Stock
reserves provisio d profit reserves provisio d profit
capital) reserve equity capital s y Stock reserve equity
n n
)
I. Balance at the end of 400,000 84,050, 58,915, 304,732 847,698 400,000 84,050, 28,830, 33,964, 546,844
the last year ,000.00 162.84 364.50 ,767.23 ,294.57 ,000.00 162.84 023.24 695.93 ,882.01
Add: Changes of
accounting policy
Error correction of the
last period
Others
II. Balance at the 400,000 84,050, 58,915, 304,732 847,698 400,000 84,050, 28,830, 33,964, 546,844
beginning of this year ,000.00 162.84 364.50 ,767.23 ,294.57 ,000.00 162.84 023.24 695.93 ,882.01
III. Increase/ Decrease in
63,368, 490,318 553,686 30,085, 270,768 300,853
this year (Decrease is
685.86 ,172.72 ,858.58 341.26 ,071.30 ,412.56
listed with “-”)
633,686 633,686 300,853 300,853
(I) Net profit
,858.58 ,858.58 ,412.56 ,412.56
(II) Other consolidated
income
633,686 633,686 300,853 300,853
Subtotal of (I) and (II)
,858.58 ,858.58 ,412.56 ,412.56
(III) Owners’ devoted
and decreased capital
1. Owners’ devoted
capital
2. Amount calculated into
9
owners’ equity paid in
shares
3. Others
-143,36
63,368, -80,000, 30,085, -30,085,
(IV) Profit distribution 8,685.8
685.86 000.00 341.26 341.26
6
1. Withdrawal of surplus 63,368, -63,368, 30,085, -30,085,
reserves 685.86 685.86 341.26 341.26
2. Withdrawal of general
risk provisions
3. Distribution for -80,000, -80,000,
owners (shareholders) 000.00 000.00
4. Others
(V) Carrying forward
internal owners’ equity
1. Capital reserves
conversed to capital
(share capital)
2. Surplus reserves
conversed to capital
(share capital)
3. Remedying loss with
profit surplus
4. Others
(VI) Reasonable reserve
1. Withdrawal in the
report period
2. Usage in the report
period
(VII) Other
1,401,3
IV. Balance at the end of 400,000 84,050, 122,284 795,050 400,000 84,050, 58,915, 304,732 847,698
85,153.
the report period ,000.00 162.84 ,050.36 ,939.95 ,000.00 162.84 364.50 ,767.23 ,294.57
15
10
Shandong Airlines Co., Ltd.
Notes to the financial statements
As at 31st December 2010
（All amounts are expressed in CNY unless otherwise stated）
Note 1. Corporation Profile
1.1. Company’s history
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign-invested limited liability company
incorporated in the People’s Republic of China. The Company was incorporated through the
restructuring project jointly initiated by Shandong Airlines Group Co., Ltd. (hereafter, SDA Group),
Inspur Co., Ltd. (previously known as Inspur Electronic Information Industry Group Company (浪潮
电子信息产业集团公司)), Shandong Hualu Group Co., Ltd, Shandong Group Corp. of Fisheries
Enterprises and Luyin Investment Group (鲁银投资集团股份有限公司) following the approval
(LuTiGaiQiZi(1999)No.88 (鲁体改企字（1999）第 88 号)) granted by the Economic Reform
Commission of Shandong Province (山东省经济体制改革委员会) on July 29th, 1999.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares (国有法人股),
with CNY 1.00 at par, of the Company by transferring its air transportation operation and the related
assets and liabilities to the Company on November 25th, 1999. Inspur Co., Ltd., Shandong Hualu
Group Co., Ltd. and Shandong Group Corp. of Fisheries Enterprises each acquired 199,000
state-owned corporate shares, with CNY 1.00 at par, by cash investment of CNY 200,000.00 each on
November 26th, 1999. Luyin Investment Group acquired 199,000 domestic corporate shares (国内法
人股), with CNY 1.00 at par, by cash investment of CNY 200,000.00 on November 26th, 1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign currency (境内
上市外资股) (hereafter, B share(s)), with par value at CNY 1.00 each and issue price at HKD 1.58
each, on August 28th, 2000 upon the approval (ZhengJianFaXingZi[2000]No.116 (证监发行字
[2000]116 号)) granted by the China Securities Regulatory Commission on August 22nd, 2000; and,
the Company was listed on the Shenzhen Stock Exchange on September 12th, 2000. Immediately after
the issuance of the B shares, the capital of the Company increased to CNY 400,000,000.00.
The Agreement of Share Transfer (《股份转让协议》) signed by SDA Group and China National
Aviation Holding Company (hereafter, China Aviation Group) on February 28th, 2004 authorised the
transfer of 91,200,000 shares of the Company, equal to 22.8% shareholding, from SDA Group to
China Aviation Group. Immediately after the share transfer, SDA Group’s shareholding in the
Company was 42.00%. In November 2004, the Board of Directors of the Company, in accordance
with the approval (GuoZiChanQuan[2004]No.956 (国资产权[2004]956 号：《关于中国航空集团公
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司将受让山东航空股份有限公司国有股的合同实施转让有关问题的批复》)) issued by the
State-owned Assets Supervision and Administration Commission of the State Council, authorised
China Aviation Group to transfer the state-owned corporate shares received from SDA Group to Air
China Co., Ltd. (hereafter, Air China). As so provided in GuoZiChanQuan[2004]No.956, the rights
and obligation attributable to China Aviation Group as specified in the Agreement of Share Transfer
shall be afforded by Air China. The change of share ownership was registered at the China Securities
Depository and Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on
December 3rd, 2004; And, 91,200,000 shares of the Company then became held by Air China.
Legal representative of the Company: ZHANG, Xingfu
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746 – East 2nd Ring Road, Jinan, Shandong
1.2. Industry of operation
The Company operates in the industry of transportation.
1.3. Operating capacity
The Company is permitted to undertake international and domestic passenger and cargo transportation,
hotel and beverage related operation (limited to operation through branch), provision of aircraft
maintenance, training of civil aviation pilots and air crew, insurance brokerage (limited to air accident
insurance, with period of operation valid until September 3rd, 2012), inter-airline agenting, and
principal operation related ground services.
1.4. Principal products (and/or services)
The principal service supplied by the Company is domestic air transportation.
Note 2. Summary of significant accounting policies and estimates, and correction of errors
2.1. Bases for preparation of the financial statements
The financial statements of the Company have been prepared on the going concern basis with
reference to the actual occurrence of transactions and events and in accordance with the China
Enterprise Accounting Standards (CAS) issued by the Ministry of Finance on 15th February 2006 and
the significant accounting policies and estimates as set out in Note 2.
2.2. Declaration of Compliance with the Enterprise Accounting Standards
The financial statements of the Company have been prepared in accordance with the Enterprise
Accounting Standards to present truly and completely the financial position, result of operation and
cash flow and the relevant information of the Company.
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2.3. Accounting year
The Company’s accounting year is the calendar year, ie. from 1 January to 31 December each year.
2.4. Presentation (functional) currency
The presentation (functional) currency of the Company is Chinese Yuan (hereafter, CNY).
2.5. Business acquisitions
2.5.1. Acquiring business under common control
The Company measures the identifiable assets acquired and liabilities assumed at their
acquisition-date book values in the accounts of the acquiree. The excess of the consideration
transferred in the form of book value or shares issued over the acquisition-date book values in the
acquiree’s accounts of the identifiable net assets acquired is debited to Capital reserves and to
Undistributed profits where the total value of Capital reserves is insufficient.
2.5.2. Acquiring business not under common control
The Company measures the identifiable assets acquired and the liabilities assumed at their
acquisition-date fair values. Goodwill as of the acquisition date measured as the excess of the amount
of the total consideration paid for the acquisition measured in accordance with s11, Ch. 3, CAS 20
over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed measured in accordance with s14, Ch.3, CAS 20 is recognised by the Company, if the later
exceeds the former (ie. negative excess), the Company recognises the resulting gain in profit or loss
on the acquisition date after reviewing their fair values and confirming the negative excess.
2.6. Consolidated financial statements
2.6.1. Scope of consolidated financial statements
Consolidated financial statements are prepared on the basis of control existence in accordance with
CAS 33 issued by the Ministry of Finance in February 2006. The consolidated financial statements of
the Company include all subsidiaries and the entities, which are established for specified purposes,
either directly or indirectly controlled by the Company and the Company itself. The Company has
control over an entity where the Company has the power to govern the financial and operating
policies of the entity under a statute or an agreement and is able to obtain economic benefit from the
entity’s operation by virtue of that power. Where it is clearly demonstrated that the Company’s
investment in an entity does not constitute control over the entity, the Company excludes the entity
from consolidation.
2.6.2. Purchase and sales of ordinary shares of subsidiaries
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The Company determines the date of purchase and sales of the ordinary shares of subsidiaries on the
basis of the actual occurrence of transfer of the risks attached to and proceeds associated with the
shares respectively. The respective post- or pre-transaction-date operation results and cash flows of
the subsidiary acquired or disposed in the course of the combination of businesses not under common
control are accounted for in the consolidated income statement and cash flow statement. The
operation results and cash flows of the subsidiary, which occur after the start date of the accounting
period in which the subsidiary is acquired and prior to the disposal date, acquired in the course of the
combination of businesses under common control are accounted for and separately presented in the
consolidated income statement and cash flow statement with comparables adjusted accordingly.
The excess of the value of a long-term equity investment, recognised and measured in accordance
with CAS 2, in a subsidiary arising from the purchase of small amount of the ordinary shares of the
subsidiary over the Company’s share of the net fair value of the subsidiary’s identifiable assets and
liabilities as from the purchase date is debited to Capital reserves, and to Undistributed profits where
the total value of Capital reserves is insufficient.
2.6.3. Uniform accounting policies
If a subsidiary uses accounting policies other than those adopted in the consolidated financial
statements for like transactions and events in similar circumstances, appropriate adjustments are made
to its financial statements in preparing the consolidated financial statements; the adjustments are
conducted also with reference to the acquisition-date fair values of the identifiable assets acquired and
the liabilities assumed from the subsidiary measured in accordance with s14, Ch.3, CAS 20 where the
subsidiary is acquired in the course of the combination of businesses not under common control.
2.6.4. Consolidation procedures
Intragroup balances and transactions are eliminated in full in the preparation of consolidated financial
statements. Non-controlling interests in the net assets of consolidated subsidiaries are identified
separately from the Company’s ownership interests in them. Non-controlling interests are debited by
the excess, if any, of the loss attributable to non-controlling shareholders over their share of the net
fair value of the subsidiary’s identifiable assets and liabilities where they are able and obliged to
contribute to the excess; the excess is otherwise attributable to the Company.
2.7. Cash equivalents
Cash equivalents are short-term (usually with a maturity date within three months from the date of
acquisition), highly liquid investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
2.8. Foreign currency transactions and foreign currency translation
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2.8.1. Foreign currency transactions
The Company’s foreign currency transactions are recorded, on initial recognition in the reporting
(functional) currency, by applying to the foreign currency amount the middle exchange rate quoted by
the People’s Bank of China (hereafter, the (spot) exchange rate) between the reporting (functional)
currency and the foreign currency at the date of the transaction.
Foreign currency monetary items as at the balance sheet date are translated using the
balance-sheet-date spot exchange rate; non-monetary items as at the balance sheet date that are
measured in terms of historical cost in foreign currencies are translated using the transaction-date
exchange rates with no adjustment made to the recorded amounts on initial recognition in the
reporting (functional) currency; non-monetary items as at the balance sheet date that are measured at
fair value in foreign currencies are translated using the exchange rates at the dates when the fair
values were determined. Exchange differences arising on translating monetary or non-monetary items
at rates different from those at which they were translated on initial recognition during the period or in
previous financial statements are recognised directly or as fair value adjustments in profit or loss in
the period in which they arise except for monetary items that satisfy the criteria for borrowing costs
capitalisation.
2.8.2. Foreign currency translation
① Assets, liabilities and all Shareholders’ equity items as at the balance sheet date except
undistributed profits are translated using the balance-sheet-date spot exchange rates.
② Income and expenses are translated using the transaction-date exchange rates.
Exchange differences arising from the translation methods specified in paragraph 2.8.2① and ② are
separately presented in Shareholders’ equity.
③ The cash flows of a foreign subsidiary are translated at the exchange rates at the dates of the cash
flows. The effect of exchange rate changes on cash and cash equivalents held or due in foreign
currencies is reported in the cash flow statement by presenting separately the amount of the unrealised
exchange differences arising from changes in foreign currency exchange rates
2.9. Financial instruments
2.9.1. Categorisation of financial assets and financial liabilities
The Company categorises its financial assets and financial liabilities, with reference to their objectives
of investments and economic nature, as financial assets or financial liabilities at fair value through
profit or loss, held-to-maturity investments, loans and receivables, available-for-sale financial assets,
and other financial liabilities.
① Financial assets or financial liabilities at fair value through profit or loss include the financial
assets or financial liabilities classified as held for trading and the financial assets or financial liabilities
designated by the Company as at fair value through profit or loss on their initial recognition.
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A financial asset or financial liability is classified as held for trading if it meets either of the following
conditions:
a. it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
b. on initial recognition it is part of a portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
c. it is a derivative (except for a derivative that is a designated and effective hedging instrument, a
financial guarantee contract, or linked to and only settled by delivery of an equity instrument that does
not have a quoted market price in an active market and whose fair value cannot be reliably measured).
A financial asset or financial liability is designated by the Company as at fair value through profit or
loss if it meets either of the following conditions:
a. the designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on
them on different bases; or
b. a group of financial assets, financial liabilities or both is managed and its performance is
evaluated on a fair value basis, in accordance with an officially documented risk management or
investment strategy, and information about the group is provided internally on that basis to the
Company’s key management personnel.
② Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturity that the Company has the positive intention and ability to hold to
maturity, which include principally fixed-rate treasury bonds and floating-rate corporate bonds that
the Company has the positive intention and ability to hold to maturity.
③ Receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market, which include principally accounts receivables arising from sales of
products and provisions of services by the Company and other receivables.
④ Available-for-sale financial assets are those non-derivative financial assets that are designated as
available for sale on their initial recognition or are not categorised as loans and receivables,
held-to-maturity investments or financial assets at fair value through profit or loss.
⑤ Other financial liabilities are financial liabilities that are not categorised as financial liabilities at
fair value through profit or loss.
2.9.2. Measurement of financial assets and financial liabilities
When a financial asset or financial liability is recognised initially, the Company measures it at its fair
value plus, in the case of a financial asset or financial liability not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition or issue of the financial asset or
financial liability; transaction costs attributable to the acquisition or issue of the financial asset or
financial liability at fair value through profit or loss are accounted for through profit or loss for the
current period.
The Company subsequently measures financial assets and financial liabilities according to the
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following procedures:
① Financial assets or financial liabilities are subsequently measured at fair value through profit or
loss at their fair value, with gains or losses arising from changes in fair value or de-recognistion
accounted for through profit or loss for the current period.
② Held-to-maturity investments are subsequently measured at amortised cost using the effective
interest method, with gains or losses arising from de-recognistion, impairment or amortisation
accounted for through profit or loss for the current period.
③ Receivables are subsequently measured at amortised cost using the effective interest method,
with gains or losses arising from de-recognistion, impairment or amortisation accounted for through
profit or loss for the current period.
④ Available-for-sale financial assets are subsequently measured at their fair value, with gains or
losses arising from changes in fair value recognised in Capital reserves. The difference between the
disposal proceeds and carrying value of an available-for-sale financial asset on its disposal is
recognised as investment gain or loss, with the cumulative gains or losses recognised in Capital
reserves de-recognised from Capital reserves and re-recognised as investment gains or losses.
Impairment losses and exchange differences of available-for-sale financial assets, if any, are
accounted for through profit or loss for the current period. Interests and dividends arising from the
possession of available-for-sale financial assets, if any, are recognised as investment gains.
⑤ Other financial liabilities and a instrument that is linked to and only settled by delivery of an
equity instrument that does not have a quoted market price in an active market and whose fair value
cannot be reliably measured are subsequently measured at cost.
A financial guarantee contract or a loan that bears an off-market interest rate, which are not designated
by the Company as at fair value through profit or loss, are subsequently measured at the higher of:
a. the value specified by CAS 13 Contingencies; and
b. the residual value after deducting the cumulative amortisation determined in accordance with
CAS 14 Revenue from the value recognised on its initial recognition.
Other financial liabilities are subsequently measured at amortised cost using the effective interest
method, with gains or losses arising from de-recognistion, impairment or amortisation accounted for
through profit or loss for the current period.
⑥ Fair value is the amount for which an asset could be exchanged or a liability settled between
knowledgeable, willing parties in an arm’s length transaction. The parties to an arm’s length
transaction shall be going concerns, not subject to or intended to enter the procedures of liquidation or
significant reduction in operating capacity, or forced to enter the transaction. The fair value of a
financial asset or financial liability for which there is an active market shall be measured at the quoted
market price in the active market; the fair value of a financial asset or financial liability for which
there is not an active market shall be established by the Company using a valuation technique.
The Company measures initially and subsequently the fair value of an interest rate swap at the value
of a competitor’s interest rate swap quoted by a recognised financial institution as at the Company’s
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balance sheet date in accordance with the principle of consistency.
⑦ The residual cost of a financial asset is the residual value after deducting the sum of impairment
losses and the principal amount that has been repaid from the sum of its value measured on its initial
recognition and the cumulative amortisation of the difference between its value measured on its initial
recognition and its value on its maturity determined using the effective interest method. The residual
cost of a financial liability is the residual value after deducting the sum of the principal amount that
has been repaid and the cumulative amortisation of the difference between its value measured on its
initial recognition and its value on its maturity determined using the effective interest method from its
value measured on its initial recognition.
⑧ The effective interest rate method is a valuation method for determining the residual value and
interest income or/and expense of a financial instrument (or a group of financial instruments) using
the effective interest rate. An effective interest rate is the interest rate used to discount the cash flows
of a financial instrument (or a group of financial instruments) over its expected life, or a shorter
period if it is relevant, to determine its current carrying value. The effective interest rate applicable to
a financial intrument (or a group of financial instruments) shall be determined with reference to its
future cash flows estimated by taking into account the whole of its contract terms (including but not
limited to early repayment rights, call options and option equivalents, but excluding future credit
losses).
2.9.3. Transfer and de-recognition of financial assets
① The Company de-recognises a financial asset if it meets either of the following conditions:
a. the contractual rights to the cash flows from the financial asset expire;
b. the financial asset has been transferred and all the risks and rewards of ownership of the financial
asset have been substantially transferred to the transferee; or
c. the financial asset has been transferred and the Company has neither transferred nor retained
substantially all the risks and rewards of ownership of the financial asset and not retained control of
the financial asset.
② Where the transfer of the whole of a financial asset satisfies the conditions for de-recognition set
out in paragraph 2.9.3①, the Company recognises through profit or loss for the current period the
difference between:
a. the carrying value of the financial asset; and
b. the sum of the proceeds from the transfer and the cumulative gains or losses recognised in
Shareholders’ equity.
③ Where the transfer of a part of a financial asset satisfies the conditions for de-recognition set out
in paragraph 2.9.3①, the fair value of the whole of the financial asset is apportioned accordingly to
the transferred part and the part not transferred; and, the Company recognizes through profit or loss
for the current period the difference between:
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a. the carrying value of the transferred part of the financial asset; and
b. the sum of the proceeds from the transfer and the cumulative gains or losses attributable to the
transferred part of the financial asset recognised in Shareholders’ equity.
④ If a transfer of a financial asset does not satisfy the conditions for de-recognition set out in
paragraph 2.9.3①, the Company continues to recognise the transferred asset in its entirety and
recognises a financial liability for the consideration received. Where the Company is in continuing
involvement in a transferred financial asset, the Company continues to recognise the financial asset to
the extent of its continuing involvement, and recognises an associated financial liability.
2.9.4. Impairment assessment and impairment allowance
① The company recognises impairment of a financial asset if either of the following is objectively
evidential:
a. significant financial difficulty of the issuer or obligor;
b. a breach of contract, such as a default or delinquency in interest or principal payments, by the
obligor;
c. the lender, for economic or legal reasons relating to the obligor’s financial difficulty, granting to
the obligor a concession that the lender would not otherwise consider;
d. it becoming probable that the obligor will enter bankruptcy or other financial reorganization;
e. the disappearance of an active market for that financial asset because of significant financial
difficulty of the issuer;
f. observable data indicating that there is a measurable decrease in the estimated future cash flows
from a group of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the group;
g. significant changes with an adverse effect that have taken place in the technological, market,
economic or legal environment in which the obligor operates, and indicates that the cost of the
investment in the equity instrument may not be recovered;
h. a significant or prolonged decline in the fair value of an investment in an equity instrument; or
i. other events of impairment.
② The Company assesses the occurrence of impairment of different categories of financial assets
and recognises and measures impairment on the balance sheet date using different criteria.
a. If there is objective evidence that an impairment loss on a held-to-maturity investments has been
incurred as at the balance sheet date, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of its estimated future cash flows.
b. If there is objective evidence that the fair value of an available-for-sale financial asset has
experienced a significant decline and the decline is not temporary after considering all relevant
information as at the balance sheet date, impairment loss on the available-for-sale financial asset is
recognised and the cumulative loss recognised in Shareholders’ equity is reclassified from equity to
profit or loss as impairment loss.
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2.10. Receivables
2.10.1. Receivables of individual significance
Individual receivables equal to or higher than 5%
Receivables of individual significance of total receivables are classified as receivables of
individual significance.
Receivables of individual significance are
individually assessed for impairment. If it is
objectively evidential that a receivable of
Method of recognition of provision for bad debts individual significance is subject to impairment,
for receivables of individual significance the excess of the carrying amount over the net
present value of the estimated future cash flows is
recognised as impairment loss and a provision for
bad debts is recognised at the same amount.
2.10.2 Credit-risk-categorised receivables
Basis for categorisation:
Category Basis
Receivables not individually assessed for
impairment are categorised on the basis of credit
risk. Provision for bad debts for each category of
receivables is recognised at the actual rate of loss
Categorisation by nature of receivables
for the previous year of the same or similar
category bearing similar credit risk characteristics
after adjustment for the current year
circumstances.
Method of recognition of provision for bad debts for categorised receivables:
Category Method of recognition
Categorisation by nature of receivables Percentage of carrying amount
Categories of receivables subject to provision for bad debts by percentage of carrying amount:
Percentage of carrying Percentage of carrying
amount for recognition of amount for recognition of
Category provision for bad debts provision for bad debts
applicable to accounts applicable to other
receivable receivables
Categorisation by nature of receivables 5% 5%
2.10.3 Receivables of individual insignificance subject to individual assessment for impairment
20
If it is objectively evidential that a receivable of individual
Justification for individual assessment for insignificance bears differing credit risk characteristics to
impairment other receivables of individual insignificance, the receivable
is subject to individual assessment for impairment.
The provision for bad debts for an receivable of individual
Method of recognition of provision for insignificance subject to individual assessment for
bad debts for receivables of individual impairment is recognised as the excess of the carrying
insignificance subject to individual amount over the net present value of the estimated future
assessment for impairment cash flows; an impairment loss is recognised at the same
amount.
2.11. Inventories
2.11.1. Categorisation of inventories
The Company’s inventories include materials or supplies to be consumed by the Company in the
rendering of services during the Company’s ordinary operating activities. The Company categorises
its inventories as air materials and low-value consumables.
2.11.2. Cost of inventories
The cost of inventories at their acquisition is measured at their actual cost of purchase. The cost of
inventories at their issue is determined using the first-in, first-out (FIFO) cost formula.
2.11.3. Net realisable value and impairment of inventories
① Determination of net realisable value of inventories
The net realisable value of finished goods, products and sellable materials is measured as the residual
value after deducting the estimated sales expense and related taxes and fees from the estimated selling
price. The net realisable value of an item of inventories subject to further processing is measured as
the residual value after deducting the sum of the estimated costs of completion, sales expense and
related taxes and fees from the estimated selling price of the sellable item. The net realisable value of
the quantity of inventories held to satisfy firm sales or service contracts is based on the contract price.
If the sales contracts are for less than the inventory quantities held, the net realisable value of the
excess is based on general selling prices.
② Impairment of inventories
The Company measures inventories at the lower of historical costs and net realisable values as at the
balance sheet date. If the net realisable value is lower than the historical cost of an item of inventories
as at the balance sheet date, an impairment allowance is recognised. An impairment allowance, if any,
is generally individually recognised for each type of inventories except:
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a. an individual impairment allowance, if any, is recognised for the whole category of inventories of
low value and large quantities; and
b. an individual impairment allowance, if any, is recognised for a group of inventories, which are
held for the production and sales of products of a single territory and for identical or similar usages or
purposes, and which are indistinguishable from other types of inventories within the group.
When the circumstances that previously caused inventories to be written down below cost no longer
exist, the amount of the write-down is reversed and the associated impairment allowance
de-recognised and re-recognised through profit or loss for the period in which the reversal occurs.
2.11.4. Stocktaking
The Company adopts the perpetual stocktaking system.
2.11.5. Amortisation of low-value consumables and packaging materials
The Company amortises consumables in full when they are issued for use.
2.12. Long-term equity investments
The Company’s long-term equity investments include the Company’s equity investments in an
investee which constitute the Company’s control, joint control or significant influence over the
investee and the Company’s equity investments in an investee which do not constitute the Company’s
control, joint control or significant influence over the investee and of which the fair value is not
quoted in an active market.
2.12.1. Initial measurement of long-term equity investments
Long-term equity investments are initially measured using the following two methods:
① Initial measurement of long-term equity investments acquired through business combination
a. The cost of a business under common control acquired by the Company by payment in cash,
non-monetary asset transfer, or assuming the acquiree’s liabilities is initially measured at the carrying
value of the equity instruments acquired as at the acquisition date, with the excess of the (carrying)
value of cash paid, assets transferred, or liabilities assumed over the initially measured cost debited to
Capital reserves, and to Undistributed profits where the total value of Capital reserves is insufficient.
The cost of a business under common control acquired by the Company by share issues is initially
measured at the carrying value of the equity instruments acquired as at the acquisition date, with the
excess of the total value at par of shares issued over the initially measured cost debited to Capital
reserves, and to Undistributed profits where the total value of Capital reserves is insufficient.
Expenses incurred directly for the acquisition, including but not limited to audit fees, valuation fees
and legal fees, are recognised through profit or loss for the period in which the expenses are incurred.
b. The cost of a business not under common control acquired by the Company is initially measured
at the fair value of assets transferred, liabilities incurred or assumed, or shares issued for the
22
acquisition as at the transaction date. The excess of the initially measured cost over the net of the
carrying values of the identifiable assets acquired and the liabilities assumed as at the acquisition date
is recognised as goodwill. The excess of the net of the carrying values of the identifiable assets
acquired and the liabilities assumed as at the acquisition date over the initially measured cost is
recognised through profit or loss for the current period in Non-operating revenue. Fees paid to
advisers including auditors, solicitors, valuers, consultants, etc. and other related administrative
expenses are accounted for through profit or loss for the reporting period during which they are
incurred; transaction costs incurred by the acquirer directly attributable to the issuance of equity
instruments or debt instruments, which are consideration for the acquisition, are capitalised as part of
the initial measurement of the relevant equity instruments or debt instruments.
Differing accounting treatments shall be applied to the consolidated financial statements and the
acquirer’s separate financial statements for a business combination not under common control
achieved in stages:
(I) In the acquirer’s separate financial statements, the cost of investment of a business combination not
under common control achieved in stages is initially measured as the sum of the carrying amount of
the investment immediately before the addition investment and the cost of the additional investment;
if the carrying amount of the investment immediately before the additional investment includes other
comprehensive income, the related other comprehensive income (such as changes in fair value of
available-for-sale financial assets accounted for in capital reserves, hereafter the same applied) is
transferred to investment income for the reporting period during which the investment is disposed.
(II) In the consolidated financial statements, the carrying amount of the investment immediately
before the additional investment is adjusted to the fair value of the existing investment as at the
acquisition date of the additional investment and the difference between the carrying amount of the
investment immediately before the addition investment and the fair value of the existing investment as
at the acquisition date of the additional investment is accounted for in investment income for the
reporting period during which the additional investment is acquired; if the carrying amount of the
investment immediately before the additional investment includes other comprehensive income, the
related other comprehensive income is transferred to investment income for the reporting period
during which the additional investment is acquired. The fair value of the existing investment as at the
acquisition date of the additional investment and the gain or loss arising from the fair value
adjustment are disclosed in the notes to the financial statements.
② Initial measurement of long-term equity investments acquired not through business combination
a. The cost of a long-term equity investment acquired by the Company by payments in cash is
initially measured at the sum of the consideration transferred and the fees, taxes and necessary
expenses directly attributable to the acquisition, with the value of declared-but-unpaid cash dividends
included in the consideration separately recognised as receivables.
b. The cost of a long-term equity investment acquired by the Company by share issues is initially
measured at the fair value of shares issued for the acquisition as at the issuance date.
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c. The cost of a long-term equity investment acquired by the Company by direct shareholder
contribution is initially measured at the value agreed upon the investment contract or agreement,
excluding a contract value or agreement value that is inconsistent with the definition of fair value.
d. The cost of a long-term equity investment acquired by the Company by non-monetary asset
transfer is initially measured at the sum of the fair values of the assets transferred to the transferee and
the taxes directly attributable to the asset transfer, with the difference between the fair values of the
assets transferred to the transferee and their carrying values as at the transaction date recognised
through profit or loss for the current period, where the exchange of non-monetary assets for equity
instruments is transacted on a commercial basis and the fair values of the assets transferred and equity
instruments acquired can be reliably measured; or, at the sum of the carrying values of the assets
transferred to the transferee and the taxes directly attributable to the asset transfer, where the exchange
of non-monetary assets for equity is not on a commercial basis or the fair values of the assets
transferred or equity instruments acquired can not be reliably measured.
e. The cost of a long-term equity investment acquired by the Company through the investee’s debt
restructuring is initially measured at the fair values of the equity instruments acquired, with the
difference between the initially measured cost and the carrying value of the original loans to the
investee as at the restructuring date recognised through profit or loss for the current period.
2.12.2. Subsequent measurement and recognition and measurement of gains or losses
Long-term equity investments in subsidiaries are subsequently measured at cost. In preparing
consolidated financial statements, the long-term equity investments in subsidiaries are adjusted using
the equity method.
Long-term equity investments which do not constitute the Company’s joint control or significant
influence over the investee, of which the fair value of equity instruments is not quoted in an active
market and can not be measured reliably, are subsequently measured at cost.
Long-term equity investments which constitute the Company’s joint control or significant influence
over the investee are subsequently measured by the equity method.
a. If a long-term equity investment is subsequently measured at cost, further acquisition or disposal
of the investment increases or reduces the cost of the investment accordingly; dividends or share of
profits, except those included in the consideration which has been declared but not received, are
recognised through profit or loss for the current period.
b. If a long-term equity investment is subsequently measured by the equity method, its carrying
value is adjusted by the share of the investee’s net profit or loss.
Gain or loss for the current period is measured at the share of the net profit or loss of the investee for
the current period. When determining the net profit or loss of the investee, where the investee adopts
different accounting policies, the net profit or loss reported by the investee is adjusted by the
depreciation or amortisation calculated on the basis of the fair value of the investee’s fixed assets or
intangible assets as at acquisition and the impairment provisions determined on the basis of the fair
24
value of the relevant assets of the investee as at acquisition; transactions between the Company and
associates or joint ventures are also eliminated. The losses arising from transactions between the
Company and associates or joint ventures are wholly recognised as asset impairment if the losses meet
the conditions set by CAS 8 – Asset Impairment.
Losses of a long-term equity investment reduce the carrying value of the investment to zero as the
furthest. If the cumulative value of subsequent profits of the investee becomes higher than the
cumulative value of unrecognised losses, the excess of the cumulative profits over the cumulative
unrecognised losses is recognised in the carrying value of the investment.
Where a long-term equity investment existed prior to the first adoption of CAS, the excess of
consideration over acquired net assets of the investee as at the adoption date, if any, is amortised over
the remaining life determined at the acquisition using the straight line method; the amortisation is
recognised through profit or loss for the current period.
2.12.3. Joint control and significant influence
① The Company has joint control over an investee if the investment meets one of the following
conditions:
a. neither of the investors can individually influence the operation of the investee;
b. decisions of the investee’s must be approved by the general consensus of the investors; or
c. an individual investor is authorised by an agreement of contract signed by each investor to
manage the investee’s operation in accordance with the accounting and operation policies agreed by
each investor.
Investors may lose joint controls over an investee where the investee is in the procedures of legal
administration or bankruptcy, or where the investee’s ability to transfer economic resource to investors
is severely limited for a substantial length of time; however, if it is objectively evidential that the joint
control exists, the investors shall continue to recognise and measure the investment using the equity
method.
② The Company has significant influence over an investee if:
a. the Company has delegates in the investee’s Board of Directors or similar body;
b. the Company participates in the investee’s policy making process, including the policy making
process for declaration of dividends;
c. the Company has significant transactions with the investee;
d. the Company has delegated personnel to the investee’s management; or
e. the Company has provided key technology to the investee.
2.12.4. Impairment of long-term equity investments
The Company assesses the operation policies, legal environment, market and industry conditions, and
profitability each long-term equity investment individually on the balance sheet date to determine
whether an investment is subject to impairment. If the net recoverable value of an investment is lower
25
than its carrying value as at the balance sheet date, an impairment provision is recognised at the
excess of its carrying value over the net recoverable value as at the balance sheet date. A recognised
impairment loss of an investment is not recoverable in subsequent periods.
2.13. Fixed Assets
2.13.1. Recognition
A fixed asset is a tangible asset the Company holds for the purpose of production, service rendering,
leasing and operation, of which the useful life is longer than one year and which has a relatively
higher value. A fixed asset is measured at the cost of acquisition if it meets both of the following
conditions:
① it is probable that the economic benefits associated with the asset will flow to the Company; and
② the cost of the asset can be measured reliably.
Subsequent expense associated with the asset, which meets the above conditions, is recognised as
parts of its cost; otherwise, through profit or loss for the period in which the expense is accrued.
2.13.2. Depreciation
Fixed assets are depreciated using the straight line method. The useful life, residual value percentage
and annual depreciation are listed below.
Residual value Expected Annual
Types
percentage(%) useful life(years) depreciation rate(%)
Houses and building 5.00 27-33 2.88-3.52
Key components and power
5.00 15-20 4.75-6.33
supports of aircraft engine
Replacement parts of aircraft body 0.00 6-8 12.5-16.67
Replacement parts of engine 0.00 3-5 20-33.33
Equipments, electronic
0-5.00 4-10 9.5-23.75
devices and furniture
High value rotables 0.00 15-18 5.56-6.67
Transportation vehicles 5.00 5-10 9.5-19.00
2.13.3. Impairment
The Company assesses each non-current asset for impairment on the balance sheet date. If it is
objectively evidential that the net recoverable value of a non-current asset is lower than its carrying
value as at the balance sheet date, its carrying value is reduced to the net recoverable value and the
reduction accounted for through profit for the current period and recognised as impairment provision.
A recognised impairment loss of a non-current asset is not recoverable in subsequent periods. A
non-current asset is impaired if one of the following is evidential:
① its fair value decreased significantly during the current period with a decrease rate significantly
higher than the rate estimated on the basis of time or normal usage;
② the economic, technological or legal environment, in which the Company operates or in which
26
the asset is located, changed during the current period or is going to change in the near future; and, e
the change caused or is going to cause significant disadvantage to the Company;
③ the rate for discounting future cash flows, which has been affected by the increased interest rate
or investment return rate, has led to a significant decrease of the asset’s recoverable value;
④ the asset is either obsolete or physically damaged;
⑤ the asset has been or is going to be retired, terminated for usage or disposed prior to the end of its
use life;
⑥ the Company recognised internally that the asset’s associated economic benefit has been or is
going to be below expectation, eg. the net cash flows or net profit or loss significantly lower than the
expected value; or
⑦ there is other evidence which suggests the asset has been impaired.
2.13.4. Leased fixed assets
If the Company acquired substantially the risks attached to and the economic benefits associated with
a leased non-current asset, the asset is recognised. The asset is measured at the lower of the asset’s
fair value as at the lease-commence date and the net present value of the minimum lease payment.
The depreciation policies for owned non-current assets are applicable to leased non-current assets.
The expected useful life of a leased asset, of which the ownership is reasonably transferrable to the
Company after the expiry of the lease, is the asset’s own expected useful life; the expected useful life
of a leased asset, of which the ownership is not reasonably transferrable to the Company, is the shorter
of the lease life and the asset’s own expected useful life.
2.14. Construction-in-progress
2.14.1. Categorisation
The Company categorises construction-in-progress on the basis of project approval.
2.14.2. Conversion of construction -in-progress to fixed assets
A construction-in-progress is recognised as a fixed asset when it satisfied the predetermined usable
state. A converted construction-in-progress is initially measured at its full construction cost. A
converted construction-in-progress of which the construction cost is not fully recognised is initially
measured at a reasonable estimate; and, the initial measured cost is adjusted to its full construction
cost when the construction is fully recognised; but, its recognised depreciation as at the full
recognition is not adjusted.
2.14.3. Impairment
The Company assesses each construction-in-progress for impairment on the balance sheet date. If it is
objectively evidential that the net recoverable value of a construction-in-progress is lower than its
27
carrying value as at the balance sheet date, its carrying value is reduced to the net recoverable value
and the reduction accounted for through profit for the current period and recognised as impairment
provision. A recognised impairment loss of a construction-in-progress is not recoverable in subsequent
periods. A construction-in-progress is impaired if one or more of the following are evidential:
① the project has been suspended for a substantially long period of time and of which the
construction is not to be re-activated within three years;
② either the capability or the technology of the project is obsolete and the economic benefit
associated with the project is highly indeterminable; or
③ there is other evidence which suggests the project has been impaired.
2.15. Borrowing costs
2.15.1. Capitalisation of borrowing costs
The borrowing costs directly attributable to asset construction or production are capitalised into cost
of asset when they meet the following conditions:
① the asset construction or production expense has been incurred;
② the borrowing costs have been incurred; and
③ the construction or production which directly contributes to the usable state of the asset has been
activated.
Other borrowing costs, discounts, premiums and exchange differences are accounted for through
profit or loss of the period in which they are incurred.
If the construction or production of an asset eligible for capitalisation has suspended not in accordance
with schedule, where the suspension has lasted continuously for a period longer than three months, the
capitalisation of relevant borrowing costs is suspended.
The capitalisation of relevant borrowing costs is terminated when a constructed or produced asset
reaches its usable or sellable state. Any subsequent borrowing cost associated with the asset is
accounted for through profit or loss for the period in which it is incurred.
2.15.2. Measurement of capitalised borrowing costs
The capitalised borrowing costs of a finance specifically raised for an asset construction or production
are measured at the excess of the borrowing costs over the interests arising from the deposit of the
unused part of the finance or the gains arising from the investment using the unused part of the
finance for the relevant period.
Where the value of an asset construction or product is higher than the finance specifically raised for
the construction or production, the capitalised borrowing costs of the part of general finance used by
the construction or production are measured by multiplying the weighted average of the excess of the
asset value over the specific-raised finance with the capitalisation rate of general finance.
28
2.16. Intangible assets
2.16.1. Measurement
Intangible assets are initially measured at cost.
2.16.2. Useful life and amortization
The period during which an intangible asset is reasonably capable of generating economic benefits for
the Company with reference to its contractual rights and other legal rights, industry practice, historical
experience, and professional evidence is determined as the asset’s useful life. If a period during which
an intangible asset is reasonably capable of generating economic benefits for the Company is not
determinable, the asset is categorised as with undeterminable useful life.
① The useful life of an intangible asset with useful life is determined on the basis of:
a. the general useful life of products produced by the asset and the obtainable information in
relation to the useful life of a similar asset;
b. the current condition and estimated future trends of technology and techniques;
c. the market demand for products produced or service rendered by the asset;
d. the expected reaction of existing and potential competitors;
e. the estimated maintenance expense for the continuance of the asset’s ability in generating
economic benefits and the Company's estimated ability in maintaining the expense;
f. the relevant law and regulation which regulate the ownership period of the asset, eg. chartered
usage rights and lease rights; and
g. the connection between the useful life of the asset and the useful life of the Company’s other
assets.
② An intangible asset with undeterminable useful life is amortised using a reasonable method
determined by the realisation process of the asset’s expected economic benefit. Where a reasonable
amortisation method is undeterminable, the asset is amortised using the straight line method.
2.16.3. Impairment of intangible assets with undeterminable useful life
① The Company assesses the useful life of each intangible asset with undeterminable useful life on
the balance sheet date. If the useful life of an asset remains undeterminable, the asset is assessed for
impairment on the balance sheet date. If it is objectively evidential that the net recoverable value of an
intangible asset with undeterminable useful life is lower than its carrying value as at the balance sheet
date, its carrying value is reduced to the net recoverable value and the reduction accounted for through
profit for the current period and recognised as impairment provision. A recognised impairment loss of
an intangible asset with undeterminable useful life is not recoverable in subsequent periods. An
intangible asset with undeterminable useful life is assessed for impairment if one or more of the
following are evidential:
a. the asset has been replaced by another new technology which renders its ability to generate
economic benefit for the Company being significantly devastated;
29
b. the asset’s fair value has decreased significantly during the period and it may not increase during
the remaining life of the asset; or
c. there is there is other evidence which suggests the asset has been impaired.
2.16.4. Research and development
Research expenses associated with an internal development project are accounted for through profit or
loss for the period in which they are incurred. Development expenses associated with an internal
development project are recognised as intangible assets if the project meets all of the following:
① assets arising from the project are either for sale or for internal use and it is technically viable to
complete the project;
② the Company has clear intention to complete the intangible asset and to use or sell the asset;
③ it is objectively evidential that products produced by the intangible or the intangible asset itself
are marketable or that the intangible asset is employable if used internally;
④ it is practical, in terms of technology, finance and other resources, to complete the development
of the intangible asset and to use or sell the intangible asset; and
⑤ development expenses of the development of the intangible asset can be measured reliably.
2.17. Regular repair and substantial repair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is accounted
for through profit or loss for the period in which it is incurred. Substantial repair expenditure eligible
for capitalisation is capitalised when incurred and recognised as replacement cost of non-current
assets and depreciated over a reasonable length of time. Substantial repair expenditure of aircrafts
under an operating lease incurred before the lease expiry date is amortised using the straight line
method or on the basis of air hours over the lease period.
2.18. Long-term deferred expenses
The Company’s long-term deferred expenses refer to expense which has been incurred but which
generates economic benefit for the Company for a period of longer than one year, such as expenses
for pilots’ initial trainings. Those expenses are amortized at 10 years according to their benefit period
respectively. When a pilot is transferred from the Company, the cost of transfer is the unamortized
part of the original expenditure.
2.19. Accrued liabilities
2.19.1. Recognition of accrued liabilities
The obligations related to some items that meet the following conditions at the same time will be
confirmed as the liabilities:
①This obligation is the current obligation of the company;
②The performance of this obligation will probably cause the economic benefits to flow out of the
30
company;
③The amount of this obligation can be reliably calculated.
The Company should recognize accrued liabilities, when the Company’s loss contract and
restructuring liabilities undertaken satisfied above conditions.
2.19.2. The measurement of accrued liabilities
The accrued liabilities are initially measured in accordance with the best estimated outflow of
economic benefits to fulfill the current obligation as well as related risks regarding the contingencies,
uncertainties and time value of money. Significant impact on the time value of money the best
estimation is determined through the related discounted future cash outflows. The increase of book
value of accrued liability caused due to the passage of time is recognized as interest.
2.19.3. Optimum evaluation of accrued liabilities
If the necessary payments have scopes, the optimum evaluation shall be determined based on the
average amount between the upper and lower limit amount of scope ; if the necessary payments do
not have such scopes, the optimum evaluation shall be determined in the following method:
① If the contingent event is involved in an individual project, the optimum evaluation amount will
be determined based on the possible amount;
② If the contingent event is involved in some projects, the optimum evaluation amount shall be
determined based on possible amount and occurrence probability. In case of all or part of payments
about the confirmed liquidation liabilities are expected to be compensated by the third parties or other
parties, and the compensation amounts are surely received, then such amounts shall be separately
recognized. The confirmed compensation amounts shall not exceed book values of confirmed
liabilities
2.20. Revenue
2.20.1. Service rendering
① The Company recognise revenue from rendering of air service for carriage of passengers when
the service is rendered or when an unused ticket expires. The sale of a ticket does not constitute
revenue. An unused ticket expires on the annual anniversary of its sale. Tickets sold but of which the
service is not yet rendered are recognised in current liabilities as Advances from customers. If service
is rendered through code sharing, revenue arising from the service provision is apportioned amongst
parties to the code sharing agreement. The revenue arising from code sharing is also recognised when
the service is rendered.
② If the service is rendered in conjunction with reward points, the amount arising from ticket sales
and of receivables shall be apportioned between revenue and reward points. The amount apportioned
to reward points is initially recognised as deferred income and subsequently accounted for through
31
profit or loss for the period in which the reward points expire or are exchanged.
③ Revenue arising from other air service rendering is recognised when the service rendering is
completed.
2.20.2. Transfer of asset use rights
Revenue is recognised when the inflow of the economic benefit associated with the transfer is
probable and when the amount of the inflow can be measured reliably. Revenue arising from transfer
of asset use rights is recognised according to the income category:
① interest income is recognised on the basis of the length of time for which the Company’s
monetary asset is used by other parties using the effective interest rates;
② use right income is recognised in accordance with the payment schedules and means agreed in
the relevant contracts or agreements.
2.21. Government grants
2.21.1. Recognition
① The Company meets the conditions attached to the grant; and
② The Company is probable to receive the grant.
2.21.2. Types of government grants and accounting for government grants
① A grant associated with an asset is recognised as deferred income when the grant is received. The
grant is subsequently averaged over the useful life of the asset and the average is accounted for
through profit or loss for subsequent periods during the asset’s useful life after the asset reaches its
usable state. If the asset is disposed, transferred, scrapped or damaged prior to the end of its useful life,
the whole of the remaining deferred income is accounted for through profit or loss for the period in
which the asset is disposed, transferred, scrapped or damaged.
② A grant compensating expenditure or loss in subsequent periods is initially recognised as
deferred income and subsequently accounted for through profit or loss for the period in which the
relevant expenditure of loss is incurred. A grant compensating expenditure or loss already incurred is
accounted for through profit or loss for the period in which the grant is received.
2.21.3. Measurement
A grant that is in the form of monetary asset is measured at the amount of actual receipt or actual
receivable. A grant that is in the form of non-monetary asset is measured at fair value or at notional
value if fair value can not be obtained.
2.21.4. Repayment of government grants
① If there is deferred income associated with the grant, the carrying value of the deferred income is
32
reduced by the repayment. The excess of the repayment over the carrying value of the deferred
income is accounted for through profit or loss for the period in which the repayment is incurred.
② If there is not deferred income associated with the grant, the repayment is accounted for through
profit or loss for the period in which the repayment is incurred.
2.22. Deferred income tax assets and deferred income tax liabilities
The Company accounts for income taxes by the balance sheet approach.
The Company calculates the value of a deferred income tax asset or deferred income tax liability on
the basis of the difference between the carrying value of an asset or liability and its tax base and the
income tax rates applicable to the period through which the asset or liability is recovered or settled.
2.22.1. Recognition of deferred income tax assets
① A deferred income tax asset is recognised for all deductible temporary differences to the extent
that it is probable that taxable profit will be available against which the deductible temporary
difference can be utilised, unless the deferred income tax asset arises from the initial recognition of an
asset or liability in a transaction that:
a. is not a business combination; and
b. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
② A deferred income tax asset is recognised for all deductible temporary differences arising from
investments in subsidiaries, branches and associates, and interests in joint ventures, to the extent that,
and only to the extent that, it is probable that:
a. the temporary difference will reverse in the foreseeable future; and
b. taxable profit will be available against which the temporary difference can be utilised.
③ A deferred income tax asset is recognised for all tax losses and tax credits eligible for being
carried forward to the extent that it is probable that taxable profit will be available against which the
tax losses and tax credits can be utilised.
2.22.2. Recognition of deferred income tax liabilities
A deferred income tax liability is recognised for all taxable temporary differences, except to the extent
that the deferred income tax liability arises from:
① the initial recognition of goodwill; or
② the initial recognition of an asset or liability in a transaction which:
a. is not a business combination; and
b. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
③ A deferred income tax liability is recognised for all taxable temporary differences associated
with investments in subsidiaries, branches and associates, and interests in joint ventures, except to the
extent that both of the following conditions are satisfied:
a. the parent, investor or venturer is able to control the timing of the reversal of the temporary
33
difference; and
b. it is probable that the temporary difference will not reverse in the foreseeable future.
2.22.3. The carrying value of a deferred income tax asset is assessed on the balance sheet date. It is
probable that there is not enough taxable profit in the future against which the deferred income tax
asset can be utilised, the carrying value of the deferred income tax asset is written off; when it
becomes probable again that there is enough taxable profit in the future against which the deferred
income tax asset can be utilised, the write-off is reversed.
2.23. Financial leases and operating leases
2.23.1. Operating leases
① When the Company is the leasee to a operating lease, the total lease expenditure is apportioned
over the lease life using the straight line method or on the basis of the leased asset usage. The
apportioned amount is recognised through profit or loss for the relevant period. Initial expenditure
directly attributable to the acquisition of the lease is recognised in administrative expenses for the
period in which the expenditure is incurred or recognised through profit of loss for the period in which
the first lease payment is incurred. If a rent holiday is offered by the leasor, the total expenditure is
apportioned over the whole life of the lease using the straight line method or on a reasonable basis;
the lease expense during the rent holiday is accounted for through profit or loss for the relevant period
and recognised as a liability on the balance sheet. If a part of the total lease expenditure is
compensated by the leasor, the residual amount after deducting the compensation from the total lease
expenditure is apportioned over the lease life.
② When the Company is the leasor to a operating lease, the total lease revenue is apportioned over
the lease life. The apportioned amount is recognised through profit or loss for each year of the lease
life. Initial expenditure directly attributable to the grant of the lease is recognised through profit or
loss for the period in which it is incurred. If the initial expenditure is of significant value, it is
capitalised and apportioned over the lease life using the same method adopted for the apportionment
of lease revenue; the apportioned amount is recognised through profit or loss for each year of the lease
life. The initial expenditure of significant value is recognised in full through profit or loss for the
period in which the first lease income is accrued if the recognition is so provided by an agreement. If
a rent holiday is offered, the total lease revenue is apportioned over the whole life of the lease using
the straight line method or on a reasonable basis. The apportioned amount is recognised as lease
income for each year of the lease life, including the years within the rent holiday. If a part the total
lease expenditure is compensated by the leasor, the residual amount after deducting the compensation
from the total lease revenue is apportioned over the lease life.
2.23.2. Financial leases
34
① When the Company is the leasee to a financial lease, the Company recognises on the lease start
date the leased asset at the lower of its fair value as at the lease start date and the minimum total lease
payments; the minimum total lease payments is recognised as long-term payables; and, the excess of
the minimum total lease payments over the leased asset’s fair value as at the lease start date is
accounted for as unrecognised financing cost and amortised over the life of the lease using the
effective interest rate method with the amortised amount recognised in financial costs for the relevant
period. Initial expenditure directly attributable to the acquisition of the lease is recognised as a part of
the leased asset’s carrying value.
The depreciation policies for owned depreciatable assets are applicable to an asset leased under a
financial lease. The expected useful life of a leased asset, of which the ownership is reasonably
transferrable to the Company after the expiry of the lease, is the asset’s own expected useful life; the
expected useful life of a leased asset, of which the ownership is not reasonably transferrable to the
Company, is the shorter of the lease life and the asset’s own expected useful life.
② When the Company the leasor to a financial lease, the Company recognises on the lease start date
the sum of initial expenditure directly attributable to the grant of the lease and the minimum total
lease revenue as long-term receivables; and, the unguaranteed residual value is recorded. The excess
of the sum of the minimum total lease revenue, initial expenditure directly attributable to the grant of
the lease and unguaranteed residual value over the leased asset’s fair value as at the least start date is
accounted for as unrealised financing income and amortised over the lease life using the effective
interest rate method with the amortised amount recognised as rental income for the relevant period.
2.24. Significant changes of accounting policies and accounting estimates
There is no significant change of accounting policies and accounting estimates for the Company
during the reporting period.
Note 3. Taxation
3.1. Major taxes and tax rates
The major taxes and tax rates applicable to the Company are listed below:
Tax Tax base Tax rate
Operating tax Revenue from air service for carriage of goods and passengers and from commission or rental service 3% 、5%
Enterprise income
Taxable profit 25%
tax
Other taxes applicable to the Company are calculated in accordance with the relevant law and
regulation.
3.2. Infrastructure fund for civil aviation
Infrastructure fund for civil aviation is calculated in accordance with the guidance set out in
35
CaiZong[2004] No.38 (财政部 关于印发民航基础设施建设基金征收使用管理暂行办法) issued
by the Ministry of Finance. CaiZong[2004] No.38 provides that infrastructure fund and civil aviation
shall be calculated using the rates set out within applicable to the relevant category of flight routes,
maximum departure weight and flight distance adopted by the civil aviation industry.
3.3. Tax incentives
3.3.1. Fuel surcharge collected by aviation incorporation upon approval is exempted for operating tax
purposes for the period from January 1st, 2008 to December 31st, 2010 as provided by
CaiShui[2008]No.178 (财政部 国家税务总局 关于航空公司燃油附加费免征营业税的通知).
3.3.2. Revenue earned by domestic individuals and incorporation domiciled in the PRC for the
provision of international transportation services is exempted for operating tax purposes as from
January 1st, 2010 as provided by Caishui[2010]No.8 (财政部国家税务总局关于国际运输劳务免征
营业税的通知)
Note 4. Business combination and consolidated financial statements
4.1. Subsidiaries acquired through incorporation or investment
Type of Place of
Name of subsidiary Nature of business Registered capital Business scope
subsidiary registration
Qingdao International Warehousing and
Air Logistics Centre Holding Shandong Transportation distribution of air
CNY 30,000,000.00
Co., Ltd (hereafter, subsidiary Qingdao warehousing cargo,
Qingdao Logistics) E-commerce, etc
(Continued)
Ending balances of projects
Actual investment value
Name of subsidiary constituting net investment Shareholding proportion (%) Voting right (%)
as at December 31,2010
in the subsidiary
Qingdao Logistics 23,813,205.97 0.00 70.00 70.00
(Continued)
36
The balance of parent company’s equity,
Value of minority
that is equal to the parent shareholders’
interest that utilized to
Financial statement equity less the subsidiary’s current loss
Name of subsidiary Minority interest write off the profits or
consolidation undertaken by the minority shareholders
losses attributed to
according their share quotient at the
minority shareholders
beginning of the period
Qingdao Logistics Yes 13,462,271.78 0.00 0.00
4.2. Subsidiaries acquired through business combination not under common control
Type of Nature of
Name of subsidiary Place of registration Registered capital Business scope
subsidiary business
Qingdao Feisheng Development and
International Aviation application of civil
Training Technology Wholly-owned aviation technology;
Shandong Qingdao Pilot training CNY 51,545,500.00
Development Co., Ltd subsidiary pilot training and related
(hereafter, Qingdao activities and
Feisheng) consultancy
(Continued)
Ending balances of
Actual investment value as projects constituting Shareholding
Name of subsidiary Voting right (%)
at December 31,2010 net investment in the proportion (%)
subsidiary
Qingdao Feisheng 57,677,479.46 0.00 100.00 100.00
(Continued)
Value of minority
The balance of parent company’s equity,
interest that utilized
that is equal to the parent shareholders’
to write off the
Financial statement equity less the subsidiary’s current loss
Name of subsidiary Minority interest profits or losses
consolidation undertaken by the minority shareholders
attributed to
according their share quotient at the
minority
beginning of the period
shareholders
Qingdao Feisheng Yes 0.00 0.00 0.00
4.3. Change of the scope of consolidation
4.3.1. Change of the scope of consolidation
Shares of Qingdao Feisheng previously held by SDA Group were acquired by the Company on
November 29th, 2010. Immediately after the share acquisition, Qingdao Feisheng became a
wholly-owned subsidiary of the Company, see Note 4.4 for details of the acquisition of Qingdao
Feisheng. Apart from the acquisition of Qingdao Feisheng, the scope of consolidation for the current
reporting period remained unchanged from the last reporting period.
37
4.4. Business combination not under common control during the current reporting period
The acquisition of 100% shareholding in Qingdao Feisheng from SDA Group was effected during the
current reporting period per share transfer agreement by SDA Group and the Company signed on
March 1st, 2010. The registration of the change of share ownership was completed on November 29th,
2010. Qingdao Feisheng became a wholly-owned subsidiary of the Company as from the completion
date of the registration of the change of share ownership.
Goodwill Measurement of goodwill
Acquiree
recognised upon acquisition upon acquisition
The excess of the fair value of the
acquisition-date identifiable net assets of
Qingdao Feisheng 10,220,816.22
Qingdao Feisheng over the cost of
acquisition (note)
Note: The fair value and carrying amount of the net identifiable assets of Qingdao Feisheng as at
November 29th, 2010 upon the valuation carried out by the management of the Company are
presented below:
Items Fair value Carrying amount
Monetary funds 7,644,829.83 7,644,829.83
Accounts receivable 10,591,056.50 10,591,056.50
Other receivables 229,850.00 229,850.00
Fixed assets 53,627,418.97 64,050,227.36
Deferred tax assets 229,127.01 229,127.01
Accounts payable -1,119,342.75 -1,119,342.75
Taxes payable 25,367.22 25,367.22
Interests payable -264,599.08 -264,599.08
Other payables -2,907,044.46 -2,907,044.46
Long-term borrowings -20,600,000.00 -20,600,000.00
Net assets 47,456,663.24 57,879,471.63
Goodwill recognised upon acquisition 10,220,816.22
Cost of acquisition 57,677,479.46
Note 5. Main items of the consolidated financial statements
5.1. Monetary funds
2010.12.31 2009.12.31
Currency Original Exchange Presentation Original Exchange Presentation
currency rate currency currency rate currency
Cash on hand
CNY
351,682.13 1.000000 351,682.13 262,286.69 1.000000 262,286.69
HKD
4,386.60 0.850930 3,732.69 386.60 0.880500 340.40
USD
21,819.25 6.622700 144,502.35 1,057.92 6.828200 7,223.69
GBP
1,377.70 10.218200 14,077.61 362.80 10.978000 3,982.82
CAD
10.00 6.603100 66.03 10.00 6.517100 65.17
38
2010.12.31 2009.12.31
Currency Original Exchange Presentation Original Exchange Presentation
currency rate currency currency rate currency
JPY
582,000.00 0.081260 47,293.32 0.00 0.073800 0.00
EUR
514.00 8.806500 4,526.54 6,870.00 9.797100 67,306.08
TWD 1,680.00 0.226180 379.98 0.00 0.221200 0.00
Subtotal
566,260.65 341,204.85
Bank
CNY
143,126,509.59 1.000000 143,126,509.59 47,952,878.72 1.000000 47,952,878.72
USD
627,267.34 6.622700 4,154,203.41 126,124.43 6.828200 861,202.83
KRW 40,902,359.18 0.005823 238,174.43 30,317,123.00 0.005876 178,143.41
TWD 1,038,562.00 0.226180 234,901.82 0.00 0.221200 0.00
JPY 3,522,454.00 0.081260 286,234.61 0.00 0.073800 0.00
Subtotal
148,040,023.86 48,992,224.96
Other monetary funds
CNY
184,966,363.25 1.000000 184,966,363.25 144,732,312.88 1.000000 144,732,312.88
Subtotal
184,966,363.25 144,732,312.88
Total
333,572,647.76 194,065,742.69
5.1.1. Other monetary funds as at December 31st, 2010 include monetary funds with
restriction-on-movement imposed amounting to 184,966,363.25, within which guarantee deposits for
bankers’ acceptance and guarantee deposits for Hui Li Da financing contracts amount to
34,800,000.00 and 150,166,363.25 respectively.
5.1.2. The balance carried forward of monetary funds increased for 71.89% from the balance brought
forward. The increased mainly resulted from the increased amount of guarantee deposits for Hui Li
Da financing contracts.
5.2. Financial assets held for trading
Item Fair value as at 2010.12.31 (CNY) Fair value as at 2010.01.01 (CNY)
Interest rate swaps 9,290,846.62 11,341,846.48
Total 9,290,846.62 11,341,846.48
5.2.1. The notional principal of immature interest rate swaps held as at December 31st, 2010 amounted
to USD 174,301,892.40; and, the market value of the swaps as at December 31st, 2010 quoted by the
bank amounted to CNY 9,290,846.62 (USD 1,402,878.98).
5.3. Accounts receivables
39
5.3.1. Disclosure by classification
2010.12.31
Book value Provision for bad debts
Category
Proportion Proportion
Amount(CNY) Amount(CNY)
(%) (%)
Accounts receivable of individual significance 159,361,519.11 81.68 0.00 0.00
Categorised accounts receivable:
Categorisation by nature of receivables 34,824,626.72 17.85 1,741,231.34 5.00
Subtotal of category 34,824,626.72 17.85 1,741,231.34 5.00
Accounts receivable of individual insignificance
916,508.05 0.47 916,508.05 100.00
subject to individual assessment for impairment
Total 195,102,653.88 100.00 2,657,739.39 1.36
(Continued)
Category 2009.12.31
Book value Provision for bad debts
Proportion Proportion
Amount(CNY) Amount(CNY)
(%) (%)
Accounts receivable of individual significance 130,379,296.86 91.06 0.00 0.00
Categorised accounts receivable:
Categorisation by nature of receivables 12,806,946.47 8.94 640,347.37 5.00
Subtotal of category 12,806,946.47 8.94 640,347.37 5.00
Accounts receivable of individual insignificance
0.00 0.00 0.00 0.00
subject to individual assessment for impairment
Total 143,186,243.33 100.00 640,347.37 0.45
① Classification of accounts receivable: See Note 2.10 for criteria for classification of accounts
receivable of individual significance, categorised accounts receivable and accounts receivable of
individual insignificance subject to individual assessment for impairment.
② Categories of accounts receivable subject to provision for bad debts by percentage of carrying
amount
Category Book value Proportion (%) Provision for bad debts
Categorisation by nature of
34,824,626.72 5.00 1,741,231.34
receivables
Total 34,824,626.72 1,741,231.34
5.3.2. Accounts receivable of individual insignificance subject to individual assessment for
impairment:
40
Details Book value(CNY) Bad debts(CNY) Proportion (%) Comment
Individually assessed as
CR Airways 916,508.05 916,508.05 100.00
uncollectable
Total 916,508.05 916,508.05
5.3.3. Accounts receivables owed by shareholders with 5% or more voting right during the
reporting period
2010.12.31 2009.12.31
Shareholder
Amount(CNY) Provision for bad debts (CNY) Amount(CNY) Provision for bad debts (CNY)
Air China 66,366,844.88 0.00 53,828,640.46 0.00
Total 66,366,844.88 0.00 53,828,640.46 0.00
5.3.4. The top five account receivables
% of total
Name of company Relationship with the Company Amount(CNY) Age accounts
receivables
Air China Related parties 66,366,844.88 Within 1 year 34.02
BSP Non-related parties 64,125,118.02 Within 1 year 32.87
China Civil Aviation Clearing Centre Non-related parties 28,869,556.21 Within 1 year 14.8
Air China Cargo Co., Ltd. Related parties 3,275,079.39 Within 1 year 1.68
China Post, Jinan(济南市邮政局) Non-related parties 2,799,874.16 Within 1 year 1.44
Total 165,436,472.66 84.81
5.3.5. Accounts receivables owed by related parties
% of total accounts
Name Relationship with the Company Amount (CNY)
receivables
Principal investor
Air China 66,366,844.88 34.02
of the Company
Controlled by principal investors
Shenzhen Airlines Co., Ltd. 1,849,400.00 0.95
of the Company
Controlled by principal investors
Air China Cargo Co., Ltd. 3,275,079.39 1.68
of the Company
Total 71,491,324.27 36.65
5.4. Advances to suppliers
5.4.1. Presentation by age
2010.12.31 2009.12.31
Age
Amount (CNY) Proportion (%) Amount (CNY) Proportion (%)
Within 1 year 27,837,071.95 98.18 21,184,884.28 94.13
1 – 2 years 479,793.30 1.69 1,304,378.20 5.80
2 – 3 years 27,706.35 0.10 0.07
15,000.00
3 - 4 years 8,884.20 0.03 0.00 0.00
Total 28,353,455.80 100.00 22,504,262.48 100.00
5.4.2. List the top five balance of advances to suppliers
41
Relationship with 2010.12.31 Reasons for
Name of company Age
the Company (CNY) unsettlement
Advanced
RBSAEROSPACELIMITED Non-related parties 8,669,239.05 Within 1 year
rental
Advanced
CELESTIALAVIATIONTRADING22LIMITED Non-related parties 2,521,473.32 Within 1 year
rental
Advanced
TURFDELLLIMITED Non-related parties 2,454,580.00 Within 1 year
rental
Advanced
Shandong XiangYu Air Technology Co., Ltd. Related parties 1,918,266.76 Within 1 year payment for
purchase
Advanced
PACIFICBRIHARCORPORATIONLIMITED Non-related parties 1,167,584.00 Within 1 year
rental
Total 16,731,143.13
5.4.3. There is no Advance to supplier balance due from shareholders who own five or over five
percent voting rights as at December 31st, 2010.
5.4.4. Advances to related parties
% of total Advances
Name of company Relationship with the Company Balance carried forward (CNY)
to suppliers
Shandong XiangYu Air Technology Controlled by principal investors of
Co., Ltd. the Company
1,918,266.76 6.77
Total 1,918,266.76 6.77
5.5. Interests receivable
5.5.1. Interests receivable
Increase in Decrease in
Item 2009.12.31 2010.12.31
year(CNY) year(CNY)
Interests on bank deposits 0.00 3,227,582.17 1,818,054.04 1,409,528.13
Total 0.00 3,227,582.17 1,818,054.04 1,409,528.13
5.5.2. Note: Interests receivable are interest income from guarantee deposits receivable within one
year.
5.6. Dividends receivable
Item 2009.12.31 Increase in year(CNY) Decrease in year(CNY) 2010.12.31
Dividends receivable aged less than
1 year:
China TravelSky Co., Ltd. 1,617,642.00 1,165,398.00 2,783,040.00 0.00
Jinan International Airport Co., Ltd. 0.00 69,993.15 69,993.15 0.00
Total 1,617,642.00 1,235,391.15 2,853,033.15 0.00
42
5.7. Other receivables
5.7.1. Disclosure by classification
2010.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion (%) Amount(CNY) Proportion (%)
Other receivable of individual significance 228,578,538.56 68.01 109,051,717.65 47.71
Categorised other receivable:
Categorisation by nature of receivables 42,550,559.86 12.66 2,127,527.99 5.00
Subtotal of category 42,550,559.86 12.66 2,127,527.99 5.00
Other receivable of individual insignificance
subject to individual assessment for 64,955,587.90 19.33 0.00 0.00
impairment
Total 336,084,686.32 100.00 111,179,245.64 33.08
(Continued)
2009.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion (%) Amount(CNY) Proportion (%)
Other receivables of individual significance 209,239,407.19 77.02 109,051,717.65 52.12
Categorised other receivables:
Categorisation by nature of receivables 41,301,839.00 15.20 2,065,091.95 5.00
Subtotal of category 41,301,839.00 15.20 2,065,091.95 5.00
Other receivables of individual
insignificance subject to individual 21,127,577.40 7.78 0.00 0.00
assessment for impairment
Total 271,668,823.59 100.00 111,116,809.60 40.90
① Classification of other receivables: See Note 2.10 for criteria for classification of other receivables of individual
significance, categorised other receivables and other receivables of individual insignificance subject
to individual assessment for impairment.
② Categories of other receivables subject to provision for bad debts by percentage of carrying
amount:
Category Book value Proportion (%) Provision for bad debts
43
Categorisation by nature of receivables 42,550,559.86 5.00 2,127,527.99
Total 42,550,559.86 2,127,527.99
5.7.2. Other receivables of individual insignificance subject to individual assessment for
impairment:
Bad and doubtful
Details Book value(CNY) Proportion (%) Comment
debt(CNY)
Individually
Aerdragon Aviation Partners Limited 3,973,620.00 0.00 0.00 assessed as
not impaired
Individually
Aviation Capital Group Corporation 8,841,304.50 0.00 0.00 assessed as
not impaired
Individually
Babcock ＆ Brown Aircraft Management LLC 9,801,596.00 0.00 0.00 assessed as
not impaired
Individually
Bellevue Aircraft Leasing(Ireland) Limited 2,880,874.50 0.00 0.00 assessed as
not impaired
Individually
BOC AVIATION 5,298,160.00 0.00 0.00 assessed as
not impaired
Individually
GE Commercial Aviation Services 3,801,429.80 0.00 0.00 assessed as
not impaired
Individually
Pacific Brihar Corporation Limited 3,496,785.60 0.00 0.00 assessed as
not impaired
Individually
Rainier Aircraft Leasing(Ireland) Limited 13,086,601.50 0.00 0.00 assessed as
not impaired
Individually
Shannon Engine Support LTD 827,837.50 0.00 0.00 assessed as
not impaired
Individually
The Boeing Company 12,947,378.50 0.00 0.00 assessed as
not impaired
Total 64,955,587.90 0.00 0.00
5.7.3. Other receivables owed by shareholders with 5% or more voting rights during the
reporting period
2010.12.31 2009.12.31
Shareholder Amount Provision for bad debts Amount Provision for bad debts
(CNY) (CNY) (CNY) (CNY)
Air China 40,503,711.76 0.00 23,382,955.26 0.00
Total 40,503,711.76 0.00 23,382,955.26 0.00
5.7.4. List the amount of top five other receivable
% of total
Relationship with the
Name of company Amount(CNY) Age other
Company
receivables
Shandong Rainbow Commercial Jet Co.,
Related parties 109,051,717.65 3-7 years 32.45
Ltd.
CDB Leasing Co., Ltd. Non-related parties 41,354,563.28 Over 5 years 12.30
Air China Related parties 40,503,711.76 Within 2 years 12.05
44
% of total
Relationship with the
Name of company Amount(CNY) Age other
Company
receivables
Beijing FuLaiTe Technology Development
Non-related parties 19,124,985.87 Within 1 year 5.69
Co., Ltd.
Singapore Aircraft Leasing Enterprise Non-related parties 18,543,560.00 Within 5 years 5.52
Total 228,578,538.56 68.01
5.7.5. Other receivables owed by related parties
% of total other
Name of company Relationship with the Company Amount(CNY)
receivables
Principal investor
Air China 40,503,711.76 12.05
of the Company
Controlled by principal investors
Shandong XiangYu Air Technology Co., Ltd. 3,864,597.95 1.15
of the Company
Shandong Rainbow Commercial Jet Co., Ltd. Associate 109,051,717.65 32.45
Total 153,420,027.36 45.65
5.7.6. The balance carried forward of other receivables increased for 40.08% from the balance brought
forward. The increase mainly resulted from guarantee deposits for importation of leased aircrafts and
aircraft maintenance and down payments for aircraft purchase paid during the current reporting
period.
5.8. Inventories
5.8.1. Classification
2010.12.31 2009.12.31
Types Impairment Carrying Impairment Carrying
Cost(CNY) Cost(CNY)
provision(CNY) value(CNY) provision(CNY) value(CNY)
Consumable
73,805,475.19 0.00 73,805,475.19 63,025,085.14 353,539.79 62,671,545.35
air equipments
Low-value
3,066,637.08 0.00 3,066,637.08 1,814,143.03 0.00 1,814,143.03
consumables
Materials 915,137.19 0.00 915,137.19 270,642.83 0.00 270,642.83
Others 0.00 0.00 0.00 511,449.89 0.00 511,449.89
Total 77,787,249.46 0.00 77,787,249.46 65,621,320.89 353,539.79 65,267,781.10
5.8.2. Impairment
Decrease in year
2009.12.31 Provision in year 2010.12.31
Type Reversal Write off
(CNY) (CNY) (CNY)
(CNY) (CNY)
45
Consumable air
353,539.79 0.00 0.00 353,539.79 0.00
equipments
Total 353,539.79 0.00 0.00 353,539.79 0.00
5.9. Investment in associates
Type of Place of Legal Nature of Register Shareholding Voting
Associate
registration registration representative business capital(CNY) proportion(%) right(%)
Shandong
Limited
Rainbow Jinan, Air
liability Zhao, Hong 50,000,000.00 45 45
Commercial Shandong transportation
company
Jet Co., Ltd.
(Continued)
Total operating
Total liabilities Net profits for the
Total assets carried Net assets carried income for the
Associate carried reporting
forward(CNY) forward(CNY) reporting
forward(CNY) period(CNY)
period(CNY)
Shandong
Rainbow
15,940,204.12 179,265,838.22 -163,325,634.10 6,631,350.00 -45,226,097.22
Commercial
Jet Co., Ltd.
5.10. Long-term equity investments
5.10.1 Disclosure
Accumulated Impairment
Changes in
Name of investee 2009.12.31(CNY) 2010.12.31(CNY) impairment provision in
year(CNY)
provision(CNY) year(CNY)
Ⅰ. Long-term equity investments measured
at cost method
China TravelSky Co., Ltd. 6,690,000.00 0.00 6,690,000.00 0.00 0.00
Sichuan Airlines Co., Ltd. 35,000,000.00 0.00 35,000,000.00 0.00 0.00
Jinan International Airport Co., Ltd. 46,662,100.00 0.00 46,662,100.00 0.00 0.00
Subtotal 88,352,100.00 0.00 88,352,100.00 0.00 0.00
Ⅱ. Long-term equity investments measured
by the equity method
Shandong Rainbow Commercial Jet Co.,
22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
Ltd
Subtotal 22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
Total 110,852,100.00 0.00 110,852,100.00 22,500,000.00 0.00
(Continued):
Reasons for
discrepancy
Cash
Initial investment Shareholding Voting between
Name of investee dividends in
cost(CNY) proportion(%) right(%) shareholding
year(CNY)
and voting
right
46
Ⅰ. Long-term equity investments measured
at cost method
China TravelSky Co., Ltd. 6,690,000.00 0.45% 0.45% n/a 1,165,398.00
Sichuan Airlines Co., Ltd. 35,000,000.00 10.00% 10.00% n/a 0.00
Jinan International Airport Co., Ltd. 46,662,100.00 2.53% 2.53% n/a 69,993.15
Subtotal 88,352,100.00 1,235,391.15
Ⅱ. Long-term equity investments measured
by the equity method
Shandong Rainbow Commercial Jet Co., Ltd 22,500,000.00 45.00% 45.00% n/a 0.00
Subtotal 22,500,000.00 0.00
Total 110,852,100.00 1,235,391.15
5.10.2. Long-term equity investments held as at 31st December 2010 have no limitation on disposal
imposed.
5.11. Fixed assets and accumulated depreciation
5.11.1. Classification
Types 2009.12.31 Increased(CNY) Decreased 2010.12.31
(CNY) Other increase (CNY) Purchase(CNY) (CNY) (CNY)
①Total historical cost 8,884,896,758.01 131,788,852.49 504,821,968.68 79,935,994.45 9,441,571,584.73
Houses and buildings 223,592,323.30 0.00 192,449.20 2,811,000.00 220,973,772.50
Aircrafts and aircraft engine 8,090,415,052.13 129,760,614.89 446,550,869.59 32,040,000.00 8,634,686,536.61
High-value rotables 431,124,374.06 0.00 41,536,398.30 17,835,593.81 454,825,178.55
Transportation vehicles 38,197,107.13 0.00 2,984,678.26 1,451,518.09 39,730,267.30
Machinery, equipments and others 101,567,901.39 2,028,237.60 13,557,573.33 25,797,882.55 91,355,829.77
Depreciation
during the
Other increase (CNY)
current
year(CNY)
②Total accumulated depreciation 2,253,295,993.05 63,611,658.21 563,013,991.59 54,847,418.97 2,825,074,223.88
Houses and buildings 26,694,789.94 0.00 6,826,310.35 0.00 33,521,100.29
Aircrafts and aircraft engine 2,014,255,500.72 61,788,614.58 516,831,677.53 31,892,733.49 2,560,983,059.34
High-value rotables 143,082,492.05 0.00 28,446,926.65 10,766,566.26 160,762,852.44
Transportation vehicles 18,673,551.96 0.00 2,797,925.91 1,237,110.16 20,234,367.71
Machinery, equipments and others 50,589,658.38 1,823,043.63 8,111,151.15 10,951,009.06 49,572,844.10
③Total carrying value 6,631,600,764.96 6,616,497,360.85
Houses and buildings 196,897,533.36 187,452,672.21
Aircrafts and aircraft engine 6,076,159,551.41 6,073,703,477.27
High-value rotables 288,041,882.01 294,062,326.11
Transportation vehicles 19,523,555.17 19,495,899.59
Machinery, equipments and others 50,978,243.01 41,782,985.67
Note: ①Depreciation increase in year totals CNY 563,013,991.59. The total value of construction
projects completed and recognised as non-current assets in year is CNY 388,853,071.98.
②Total value of non-current assets pledged as security for borrowings and leased aircraft engines
47
with limitation imposed is CNY 4,203,684,037.08.
5.11.2. Leased fixed assets under financial leases
Historical cost Accumulated depreciation Impairment Balance as at 2010.12.31
Type
(CNY) (CNY) (CNY) (CNY)
Aircrafts and aircraft engines 1,886,910,431.23 634,114,602.71 0.00 1,252,795,828.52
Total 1,886,910,431.23 634,114,602.71 0.00 1,252,795,828.52
5.11.3. Fixed assets pending ownership registration
Balance as at 2010.12.31
Types Reasons for pending ownership registration
(CNY)
Land rented from Jinan Air Control, not eligible for
Jinan cargo arrival and departure warehouses 15,564,626.56
ownership registration
Qingdao aircraft maintenance workshops 41,036,087.20 Ownership registration in process
Yantai terminal building 19,792,778.60 Ownership registration in process
Total 76,393,492.36
5.11.4. Impairment
No impairment provision was provided as at 31st December 2010 as no evidence suggests assets has
impaired.
5.12. Construction in progress
5.12.1. Details of construction in progress
2010.12.31 2009.12.31
Impairment Impairment
Types Book value Carrying value Book value Carrying value
provision provision
(CNY) (CNY) (CNY) (CNY) (CNY) (CNY)
B737-800 aircrafts 863,452,904.96 0.00 863,452,904.96 340,589,155.31 0.00 340,589,155.31
ARJ21-700 aircrafts 60,778,195.00 0.00 60,778,195.00 60,778,195.00 0.00 60,778,195.00
B737NG simulated aircrafts 0.00 0.00 0.00 19,435,867.69 0.00 19,435,867.69
Terminal buildings 11,479,922.80 0.00 11,479,922.80 0.00 0.00 0.00
Other construction projects 1,542,227.58 0.00 1,542,227.58 1,474,227.58 0.00 1,474,227.58
Total 937,253,250.34 0.00 937,253,250.34 422,277,445.58 0.00 422,277,445.58
5.12.2. Changes of significant construction in progress
Transferred to fixed Other
2009.12.31 Increase in year 2010.12.31
Types assets decreased
(CNY) (CNY) (CNY) (CNY) (CNY)
B737-800 aircrafts 340,589,155.31 836,273,789.05 313,410,039.40 0.00 863,452,904.96
ARJ21-700 aircrafts 60,778,195.00 0.00 0.00 0.00 60,778,195.00
B737NG simulated aircrafts 19,435,867.69 56,007,164.89 75,443,032.58 0.00 0.00
Maintenance workshops, terminal
buildings and arrival and 0.00 11,479,922.80 0.00 0.00 11,479,922.80
departure warehouses
Other construction projects 1,474,227.58 68,000.00 0.00 0.00 1,542,227.58
48
Total 422,277,445.58 903,828,876.74 388,853,071.98 0.00 937,253,250.34
5.12.3. Capitalisation of construction in progress
Transferred to Other
2009.12.31 Increase in year 2010.12.31
Projects fixed assets decrease Source of finance
(CNY) (CNY) (CNY)
(CNY) (CNY)
B737-800 Loans from financial
4,857,721.01 -3,616,027.05 7,872,667.00 0.00 -6,630,973.04
aircrafts institutions
ARJ21-700 Loans from financial
487,587.70 0.00 0.00 0.00 487,587.70
aircrafts institutions
Total 5,345,308.71 -3,616,027.05 7,872,667.00 0.00 -6,143,385.34
5.12.4. The corresponding carrying value of aircraft purchase rights pledged as security for
borrowings in construction in progress as at 31st December 2010 is CNY 863,452,904.96.
5.12.5. No impairment provision is provided as at 31st December 2010 as no evidence suggests
construction project impairment.
5.12.6. The balance carried forward of construction in progress increased for 122.00% from the
balance brought forward. The increase mainly resulted from progress payments for aircraft purchase
paid during the current reporting period.
5.13. Intangible assets
5.13.1. Details of intangible assets
2009.12.31 Increase in year Decrease in year 2010.12.31
Types
(CNY) (CNY) (CNY) (CNY)
A. Total historical cost 50,808,133.13 0.00 0.00 50,808,133.13
Land use rights 50,808,133.13 0.00 0.00 50,808,133.13
B. Total accumulated
2,913,059.92 748,706.68 0.00 3,661,766.60
amortization
Land use rights 2,913,059.92 748,706.68 0.00 3,661,766.60
C. Total net value 47,895,073.21 0.00 0.00 47,146,366.53
Land use rights 47,895,073.21 0.00 0.00 47,146,366.53
D. Total accumulated
0.00 0.00 0.00 0.00
impairment loss
Land use rights 0.00 0.00 0.00 0.00
E. Total carrying value 47,895,073.21 0.00 0.00 47,146,366.53
Land use rights 47,895,073.21 0.00 0.00 47,146,366.53
5.13.2. No impairment provision was provided as at 31st December 2010 as no evidence suggests
intangible asset has impaired.
5.14. Goodwill
49
Impairment
Decrease in allowance
Basis for 2009.12.31 Increase in year 2010.12.31
Name of investee year as at
recognition (CNY) (CNY) (CNY)
(CNY) 2010.12.31
(CNY)
Business
combination
Qingdao Feisheng not under 0.00 10,220,816.22 0.00 10,220,816.22 0.00
common
control
Total 0.00 10,220,816.22 0.00 10,220,816.22 0.00
The acquisition of 100% shareholding in Qingdao Feisheng from SDA Group was effected during the
current reporting period per share transfer agreement by SDA Group and the Company signed on
March 1st, 2010. The registration of the change of share ownership was completed on November 29th,
2010; the date of completion of registration of the change of share ownership was so set as the
acquisition date. See Note 4.4 for details of goodwill amounting to 10,220,816.22.
No impairment was recognised for goodwill of Qingdao Feisheng as at December 31st, 2010 upon the
assessment carried out by the management of the Company. The assessment carried out was based on
the current operating assets held by Qingdao Feisheng with consideration given to the audit of the
operation results of Qingdao Feisheng and the result of the report of valuation as at November 30th,
2010.
5.15. Long-term deferred expenses
Increase Amortisation
2009.12.31 Other decreased 2010.12.31 Reasons for other
Type in year in year
(CNY) (CNY) (CNY) decrease
(CNY) (CNY)
Pilot recruitment
and training 216,546,250.96 55,920,863.48 42,636,918.25 0.00 229,830,196.19
expenditure
Total 216,546,250.96 55,920,863.48 42,636,918.25 0.00 229,830,196.19
5.16. Deferred income tax assets and deferred income tax liabilities
5.16.1. Recognised deferred income tax assets and deferred income tax liabilities
2010.12.31 2009.12.31
Types
(CNY) (CNY)
Deferred income tax assets
Deductable temporary difference resulting from impairment
provision 28,459,246.26 27,939,289.24
Impairment provision for inventories 0.00 88,384.95
Provision for asset substantial repair 90,795,645.87 60,683,229.57
Provision for wages and salaries due 6,513,851.27 3,126,007.58
Financial liabilities held for trading 966,452.38 0.00
Total 126,735,195.78 91,836,911.34
50
2010.12.31 2009.12.31
Types
(CNY) (CNY)
Deferred income tax liabilities
Financial assets held for trading 2,322,711.66 2,835,461.62
Total 2,322,711.66 2,835,461.62
5.16.2. Corresponding temporary differences to assets and liabilities causing temporary
differences
Types Temporary difference balance carried forward( CNY)
Corresponding temporary differences to assets causing temporary differences
Deductable temporary difference resulting from impairment provision 113,836,985.03
Impairment provision for inventories 0.00
Provision for substantial asset repair 363,182,583.47
Provision for wages and salaries due 26,055,405.09
Financial liabilities held for trading 3,865,809.52
Total 506,940,783.11
Corresponding temporary differences to liabilities causing temporary
differences
Fair value changes of tradable financial assets 9,290,846.62
Total 9,290,846.62
5.16.3. Deferred income tax assets increase in year of 38.00% principally results from the in-year
increase of provision for substantial asset repair.
5.17. Impairment provisions
Increase in
2009.12.31 Decrease in year 2010.12.31
year
Types
Write
(CNY) (CNY) Reversal(CNY) (CNY)
off(CNY)
(1) Impairment provision for accounts receivables 640,347.37 2,017,392.02 0.00 0.00 2,657,739.39
(2) Impairment provision for other receivables 111,116,809.60 62,436.04 0.00 0.00 111,179,245.64
(3) Impairment provision for inventories 353,539.79 0.00 0.00 353,539.79 0.00
(4) Impairment provision for long-term equity
22,500,000.00 0.00 0.00 0.00 22,500,000.00
investments
Total 134,610,696.76 2,079,828.06 0.00 353,539.79 136,336,985.03
5.18. Short-term borrowings
5.18.1. Disclosure by classification
2010.12.31 2009.12.31
Types
(CNY) (CNY)
Secured loans (usage right on assets pledged
surrendered) 93,173,692.10 71,537,020.88
Unsecured loans
399,412,917.40 0.00
Guaranteed loans
508,682,427.23 668,282,000.00
Total
1,001,269,036.73 739,819,020.88
51
5.18.2. The balance carried forward of short-term borrowings increased for 35.34% from the balance
brought forward. The increase mainly resulted from increased use of Payment by Agreement
short-term financing.
5.19. Financial liabilities held for trading
Fair value Fair value
Item as at as at
2010.12.31 2009.12.31
Hui Li Da financing contract 3,865,809.52 0.00
Total 3,865,809.52 0.00
5.20. Notes payable
2010.12.31 2009.12.31
Types
(CNY) (CNY)
Trade acceptance
19,042,835.33 0.00
Bankers’ acceptance
116,000,000.00 182,124,331.32
Total 135,042,835.33
182,124,331.32
5.21. Accounts payable
5.21.1. Aging analysis
2010.12.31 2009.12.31
Age
(CNY) (CNY)
Within 1 year 1,007,699,961.12
804,837,986.14
Over 1 year 900,090.37
7,194,963.93
Total 1,008,600,051.49
812,032,950.07
5.21.2. Accounts payables owed to shareholders or related parties with 5% or more voting
right as at 31st December 2010
2010.12.31 2009.12.31
Companies Nature of liability
(CNY) (CNY)
Shandong International Air
Training fees 0.00 1,816,020.00
Training Co., Ltd.
Qingdao FeiSheng Training fees 0.00 3,750,453.00
Ground services, delay and claim for
Air China 3,437,689.95 3,962,987.26
loosed baggage
Shandong TaiGu Aircraft Maintenance expense and air route
27,829,926.58 13,641,513.24
Projecting Co., Ltd. subscription
Air China Cargo Co., Ltd. Landing and departure fees 414,307.39 0.00
Total 31,681,923.92 23,170,973.50
52
5.21.3. There is no accounts payable of significant value of which the age is over 1 year.
5.22. Advances from customers
5.22.1. Aging analysis
2010.12.31 2009.12.31
Type
(CNY) (CNY)
Within 1 year 202,271,352.58
117,859,114.71
Over 1 year 182,316.20
97,125.72
Total 202,453,668.78
117,956,240.43
5.22.2. The 71.63% in-year increase of advances from customers from the balance brought forward
principally results from the increased transportation capacity, the increased average fare rates and the
Spring Festival effect.
5.22.3. There is no advances from customers balance due from shareholders who own five or over
five percent voting rights as at December 31, 2010.
5.23. Employment benefits payable
Types
2009.12.31 Increase in year Payments in year 2010.12.31
(CNY) (CNY) (CNY) (CNY)
(1) Wages and salaries, bonuses, subsidies and
122,517,360.85 745,456,642.00 659,547,040.77 208,426,962.08
allowances
(2) Employee benefits 0.00 32,000,785.41 32,000,785.41 0.00
(3) Social insurance 0.00 106,341,580.40 104,693,758.91 1,647,821.49
Within: ① Medical insurance 0.00 26,745,226.50 25,097,405.01 1,647,821.49
②Basic retirement insurance 0.00 48,614,057.33 48,614,057.33 0.00
③Annuity fee 0.00 26,144,407.20 26,144,407.20 0.00
④Unemployment fee 0.00 2,954,675.18 2,954,675.18 0.00
53
Types
2009.12.31 Increase in year Payments in year 2010.12.31
(CNY) (CNY) (CNY) (CNY)
⑤ Work injury insurance 0.00 842,887.71 842,887.71 0.00
⑥Pregnancy insurance 0.00 1,040,326.48 1,040,326.48 0.00
⑦Reserved funds for disable jobseekers 0.00 0.00 0.00 0.00
(4) Housing provident fund 12,146.24 27,648,358.19 27,644,720.43 15,784.00
(5) Labor union fee and employee education fee 12,504,030.31 20,010,063.08 6,454,000.52 26,060,092.87
(6) Non-monetary benefits 0.00 0.00 0.00 0.00
(7) Redemption of termination of labor contract 0.00 45,037.81 45,037.81 0.00
(8) Others 0.00 0.00 0.00 0.00
Within: Share-based payments settled by cash 0.00 0.00 0.00 0.00
Total 135,033,537.40 931,502,466.89 830,385,343.85 236,150,660.44
5.23.1. There is no payroll in arrears within employment benefits payable.
.
5.23.2. The 74.88% in-year increase of employment benefits payable from the balance brought
forward principally results from increased annual bonus payable recognised before the year-end.
5.24. Tax payables
2010.12.31 2009.12.31
Types of Tax
(CNY) (CNY)
VAT and customs 1,240.40 0.00
Operating tax 14,137,448.21 13,493,990.29
Urban maintenance and construction surcharge 1,128,615.52 0.00
Education surcharge 816,312.29 0.00
Enterprise income tax 55,944,404.35 102,676,537.26
Property tax 1,474,989.82 1,818,917.29
Tenure tax 111,187.74 114,655.77
54
2010.12.31 2009.12.31
Types of Tax
(CNY) (CNY)
Personal income tax 4,647,833.69 1,594,343.92
Stamp duty 5,349,980.35 3,567,551.64
Infrastructure fund for civil aviation 14,415,017.73 11,478,774.38
Construction fund for civil airports 44,049,512.00 34,178,042.00
Withholding income tax 17,811,520.19 8,641,320.63
Withholding business Tax 10,218,405.79 0.00
Others 8,702.89 292.31
Total 170,115,170.97 177,564,425.49
5.25. Interests payable
2010.12.31 2009.12.31
Type
(CNY) (CNY)
Interest on borrowings
9,656,528.23 4,001,134.66
Total
9,656,528.23 4,001,134.66
Note: The balance carried forward of interests payable increased for 141.00% from the balance
brought forward. The increase mainly resulted from that certain short-term financing arrangements
have a 1-year interest settlement period.
5.26. Other payables
5.26.1. Aging analysis
2010.12.31 2009.12.31
Age
(CNY) (CNY)
Within 1 year
74,998,768.73 78,664,291.44
Over 1 year
65,735,212.41 46,266,172.15
Total 140,733,981.14
124,930,463.59
5.26.2. Other payables owed to shareholders or related parties with 5% or more voting right
st
as at 31 December 2010
2010.12.31 2009.12.31
Companies Nature of liability
(CNY) (CNY)
SDA Group Account balance 12,192,570.48 4,051,799.74
Air China Quality margin 20,000,000.00 20,000,000.00
Shandong TaiGu Aircraft Projecting Co., Ltd. Account balance 245,400.00 0.00
Shandong International Air Training Co., Ltd. Account balance 0.00 3,465,953.82
Shenzhen Airlines co., Ltd. Account balance 1,083,308.00 0.00
55
Total 33,521,278.48 27,517,753.56
5.26.3. Other payables of significant value due for more than one year
Company Balance (CNY) Age Reasons for unsettlement
Air China Co., Ltd. 20,000,000.00 3 – 4 years Wet lease not yet expired, guarantee unsettled
Total 20,000,000.00
5.27. Non-current liabilities due within one year
5.27.1. Types
2010.12.31 2009.12.31
Types
(CNY) (CNY)
Long-term borrowings due within 1 year
371,061,574.72 393,832,752.98
Long-term accounts payables due with 1 year
165,039,834.26 209,832,453.69
Subtotal
536,101,408.98 603,665,206.67
Less: Unrecognised financial lease expenditure
59,333,529.93 68,556,748.96
Total
476,767,879.05 535,108,457.71
5.27.2. Long-term borrowings due within one year
① Types
2010.12.31 2009.12.31
Types
(CNY) (CNY)
Secured loans (usage right on assets pledged
304,786,981.68 393,832,752.98
withheld)
Secured loans (usage right on assets pledged
53,667,049.45 0.00
surrendered)
Guaranteed loans 12,607,543.59 0.00
Total 371,061,574.72 393,832,752.98
② Details of the top five balances of long-term borrowings due within one year
2010.12.31 2009.12.31
Amount Amount
Amount
Companies Start date Due date Currency Amount in reporting in reporting
in foreign
in foreign currency currency currency
currency
(CNY) (CNY)
USD account,
Shandong Branch Installment
2008-7-11 USD $10,600,000.00 70,200,620.00 0.00 0.00
China Development repayment
Bank
56
2010.12.31 2009.12.31
Amount Amount
Amount
Companies Start date Due date Currency Amount in reporting in reporting
in foreign
in foreign currency currency currency
currency
(CNY) (CNY)
USD account, Jinan
Installment
Branch 2005-7-15 USD $11,200,000.00 74,174,240.00 0.00 0.00
repayment
Bank of China
USD account, Jinan
Branch 2010-10-8 2011-10-11 USD $8,103,500.00 53,667,049.45 0.00 0.00
Bank of China
CNY account, Jinan
Branch Installment
2005-4-7 CNY 50,000,000.00 50,000,000.00 0.00 0.00
China Minsheng repayment
Banking Corp., Ltd.
USD account,
DongJiao Branch Installment
Industrial and 2009-6-30 repayment USD $4,000,000.00 26,490,800.00 0.00 0.00
Commercial Bank of
China
Total 274,532,709.45 0.00
Note: The interest rates applicable to the above long-term borrowings as at 31st December 2010 are
between 1.1439% and 5.9400%.
5.27.3. There is no borrowing remained unsettled after the due date as at 31st December 2010
5.27.4. Long-term accounts payables due within one year
Balance carried
Credit Original amount Interest rate Interest accrued Conditions of
Companies forward
term (CNY) (%) (CNY) borrowing
(CNY)
Secured by
CDB Leasing Co., 2005.6-20 asset(s) with
1,440,000,000.00 6.2964% 59,333,529.93 105,706,304.33
Ltd. 20.6 usage right
withheld
5.28. Long-term borrowings
5.28.1. Types
2010.12.31 2009.12.31
Type
(CNY) (CNY)
Secured loans (usage right on 141,288,880.48
162,717,904.24
assets pledged surrendered)
Secured loans (usage right on 2,013,807,266.59 2,024,291,990.60
assets pledged withheld)
1,025,187,030.48
Guaranteed loans 1,215,742,693.55
3,180,283,177.55 3,402,752,588.39
Total
57
5.28.2.Details of the top five balances of long-term borrowings
2010.12.31 2009.12.31
Amount in Amount in reporting
Company Start date Due date Currency Amount in foreign Amount in foreign
reporting currency currency
currency currency
(CNY) (CNY)
CNY account,
Jinan Branch
China Installment
2005-4-7 CNY 200,000,000.00 200,000,000.00 227,000,000.00 227,000,000.00
Minsheng repayment
Banking Corp.,
Ltd.
USD account,
DongJiao
Branch Installment
2009-6-30 USD $30,491,654.64 201,937,081.18 $34,491,654.64 235,515,916.21
Industrial and repayment
Commercial
Bank of China
USD account,
Installment
Jinan Branch 2005-12-21 USD $26,071,798.00 172,665,696.62 $26,213,260.00 178,989,381.93
repayment
Bank of China
USD account,
Installment
Jinan Branch 2005-10-19 USD $26,213,260.00 173,602,557.00 $26,071,798.00 178,023,451.10
repayment
Bank of China
USD account,
Installment
Jinan Branch 2005-7-15 USD $19,845,450.00 131,430,461.72 $19,195,533.60 131,070,942.53
repayment
Bank of China
Total 879,635,796.52 950,599,691.77
Note: The interest rates applicable to the above long-term borrowings as at 31st December 2010 are
between 1.1439% and 5.9400%.
5.29. Long-term payables
5.29.1. The top five balances of long-term payables
Original amount Interest rate Interest accrued Balance carried forward Conditions of
Company Credit term
(CNY) (%) (CNY) (CNY) borrowing
Secured by
CDB Leasing Co., asset(s) with
2005.6-2020.6 1,440,000,000.00 6.2964% 267,738,800.57 863,013,847.54
Ltd. usage right
withheld
Total 1,440,000,000.00 267,738,800.57 863,013,847.54
5.29.2. Long-term payables during the current reporting period wholly consisted of financial lease
premium payable.
5.30. Other non-current liabilities
58
2010.12.31 2009.12.31
Items
(CNY) (CNY)
CRJ700 post-sale buy-back 695,774.11
2,087,462.11
Designated subsidy for snow disaster 4,374,958.34
4,739,458.34
SMS fund 1,000,000.00
1,000,000.00
PhoenixMiles Program 53,304,246.55 19,891,652.55
14,015,649.74
Designated subsidy for civil aviation energy-saving program 0.00
Total
73,390,628.74 27,718,573.00
5.30.1. Asset-related government grants
Increase in year Decrease in year
Items 2009.12.31(CNY) 2010.12.31 (CNY)
(CNY) (CNY)
Designated subsidy for snow disaster 4,739,458.34 0.00 364,500.00 4,374,958.34
SMS fund 1,000,000.00 0.00 0.00 1,000,000.00
Designated subsidy for civil aviation energy-saving
0.00 14,990,000.00 974,350.26 14,015,649.74
program
Total 5,739,458.34 14,990,000.00 1,338,850.26 19,390,608.08
5.30.2. PhoenixMiles Program
Increase in year Decrease in year
Items 2009.12.31(CNY) 2010.12.31 (CNY)
(CNY) (CNY)
PhoenixMiles Program 19,891,652.55 43,302,419.00 9,889,825.00 53,304,246.55
Total 19,891,652.55 43,302,419.00 9,889,825.00 53,304,246.55
5.30.3. The balance carried forward of other non-current liabilities increased for 165.00% from the
balance brought forward. The increased mainly resulted from the mileages of the PhoenixMiles
Program accumulated and the designated subsidy for civil aviation energy-saving program received
during the current reporting period.
5.31. Share capital
2009.12.31 Change of number of shares in year (+/–) 2010.12.31
Shares
Items converted
Share Bonus
(Unit: Shares) from Others Subtotal (Unit: Shares)
allotment issue
accumulated
fund
(1) Unlisted floating shares
① Promoter’s shares 260,000,000.00 0.00 0.00 0.00 0.00 0.00 260,000,000.00
Including:
State-owned shares 259,801,000.00 0.00 0.00 0.00 0.00 0.00 259,801,000.00
Shares held by domestic legal persons 199,000.00 0.00 0.00 0.00 0.00 0.00 199,000.00
Shares held by foreign legal persons 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
59
② Private placement of legal person’s
0.00 0.00 0.00 0.00 0.00 0.00 0.00
shares
③ Staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
④ Preferred shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Within: Transferred allotted shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total unlisted floating shares 260,000,000.00 0.00 0.00 0.00 0.00 0.00 260,000,000.00
(2) Listed floating shares
① Domestic shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Within: shares held by the management 0.00 0.00 0.00 0.00 0.00 0.00 0.00
② Domestic shares in foreign currency 140,000,000.00 0.00 0.00 0.00 0.00 0.00 140,000,000.00
Total listed floating shares 140,000,000.00 0.00 0.00 0.00 0.00 0.00 140,000,000.00
(3) Floating shares with imposed
0.00 0.00 0.00 0.00 0.00 0.00 0.00
limitation on sales
(4) Total 400,000,000.00 0.00 0.00 0.00 0.00 0.00 400,000,000.00
Note: ① The par value of the above shares is CNY 1.00.
② The above shares have been verified by the Report on the Verification of Capital
(YanQianZi[2000]No.27) issued by Shandong Yantai QianJu Certified Public Accountants Co., Ltd.
5.32. Capital reserve
2009.12.31 Increase in year Decrease in year 2010.12.31
Type
(CNY) (CNY) (CNY) (CNY)
Share premium
76,258,081.68 0.00 0.00 76,258,081.68
Other capital reserve
7,792,081.16 0.00 0.00 7,792,081.16
Total
84,050,162.84 0.00 0.00 84,050,162.84
5.33. Surplus reserve
2009.12.31 Increase in year Decrease in year 2010.12.31
Type
(CNY) (CNY) (CNY) (CNY)
Statutory surplus reserve 59,576,069.03 63,368,685.86 0.00 122,944,754.89
Total 59,576,069.03 63,368,685.86 0.00 122,944,754.89
5.34. Undistributed profits
Current reporting period Last reporting period
Type
(CNY) (CNY)
Balance brought forward 308,668,390.11
36,471,405.69
Add: Profits for the year 634,364,547.92
302,282,325.68
Add: Other transfers 0.00
0.00
Less: Statutory surplus reserve 63,368,685.86
30,085,341.26
Less: Employee bonus and benefit fund 0.00
0.00
60
Current reporting period Last reporting period
Type
(CNY) (CNY)
Less: Reserve fund 0.00
0.00
Less: Enterprise development fund 0.00
0.00
Less: Repaid investments 0.00
0.00
Less: Preferred dividends 0.00
0.00
Less: Discretionary surplus reserve 0.00
0.00
Less: Ordinary dividends 80,000,000.00
0.00
Less: Ordinary dividends converted to
0.00
capital 0.00
Balance carried forward 799,664,252.17
308,668,390.11
5.35.Operating revenue and operating costs
5.35.1. Operating revenue from principal operations and operating costs
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income from principal activities 7,210,784,560.38
5,301,584,923.05
Income from other activities 81,831,396.72
64,528,440.63
Total operating income 7,292,615,957.10
5,366,113,363.68
Principal activity costs 5,482,183,711.49
4,106,686,199.09
Other activity costs 5,407,179.34
3,347,076.10
Total operating costs 5,487,590,890.83
4,110,033,275.19
5.35.2. Operating revenue from principal operations and operating costs by segment
Current reporting period Last reporting period
Segment Operating income Operating costs Operating income Operating costs
(CNY) (CNY) (CNY) (CNY)
Air transportation 7,173,305,400.49 5,459,720,041.47 5,274,362,420.93 4,085,895,627.76
Cargos and logistics 13,378,807.87 2,465,292.18 7,015,287.38 1,910,437.19
Hospitality 25,414,051.87 20,815,817.17 22,984,060.08 19,179,045.59
Rental services 88,110.26 0.00 854,642.06 30,000.00
Others 80,429,586.61 4,589,740.01 60,896,953.23 3,018,164.65
Total 7,292,615,957.10 5,487,590,890.83 5,366,113,363.68 4,110,033,275.19
5.35.3. Details of operating revenue from principal operations from top five clients
Clients Operating income(CNY) % of total operating income
Air China Co., Ltd. 665,558,732.03 9.13
61
Clients Operating income(CNY) % of total operating income
PingAn Insurance (Pension) Co., Ltd.
7,970,100.00 0.11
(平安养老保险股份有限公司)
Department of Organisation,
Shandong Office of the China Communist Party 4,941,700.00 0.07
(山东省委组织部)
Air China Cargo Co., Ltd. 4,489,317.15 0.06
Shandong Jiahua Culture international travel
3,926,000.00 0.05
service Co., Ltd (JHCITS)
Total 686,885,849.18 9.42
5.35.4. Operating revenue from principal operations for the current reporting period increased for
35.90% from the last reporting period. The increase mainly resulted from the increased capacity, the
increased transportation capacity, the increased average fare rates and the increased PLF. Operating
costs for the current reporting period increased for 33.52% from the last reporting period. The
increase mainly resulted from the increased transportation capacity and the increased average fuel
price.
5.36. Operating tax and surcharges
Current reporting period Last reporting period
Item Rate
(CNY) (CNY)
Operating tax 203,287,379.43 158,797,763.77 3%、5%
Urban maintenance and construction
1,121,020.57 0.00 7%
surcharge
Education surcharge 800,728.98 0.00 3%、2%
Total 205,209,128.98 158,797,763.77
5.37. Sales expenses
Current reporting period Last reporting period
Item
(CNY) (CNY)
Employment benefits payable 79,594,030.14 37,271,075.95
Depreciation 1,892,392.40 1,876,631.63
Travel expense 3,301,618.46 2,840,357.06
Advertisement 9,955,763.45 8,068,520.74
Brokerage fee 290,417,787.76 220,270,471.60
Electronic booking fee 55,399,914.32 44,722,917.61
Online payment charge 9,043,151.60 5,121,566.85
Ticket printing cost 417,667.00 946,796.63
Rentals 8,738,843.59 8,230,038.89
62
System and network subscription 3,742,452.53 0.00
BSP data processing fee 1,559,369.18 0.00
Accommodation and catering expenses for
transit passengers 1,451,783.60 0.00
General expenses 3,869,607.58 6,276,868.12
Uniforms 1,223,500.75 1,816,509.00
Others 9,740,066.76 8,945,966.43
Total 480,347,949.12 346,387,720.51
Note: Sales expenses for the current reporting period increased for 38.67% from the last reporting
period. The increase mainly resulted from the increased ticket brokerage fees due to the increased
operating revenue from principal operations.
5.38. General and administrative expenses
Current reporting period Last reporting period
Item
(CNY) (CNY)
Employment benefits payable 72,979,360.47 175,227,413.18
Depreciation 6,423,636.57 5,688,308.49
General expenses 4,179,326.89 3,150,092.24
Amortisation of intangible assets 360,516.64 381,810.92
Amortisation of long-term deferred expenses 424,335.24 505,152.10
Taxes and surcharges 6,835,211.03 4,650,091.42
Entertainment expense 10,423,957.05 5,213,051.19
Pollution treatment cost 1,146,850.00 1,124,143.00
Rentals 7,390,683.99 4,451,755.00
Research expense 2,054,276.20 5,412,348.80
Clearing system subscription 3,079,512.95 2,882,333.01
System and network subscription 1,629,499.60 0.00
Heating expense 2,768,846.57 2,902,729.55
BSP data processing fee 0.00 1,452,766.74
Consultation fee 677,560.42 1,567,256.06
Others 16,092,240.00 14,010,595.72
Total 136,465,813.62 228,619,847.42
Note: General and administrative expenses for the current reporting period decreased for 40.31% from
the last reporting period. The significant decrease mainly resulted from that social insurance, housing
provident fund and housing subsidy collectively accounted for in general and administrative expenses
during the last reporting period was allocated to operating costs, sales expenses and general and
administrative expenses on the basis of employee positions during the current reporting period.
63
5.39. Financial costs
Items Current reporting period (CNY) Last reporting period (CNY)
Interest expenses
209,880,622.29 248,349,435.60
Less: Interest income
5,012,267.84 1,107,957.64
Exchange differences
-61,316,996.38 -781,979.99
Bank charges and others
6,964,564.29 5,411,721.86
Total
150,515,922.36 251,871,219.83
Note: Financial costs for the current reporting period decreased for 40.24% from the last reporting
period. The decrease mainly resulted from the significant increase of gain on foreign exchange
differences due to the appreciation of the Chinese Yuan.
5.40. Impairment loss on assets
Current reporting period Last reporting period
Item
(CNY) (CNY)
Bad and doubtful debt expenses 1,163,320.01 239,449.15
Total 1,163,320.01 239,449.15
5.41. Gains from changes in fair value
Current reporting period Last reporting period
Source of fair value changes
(CNY) (CNY)
-2,050,999.86
Interest rate swaps -12,118,965.63
-3,865,809.52
Hui Li Da financing contract 0.00
Total -5,916,809.38
-12,118,965.63
5.42. Investment income
5.42.1. Details of investment income
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income from long-term equity investments measured at cost 1,235,391.15 1,617,642.00
Gains from possession of tradable financial assets -2,955,503.33 2,098,225.94
Total -1,720,112.18 3,715,867.94
5.42.2. Income from long-term equity investments measured at cost
Current reporting period Last reporting period
Investee Reasons for change
(CNY) (CNY)
64
China TravelSky Co., Ltd. 1,165,398.00 1,617,642.00 Change of profit distribution
Jinan International Airport Co., Ltd. 69,993.15 0.00 Change of profit distribution
Total 1,235,391.15 1,617,642.00
5.42.3. As at 31st December 2010, there is no investment of which income remittance is imposed
with limitation.
5.42.4. The 146.29%decrease of investment income from last reporting period principally results
from the decreased gains from settlement of tradable financial assets.
5.43. Non-operating income
5.43.1. Details of non-operating income
Non-recurring gain or
Current reporting period Last reporting period loss for the current
Items
(CNY) (CNY) reporting period
(CNY)
Gains from disposals of non-current
7,642.69 16,254,369.34 7,642.69
assets
Including: Gains from disposals of
7,642.69 16,254,369.34 7,642.69
non-current assets
Government grants 16,013,518.70 135,213,761.47 16,013,518.70
Airport-funded flight-route subsidy 10,118,467.00 0.00 10,118,467.00
Others 2,872,615.50 3,654,130.06 2,872,615.50
Total 29,012,243.89 155,122,260.87 29,012,243.89
5.43.2. Government grants
Current reporting
Last reporting period
Items period Comment
(CNY)
(CNY)
Repayment of infrastructure fund for civil CaiJian[2009]No.4 issued by the CAAC
0.00 114,488,319.75
aviation and the Ministry of Finance
Subsidies granted by local Civil Aviation
Subsidies for branch line aviation 9,500,000.00 15,910,000.00
Administration
Subsidy for depreciation of assets
Designated subsidy for snow disaster 364,500.00 0.00 designated for snow disaster for the
current reporting period
Subsidy for depreciation of side wing
Designated subsidy for civil aviation
974,350.26 0.00 installation for the current reporting
energy-saving program
period
Air route subsidies granted by local
Others 5,174,668.44 4,815,441.72
governments
65
Total 16,013,518.70 135,213,761.47
5.43.3. The 81.30% decrease of non-operating income from last reporting period principally results
from repayment of infrastructure fund for civil aviation of last reporting period.
5.44. Non-operating expenses
Non-recurring
gain/loss for the
Current reporting period Last reporting period
Items current reporting
period
(CNY) (CNY) (CNY)
Total losses from disposals of non-current
assets
7,708,562.86 13,495,868.42 7,708,562.86
Within: Losses from disposals of non-current
assets 7,708,562.86 4,373,716.45 7,708,562.86
Charitable donations 61,175.00 0.00 61,175.00
Fines 300,224.97 0.00 300,224.97
Others 83,845.00 26,076.75 83,845.00
Total 8,153,807.83 13,521,945.17 8,153,807.83
5.45. Corporate income tax expenses
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income tax for current period computed in accordance with tax
245,151,066.64 140,661,971.49
laws and regulations
Adjustments of deferred income tax -35,181,907.39 -40,043,868.07
Total 209,969,159.25 100,618,103.42
5.46. Computation of basic earnings per share and diluted earnings per share
Current reporting period Last reporting period
(CNY) (CNY)
Profits for the reporting period
Basic earnings Diluted earnings Basic earnings Diluted earnings
per share per share per share per share
Net profits attributable to ordinary shareholders 1.59 1.59 0.76 0.76
Net profits attributable to ordinary shareholders after
1.56 1.56 0.51 0.51
deducting extraordinary gains or losses
Basic earnings per share = P0 ÷S
S = S0 + S1 + Si × Mi ÷M0 － Sj × Mj ÷M0 － Sk
P0: net profits attributable to ordinary shareholders or net profits attributable to ordinary
shareholders after deducting extraordinary gains or losses
S: weighted average of number of listed ordinary shares
S0: number of ordinary shares brought forward
S1: number of shares increased in the reporting period resulting from conversion of
accumulated fund or dividends
66
Si: number of shares increased in the reporting period resulting from share issues or convertible
bond issues
Sj: number of shares decreased in the reporting period resulting from share buy-backs
Sk: number of shares decreased in the reporting period resulting from share contraction
M0: number of months in the reporting period
Mi: cumulative number of months from the second month of the share number increase month
to the last month of the reporting period
Mj: cumulative number of months from the second month of the share number decrease month
to the last month of the reporting period
Diluted earnings per share = P1 / (S0 + S1 + Si × Mi ÷M0 － Sj × Mj ÷M0 － Sk + the weighted
average of number of ordinary shares increased by share warrants, share options and convertible
bonds)
P1: net profits attributable to ordinary shareholders or net profits attributable to ordinary
shareholders after deducting extraordinary gains or losses adjusted for dilutive impact in
accordance with CAS and relevant regulations
5.47. Notes to the consolidated cash flow statement
5.47.1. Other cash receipts in relation to operating activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Government grants
29,664,668.44 135,213,761.47
Interest income from bank deposits
3,602,739.71 1,107,957.64
Cash received from non-operating activities
12,991,082.50 3,654,130.06
Repayment of guarantee deposits for letters of guarantee
26,935,875.00 0.00
Cash received from accounts balances
23,830,516.63 4,118,202.36
Total
97,024,882.28 144,094,051.53
5.47.2. Other cash payments in relation to operating activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Bank charges
16,007,715.89 10,533,288.71
Cash paid from non-operating activities
445,244.97 26,076.75
Cash paid from accounts balances
44,345,294.85 13,080,052.93
Cash paid from sales expenses and administrative
expenses 93,443,426.57 73,479,851.89
67
Total
154,241,682.28 97,119,270.28
5.47.3. Other cash payments in relation to investing activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Down payments for aircraft purchase 12,947,378.50 0.00
Payments on settlement of interest rate swaps 2,955,503.33 0.00
Total 15,902,881.83 0.00
5.47.4. Other cash proceeds in relation to financing activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
11,459,417.00 0.00
Cash received from guarantee bank acceptance
11,459,417.00 0.00
Total
5.47.5. Other cash payments in relation to financing activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Cash paid to guarantee hypothecated loans 78,629,342.37 71,537,020.88
Cash paid to guarantee bank acceptance 0.00 46,259,417.00
Cash paid for financial leases of aircrafts 214,050,202.14 209,987,105.41
Total 292,679,544.51 327,783,543.29
5.48. Supplements to the consolidated cash flow statement
5.48.1. Supplements to the consolidated cash flow statement
Current reporting period Last reporting period
(1) Cash flows adjusted from net profits
(CNY) (CNY)
Net profits 634,575,287.43 302,743,202.40
Add: Impairment losses 1,163,320.01 239,449.15
Add: Depreciation of non-current assets and productive biological assets and
563,013,991.59 517,592,568.89
losses of fuel
Add: Amortisation of intangible assets 748,706.68 813,437.60
Add: Amortisation of long-term deferred assets 42,636,918.25 48,353,314.82
Add :Losses on disposals of non-current assets, intangible assets and
-4,106.42 -6,132,054.93
long-term assets (minus sign representing gains)
Add: Losses arising from scrapping non-current assets (minus sign
7,705,026.59 3,373,554.01
representing gains)
Add: Losses arising from fair value changes (minus sign representing gains) 5,916,809.38 12,118,965.63
Add: Financial costs (minus sign representing income) 148,686,355.48 248,224,796.69
Add: Investment losses (minus sign representing income) 1,720,112.18 -3,715,867.94
68
Add: Decrease of deferred income tax assets (minus sign representing
-34,669,157.43 -23,062,753.23
increase)
Add: Increase of deferred income tax liabilities (minus sign representing
-512,749.96 -16,981,114.84
decrease)
Add: Decrease of inventories (minus sign representing increase) -12,165,928.57 9,079,748.47
Add: Decrease of operating accounts receivables (minus sign representing
-68,957,632.45 -18,730,591.77
increase)
Add: Increase of operating accounts payables (minus sign representing
385,221,677.05 243,430,495.47
decrease)
Add: Others 0.00 0.00
Net cash flows from operating activities 1,675,078,629.81 1,317,347,150.42
(2) Non-cash-flow related significant investing and financing activities
Conversion of debt to equity 0.00 0.00
Conversion debt instruction of maturity less than 1 year 0.00 0.00
Non-current assets under financial leases 0.00 0.00
(3) Net change of cash and cash equivalents
Cash carried forward 148,606,284.51 49,333,429.81
Less: Cash brought forward 49,333,429.81 44,937,058.88
Add: Cash equivalents carried forward 0.00 0.00
Less: Cash equivalents brought forward 0.00 0.00
Net increase of cash and cash equivalents 99,272,854.70 4,396,370.93
5.48.2. Composition of cash and cash equivalents
Current reporting period Last reporting period
Items
(CNY) (CNY)
Ⅰ. Cash
148,606,284.51 49,333,429.81
Including: Cash on hand
566,260.65 341,204.85
Bank deposit capable of immediate payments
148,040,023.86 48,992,224.96
Other monetary assets capable of immediate payments
0.00 0.00
Ⅱ. Cash equivalents
0.00 0.00
Including: Debt instruments matured with three months
0.00 0.00
Ⅲ. Balance of cash and cash equivalents
148,606,284.51 49,333,429.81
Including: Cash and cash equivalents with imposed usage limitation 0.00 0.00
Note 6. Related party relationships and transactions
6.1. Details of the Company’s principal investors
Principal
investors’
Shareholding
Type of Place of Legal voting Institution
Name Relationship Nature of business in the
registration registration representative right in code
Company
the
Company
Limited Investment in and
SDA Largest Ma,
liability Jinan management of 42.00% 42.00% 61407164-7
Group shareholder Chongxian
company air transportation
69
Second
Air Stock
largest Beijing Kong, dong Air transportation 22.80% 22.80% 71787100-6
China company
shareholder
Note: SDA Group and Air China is largest shareholder and second largest shareholder of the Company
respectively. Air China is the largest shareholder of SDA Group, holding 49.406% of the share capital
of SDA Group which represents 49.406% voting right in SDA Group. Both SDA Group and Air China
have significant influence over the Company.
6.2. Details of the Company’s subsidiaries
The details of the Company’s subsidiaries as set out in Note 4.
6.3. Details of the Company’s associated companies
The details of the Company’s associated companies as set out in Note 5.9.
6.4. Other related parties
Name of company Relationships Institution code
Controlled by principal investors of the
Shandong TaiGu Aircraft Projecting Co., Ltd. 70588297-1
Company
Controlled by principal investors of the
Shandong XiangYu Air Technology Co., Ltd. 720736454
Company
Controlled by principal investors of the
Shandong International Air Training Co., Ltd.(Note 6.4.1.) 72755322-0
Company
Shandong Rainbow Commercial Jet Co., Ltd. Associate 72497146
Controlled by principal investors of the
Shenzhen Airlines Co., Ltd. 19221129-0
Company
Controlled by principal investors of the
Air China Cargo Co., Ltd. 71093205-6
Company
Controlled by principal investors of the
China National Aviation Finance Co., Ltd. 10113699
Company
Controlled by principal investors of the
Sichuan S Aero-engine Maintenance Co., Ltd. 71188088-4
Company
Note 1: The de-registration of Shandong International Air Training Co., Ltd. was completed on
December 20th, 2010.
6.5. Transactions with related parties
6.5.1. Acceptance of goods and service
Current reporting period Last reporting period
Pricing
and
Type of Transaction
Related parties decision
transaction description % of % of
making
transaction transaction
process Amount(CNY) Amount(CNY)
within within
Same type Same type
Aircraft
Shandong TaiGu Aircraft Projecting Co., Receipt of Market
maintenance 78,337,964.62 16.75 83,347,029.89 22.19
Ltd. service price
fees
70
Rental fees and
Receipt of food and Market
SDA Group 11,804,053.41 28.98 11,294,563.03 23.7
service accommodation price
fees
Shandong XiangYu Air Technology Co., Receipt of Repair Market
29,942,894.08 6.4 19,350,032.57 5.15
Ltd. service expenditure price
Receipt of Market
Qingdao FeiSheng Training fees 4,211,763.00 5.56 4,097,421.00 4.64
service price
Shandong International Air Training Co., Receipt of Market
Training fees 0.00 0.00 7,927,892.00 8.98
Ltd. service price
Receipt of Market
Shenzhen Airlines Co., Ltd. Training fees 3,408,580.00 4.5 0.00 0.00
service price
Receipt of Expenses for Market
Air China 14,118,424.93 2.14 0.00 0.00
service ground services price
Receipt of Expenses for Market
Air China Cargo Co., Ltd. 2,193,175.76 0.33 0.00 0.00
service ground services price
Sichuan S Aero-engine Maintenance Co., Receipt of Repair Market
27,036,322.41 5.78 0.00 0.00
Ltd. service expenditure price
Total 171,053,178.21 126,016,938.49
6.5.2. Supply of goods and service
Pricing
Current reporting period Last reporting period
Type Transaction and
Related parties
of transaction description decision making Amount % of transaction Amount % of transaction
process (CNY) within same type (CNY) Within same type
Air China Supply of service Service fees Agreed price 13,000,000.00 76.70 10,200,000.00 79.01
Total 13,000,000.00 10,200,000.00
6.5.3. Guarantee
Secured amount
Name of Guarantor Secured party Start date Expiry date Completion of guarantee
(CNY)
SDA Group The Company 80,000,000.00 2010-1-21 2011-1-20 No
SDA Group The Company 12,303,240.13 2010-1-28 2011-1-27 No
SDA Group The Company 48,638,367.11 2010-6-1 2011-5-31 No
SDA Group The Company 75,034,330.05 2010-7-12 2011-7-11 No
SDA Group The Company 12,303,240.13 2010-7-12 2011-7-11 No
SDA Group The Company 6,151,621.39 2010-7-12 2011-7-11 No
SDA Group The Company 102,259,322.57 2010-8-3 2011-8-3 No
SDA Group The Company 2,384,770.96 2010-10-21 2011-10-23 No
SDA Group The Company 2,314,371.39 2010-10-22 2011-10-24 No
SDA Group The Company 50,000,000.00 2010-10-27 2011-10-26 No
SDA Group The Company 2,450,399.00 2010-10-27 2011-10-26 No
SDA Group The Company 2,314,371.39 2010-10-27 2011-10-26 No
71
Secured amount
Name of Guarantor Secured party Start date Expiry date Completion of guarantee
(CNY)
SDA Group The Company 2,317,945.00 2010-11-1 2011-11-1 No
SDA Group The Company 2,317,945.00 2010-11-1 2011-11-1 No
SDA Group The Company 2,581,219.84 2010-11-1 2011-11-1 No
SDA Group The Company 80,834,689.39 2010-11-2 2011-11-2 No
SDA Group The Company 1,157,647.96 2010-11-8 2011-11-8 No
SDA Group The Company 2,362,074.04 2010-11-9 2011-11-8 No
SDA Group The Company 2,384,770.96 2010-11-10 2011-11-10 No
SDA Group The Company 2,450,399.00 2010-11-15 2011-11-15 No
SDA Group The Company 1,157,647.96 2010-11-16 2011-11-16 No
SDA Group The Company 1,157,647.96 2010-11-16 2011-11-16 No
SDA Group The Company 2,086,150.50 2010-11-16 2011-11-16 No
SDA Group The Company 12,947,378.50 2010-11-18 2011-11-18 No
SDA Group The Company 2,086,150.50 2010-11-19 2011-11-21 No
SDA Group The Company 2,314,371.39 2010-11-22 2011-11-22 No
SDA Group The Company 1,157,647.96 2010-11-23 2011-11-23 No
SDA Group The Company 2,384,770.96 2010-11-24 2011-11-25 No
SDA Group The Company 2,271,884.59 2010-11-26 2011-11-28 No
SDA Group The Company 1,165,595.20 2010-11-27 2011-11-28 No
SDA Group The Company 100,000,000.00 2006-12-18 2018-12-17 No
SDA Group The Company 2,200,000.00 2008-6-5 2018-12-17 No
SDA Group The Company 2,100,000.00 2008-6-18 2018-12-17 No
SDA Group The Company 123,000,000.00 2008-6-19 2018-12-17 No
SDA Group The Company 13,500,000.00 2008-7-1 2018-12-17 No
SDA Group The Company 30,000,000.00 2008-8-19 2018-12-17 No
SDA Group The Company 27,600,000.00 2007-12-3 2022-3-28 No
SDA Group The Company 83,000,000.00 2008-1-2 2022-3-28 No
SDA Group The Company 53,000,000.00 2008-4-29 2022-3-28 No
72
Secured amount
Name of Guarantor Secured party Start date Expiry date Completion of guarantee
(CNY)
SDA Group The Company 52,300,000.00 2008-6-2 2022-3-28 No
SDA Group The Company 17,200,000.00 2008-7-1 2022-3-28 No
SDA Group The Company 120,000,000.00 2008-7-15 2022-3-28 No
SDA Group The Company 114,000,000.00 2009-4-21 2022-3-28 No
SDA Group The Company 44,806,671.57 2007-5-31 2022-3-28 No
SDA Group The Company 118,909,386.41 2007-7-2 2022-3-28 No
SDA Group The Company 24,833,800.46 2007-8-1 2022-3-28 No
SDA Group The Company 98,737,172.03 2007-9-28 2022-3-28 No
Total 1,546,477,001.30
6.5.4. Inter-related-party borrowings
Related parties Amount Start date Expiry date Note
China National Aviation Finance Co., Ltd. 50,000,000.00 2010-6-21 2011-6-20
Repaid on 9 October 2010
China National Aviation Finance Co., Ltd. 50,000,000.00 2010-6-28 2011-6-27
China National Aviation Finance Co., Ltd. 50,000,000.00 2010-7-14 2011-7-13
China National Aviation Finance Co., Ltd. 50,000,000.00 2010-7-21 2011-7-20
China National Aviation Finance Co., Ltd. 150,000,000.00 2010-12-15 2011-12-14
Total 350,000,000.00
6.5.5. Reorganisation and assets transfer between related parties
Current reporting period Last reporting period
Transaction Type of Pricing % of transaction % of transaction
Related parties Amount Amount
description transaction policy within same within
(CNY) (CNY)
type same type
Aircraft
Agreed
Air China purchase Sales 0.00 0.00 333,393,389.35 100.00
price
right
Sales of
Shandong XiangYu Air Agreed
aviation Sales 3,851,850.53 100.00 2,871,828.77 100.00
Technology Co., Ltd. price
equipments
Total 3,851,850.53 336,265,218.12
6.5.6. Other transactions with related parties
Related parties Pricing policy Transaction Current reporting period Last reporting period
73
description % of transaction % of transaction
Amount Amount
within same within
(CNY) (CNY)
type same type
Air China Agreed price Wet lease 637,573,253.00 100.00 623,229,927.00 100.00
SDA Group Agreed price Guarantee fee 1,445,100.00 100.00 2,740,500.00 100.00
Air China Agreed price Route sharing 14,985,479.03 100.00 19,202,440.01 100.00
Cargo
Air China Cargo Co., Ltd. Agreed price transportation 4,489,317.15 100.00 0.00 0.00
alliance
Total 658,493,149.18 645,172,867.01
6.6. The balance of accounts payables and receivables among related parties:
2010.12.31 2009.12.31
Items Related party
(CNY) (CNY)
Accounts receivable
Air China 66,366,844.88 53,828,640.46
Shenzhen Airlines Co., Ltd. 1,849,400.00 0.00
Air China Cargo Co., Ltd. 3,275,079.39 0.00
Total 71,491,324.27 53,828,640.46
Advances to suppliers
Shandong XiangYu Air Technology Co.,
1,918,266.76 0.00
Ltd.
Total 1,918,266.76 0.00
Other receivable
Air China 40,503,711.76 23,382,955.26
Qingdao FeiSheng 0.00 1,405,287.30
Shandong XiangYu Air Technology Co.,
3,864,597.95 2,966,545.86
Ltd.
Shandong Rainbow Commercial Jet Co., Ltd 109,051,717.65 109,051,717.65
Total 153,420,027.36 136,806,506.07
Accounts payable
Shandong International Air Training Co.,
0.00 1,816,020.00
Ltd.
Qingdao FeiSheng 0.00 3,750,453.00
Air China 3,437,689.95 3,962,987.26
Shandong TaiGu Aircraft Projecting Co.,
27,829,926.58 13,641,513.24
Ltd.
Air China Cargo Co., Ltd. 414,307.39 0.00
Total 31,681,923.92 23,170,973.50
Other payable
Air China Co., Ltd. 20,000,000.00 20,000,000.00
SDA Group Co., Ltd. 12,192,570.48 4,051,799.74
Shandong TaiGu Aircraft Projecting Co., 0.00
245,400.00
Ltd.
Shandong International Air Training Co.,
0.00 3,465,953.82
Ltd..
Shenzhen Airlines Co., Ltd. 1,083,308.00 0.00
Total 33,521,278.48 27,517,753.56
74
Note 7. Contingencies
No contingencies as at the balance sheet date.
Note 8. Commitment
Signed commitments of which the performance was in process as at 31st December 2010 are listed
below:
Carrying value carried forward (’000)
Items
Within 1 year 1 – 2 years 2 – 3 years Over 3 years Total
(CNY) (CNY) (CNY) (CNY) (CNY)
Operating lease
641,711.29 625,647.77 585,997.32 3,231,618.31 5,084,974.69
Capital
1,553,748.20 2,101,752.04 2,190,421.40 4,177,828.63 10,023,750.27
Total
2,195,459.49 2,727,399.81 2,776,418.72 7,409,446.94 15,108,724.96
Note 9. Post balance sheet date events
9.1. Cash dividends CNY 3 per 10 shares from undistributed profit for the 400 million shares
outstanding as at 31st December 2010 was declared by the Fifth Meeting of the Fourth Term of Board
of Directors held on 25th March 2011.
9.2. The Proposal for Issuance of Medium-term Bonds (关于拟发行中期票据的议案) (hereafter, the
Proposal) was approved by the Fifth Meeting of the Fourth Term of Board of Directors held on 25th
March 2011. As provided by the Proposal, the Company will issue Two-to-Five-Year Bonds
amounting to CNY 500 million by one-off issuance or step issuance.
Note 10. Other significant events
10.1 Assets and liabilities measured by fair value
Cumulative Impairment
Gain/loss on change
change in fair allowance
in fair value for the
Items 2009.12.31 value recognised for the 2010.12.31
current reporting
accounted for current reporting
period
in equity period
Financial assets
Financial derivatives 11,341,846.48 -2,050,999.86 0.00 0.00 9,290,846.62
Subtotal of financial
11,341,846.48 -2,050,999.86 0.00 0.00 9,290,846.62
assets
Financial liabilities 0.00 -3,865,809.52 0.00 0.00 3,865,809.52
75
10.2 Financial assets and financial liabilities denominated in foreign currency
Cumulative Impairment allowance
Gain/loss on change in
change in fair recognised for the
Items 2009.12.31 fair value for the current 2010.12.31
value accounted current reporting
reporting period
for in equity period
Financial assets
Financial derivatives 11,341,846.48 -2,050,999.86 0.00 0.00 9,290,846.62
Subtotal of financial
11,341,846.48 -2,050,999.86 0.00 0.00 9,290,846.62
assets
Financial liabilities 0.00 -3,865,809.52 0.00 0.00 3,865,809.52
10.3 Other significant events
The 8th Extraordinary Meeting of 2010 of the 4th Term of the Board of Directors of the Company held
on December 22nd, 2010 considered and approved the “Shandong Airlines Co., Ltd.: Proposal of
Purchase of Fifteen B737-800 Aircrafts during the Period from 2014 to 2015 from the Boeing
Company” 《关于山东航空股份有限公司 2014 年-2015 年购买 15 架 B737-800 飞机事宜的议案》);
and the purchase agreement for the fifteen aircrafts was so signed with the Boeing Company on
December 23rd, 2010. The proposal is pending the resolution by the General Meeting of the Company
and the approval by the relevant governing authorities.
Note 11. Main notes to financial statements of parent company
11.1. Accounts receivables
11.1.1. Disclosure by classification
2010.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion(%) Amount(CNY) Proportion(%)
Accounts receivable of individual
159,361,519.11 85.10 0.00 0.0
significance
Categorised accounts receivable:
Categorisation by nature of receivables 27,907,177.65 14.90 1,395,358.88 5.00
Subtotal of category 27,907,177.65 14.90 1,395,358.88 5.00
Accounts receivable of individual
insignificance subject to individual 0.00 0.00 0.00 0.00
assessment for impairment
Total 187,268,696.76 100.00 1,395,358.88 0.75
(Continued):
76
2009.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion(%) Amount(CNY) Proportion(%)
Accounts receivable of individual
130,379,296.86 92.29 0.00 0.00
significance
Categorised accounts receivable:
Categorisation by nature of receivables 10,897,132.27 7.71 544,856.66 5.00
Subtotal of category 10,897,132.27 7.71 544,856.66 5.00
Accounts receivable of individual
insignificance subject to individual 0.00 0.00 0.00 0.00
assessment for impairment
Total 141,276,429.13 100.00 544,856.66 0.39
① Classification of accounts receivable: See Note 2.10 for criteria for classification of accounts
receivable of individual significance, categorised accounts receivable and accounts receivable of
individual insignificance subject to individual assessment for impairment.
② Categories of accounts receivable subject to provision for bad debts by percentage of carrying
amount:
Category Book value Proportion (%) Provision for bad debts
Categorisation by nature of
27,907,177.65 5.00 1,395,358.88
receivables
Total 27,907,177.65 1,395,358.88
11.1.2. Accounts receivable owed by shareholders with 5% or more voting right during the
reporting period
2010.12.31 2009.12.31
Shareholder
Amount Provision for bad debts Amount Provision for bad debts
(CNY) (CNY) (CNY) (CNY)
Air China 66,366,844.88 0.00 53,828,640.46 0.00
Total 66,366,844.88 0.00 53,828,640.46 0.00
11.1.3. The balance of top five accounts receivable
Relationship % of total
Nature of accounts
Name of company with the Amount(CNY) Age accounts
receivable
Company receivables
Wet lease premium
receivable and balance
Air China Related party 66,366,844.88 Within 1 year 35.44
receivable from joint
operations
Non-related
BSP 64,125,118.02 Within 1 year Balance pending settlement 34.24
party
Non-related
China Civil Aviation Clearing Centre 28,869,556.21 Within 1 year Offset balance receivable 15.42
party
77
Balance receivable from
Air China Cargo Co., Ltd. Related party 3,275,079.39 Within 1 year 1.75
joint cargo operations
Non-related Receivables from cabin
China Post, Jinan(济南市邮政局) 2,799,874.16 Within 1 year 1.50
party charter
Total 165,436,472.66 88.35
11.1.4. Accounts receivables owed by related parties
Name Relationship with the Company Amount (CNY) % of total accounts receivables
Principal investor of the
Air China Co., Ltd. 66,366,844.88 35.44
Company
Controlled by principal investors
Air China Cargo Co., Ltd. 3,275,079.39 1.75
of the Company
Qingdao Logistics Partially-owned subsidiary 848,880.00 0.45
Total 70,490,804.27 37.64
11.2. Other receivables
11.2.1. Disclosure by classification
2010.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion(%) Amount(CNY) Proportion(%)
Other receivable of individual
228,578,538.56 67.92 109,051,717.65 47.71
significance
Categorised other receivable:
Categorisation by nature of receivables 43,013,704.89 12.78 2,150,685.24 5.00
Subtotal of category 43,013,704.89 12.78 2,150,685.24 5.00
Other receivable of individual
insignificance subject to individual 64,955,587.90 19.30 0.00 0.00
assessment for impairment
Total 336,547,831.35 100.00 111,202,402.89 33.04
(Continued):
2009.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion(%) Amount(CNY) Proportion(%)
Other receivable of individual
209,239,407.19 77.04 109,051,717.65 52.12
significance
Categorised other receivable:
78
Categorisation by nature of receivables 41,229,693.20 15.18 2,061,484.66 5.00
Subtotal of category 41,229,693.20 15.18 2,061,484.66 5.00
Other receivable of individual
insignificance subject to individual 21,127,577.39 7.78 0.00 0.00
assessment for impairment
Total 271,596,677.78 100.00 111,113,202.31 40.91
① Classification of other receivables: See Note 2.10 for criteria for classification of other receivables
of individual significance, categorised other receivables and other receivables of individual
insignificance subject to individual assessment for impairment.
② Categories of other receivables subject to provision for bad debts by percentage of carrying
amount:
Category Book value Proportion (%) Provision for bad debts
Categorisation by nature of
43,013,704.89 5.00 2,150,685.24
receivables
Total 43,013,704.89 2,150,685.24
11.2.2. Other receivables of individual insignificance subject to individual assessment for
impairment:
Bad and
Book Proportion
Details doubtful Comment
value(CNY) (%)
debt(CNY)
Individually assessed as not
Aerdragon Aviation Partners Limited 3,973,620.00 0.00 0.00
impaired
Individually assessed as not
Aviation Capital Group Corporation 8,841,304.50 0.00 0.00
impaired
Individually assessed as not
Babcock ＆ Brown Aircraft Management LLC 9,801,596.00 0.00 0.00
impaired
Individually assessed as not
Bellevue Aircraft Leasing(Ireland) Limited 2,880,874.50 0.00 0.00
impaired
Individually assessed as not
BOC AVIATION 5,298,160.00 0.00 0.00
impaired
Individually assessed as not
GE Commercial Aviation Services 3,801,429.80 0.00 0.00
impaired
Individually assessed as not
Pacific Brihar Corporation Limited 3,496,785.60 0.00 0.00
impaired
Individually assessed as not
Rainier Aircraft Leasing(Ireland) Limited 13,086,601.50 0.00 0.00
impaired
Individually assessed as not
Shannon Engine Support LTD 827,837.50 0.00 0.00
impaired
Individually assessed as not
The Boeing Company 12,947,378.50 0.00 0.00
impaired
Total 64,955,587.90 0.00 0.00
11.2.3. Other receivables owed by shareholders with 5% or more voting right during the
reporting period
Shareholder 2010.12.31 2009.12.31
79
Bad and doubtful debt Bad and doubtful debt
Amount Amount
provision provision
(CNY) (CNY) (CNY) (CNY)
Air China 40,503,711.76 0.00 23,382,955.26 0.00
Total 40,503,711.76 0.00 23,382,955.26 0.00
11.2.4. List the top five balance of other receivables
Relationship % of total
Name of company with the Nature Amount(CNY) Age other
Company receivables
Related Operating
Shandong Rainbow Commercial Jet Co., Ltd. 109,051,717.65 3-7 years 32.4
parties receivable
Non-related
CDB Leasing Co., Ltd. Guarantee deposit 41,354,563.28 Over 5 years 12.29
parties
Related
Air China Guarantee deposit 40,503,711.76 Within 2 years 12.04
parties
Non-related
Beijing FuLaiTe Technology Development Co., Ltd. Guarantee deposit 19,124,985.87 Within 1 year 5.68
parties
Non-related
Singapore Aircraft Leasing Enterprise Guarantee deposit 18,543,560.00 Within 5 years 5.51
parties
Total 228,578,538.56 67.92
11.2.5. Other receivables owed by related parties
% of total other
Name of company Relationship with the Company Amount(CNY)
receivables
Air China Principal investor of the Company 40,503,711.76 12.04
Controlled by principal investors of
Shandong XiangYu Air Technology Co., Ltd. 3,864,597.95 1.15
the Company
Qingdao Logistics Partially-owned subsidiary 213,840.33 0.06
Qingdao Feisheng Wholly-owned subsidiary 746,858.24 0.22
Shandong Rainbow Commercial Jet Co., Ltd. Associate 109,051,717.65 32.40
Total 154,380,725.93 45.87
11.3. Long-term equity investments
Reasons for
discrepancy
Method of Initial investment
Name of investee Shareholding(%) Voting right(%) between
measurement cost(CNY)
shareholding and
voting right
Qingdao Logistics Measured at cost 23,813,205.97 70.00 70.00 n/a
China TravelSky Co., Ltd. Measured at cost 6,690,000.00 0.45 0.45 n/a
Sichuan Airlines Co., Ltd. Measured at cost 35,000,000.00 10.00 10.00 n/a
Jinan International Airport Co.,
Measured at cost 46,662,100.00 2.53 2.53 n/a
Ltd.
Qingdao Feisheng Measured at cost 57,677,479.46 100.00 100.00 n/a
Shandong Rainbow Commercial Measured by the
22,500,000.00 45.00 45.00 n/a
Jet Co., Ltd equity method
Total 192,342,785.43
Continued：
80
Impairment
Accumulated
Balance brought Changes in Balance carried provision Cash
Name of investee impairment
forward(CNY) year(CNY) forward(CNY) in dividends
provision(CNY)
year(CNY)
Qingdao Logistics 23,813,205.97 0.00 23,813,205.97 0.00 0.00 0.00
China TravelSky Co., Ltd. 6,690,000.00 0.00 6,690,000.00 0.00 0.00 1,165,398.00
Sichuan Airlines Co., Ltd. 35,000,000.00 0.00 35,000,000.00 0.00 0.00 0.00
Jinan International Airport Co.,
46,662,100.00 0.00 46,662,100.00 0.00 0.00 69,993.15
Ltd.
Qingdao Feisheng 57,677,479.46 0.00 57,677,479.46 0.00 0.00 0.00
Shandong Rainbow Commercial
22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00 0.00
Jet Co., Ltd
Total 192,342,785.43 0.00 192,342,785.43 22,500,000.00 0.00 1,235,391.15
11.4. Operating income and operating costs
11.4.1. Operating income and operating costs
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income from principal activities 7,202,653,930.01 5,298,145,040.55
Income from other activities 81,820,139.22 64,528,440.63
Total operating income 7,284,474,069.23 5,362,673,481.18
Principal activity costs 5,479,055,497.83 4,108,351,166.78
Other activity costs 5,407,179.34 3,347,076.10
Total operating costs 5,484,462,677.17 4,111,698,242.88
11.4.2. Operating income and operating costs by segment
Current reporting period Last reporting period
Segment Operating income Operating costs Operating income Operating costs
(CNY) (CNY) (CNY) (CNY)
Air transportation 7,179,220,348.49 5,459,720,041.47 5,277,937,825.81 4,089,471,032.64
Hospitality 25,414,051.87 20,815,817.17 22,984,060.08 19,179,045.59
Rental services 88,110.26 0.00 854,642.06 30,000.00
Others 79,751,558.61 3,926,818.53 60,896,953.23 3,018,164.65
Total 7,284,474,069.23 5,484,462,677.17 5,362,673,481.18 4,111,698,242.88
11.4.3. Details of operating revenues from top five clients
Clients Operating income (CNY) % of total operating income
Air China Co., Ltd.
665,558,732.03 9.14
81
PingAn Insurance (Pension) Co., Ltd.
(平安养老保险股份有限公司) 7,970,100.00 0.11
Department of Organisation,
Shandong Office of the China Communist Party
(山东省委组织部) 4,941,700.00 0.07
Air China Cargo Co., Ltd.
4,489,317.15 0.06
Shandong Jiahua Culture international travel service Co.,
Ltd (JHCITS) 3,926,000.00 0.05
Total
686,885,849.18 9.43
11.5. Investment income
11.5.1. Details of investment income
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income from long-term equity investments measured at
1,235,391.15 1,617,642.00
cost
Gains from possession of tradable financial assets -2,955,503.33 2,098,225.94
Total -1,720,112.18 3,715,867.94
11.5.2. Income from long-term equity investments measured at cost
Current reporting period Last reporting period
Investee Reasons for change
(CNY) (CNY)
Dividend announced
China TravelSky Co., Ltd. 1,165,398.00 1,617,642.00
by the investee
Dividend announced
Jinan International Airport Co., Ltd. 69,993.15 0.00
by the investee
Total 1,235,391.15 1,617,642.00
11.5.3. As at 31st December 2010, there is no investment of which income remittance is imposed
with limitation.
11.6. Supplements to the consolidated cash flow statement
Current reporting period Last reporting period
(1) Cash flows adjusted from net profits
(CNY) (CNY)
Net profits
Add: Impairment losses 633,686,858.58 300,853,412.56
Add: Depreciation of non-current assets and productive biological
939,702.80 196,362.15
assets and losses of fuel
Add: Amortisation of intangible assets 561,748,970.27 516,738,335.70
Add: Amortisation of long-term deferred assets 714,050.73 778,781.65
Add: Losses on disposals of non-current assets, intangible assets and 42,512,979.36 48,338,171.32
82
Current reporting period Last reporting period
(1) Cash flows adjusted from net profits
(CNY) (CNY)
long-term assets (minus sign representing gains)
Add: Losses arising from scrapping non-current assets (minus sign
-4,106.42 -6,133,554.83
representing gains)
Add: Losses arising from fair value changes (minus sign representing
7,619,454.74 3,373,554.01
gains)
Add: Financial costs (minus sign representing income) 5,916,809.38 12,118,965.63
Add: Investment losses (minus sign representing income) 148,529,818.13 248,224,796.69
Add: Decrease of deferred income tax assets (minus sign representing
1,720,112.18 -3,715,867.94
increase)
Add: Increase of deferred income tax liabilities (minus sign
-34,613,253.12 -23,044,980.11
representing decrease)
Add: Decrease of inventories (minus sign representing increase) -512,749.96 -16,981,114.84
Add: Decrease of operating accounts receivables (minus sign
-12,165,928.57 9,079,748.47
representing increase)
Add: Increase of operating accounts payables (minus sign
-76,890,676.84 -17,601,473.01
representing decrease)
Add: Others 392,661,666.17 244,772,201.97
Net cash flows from operating activities 0.00 0.00
(2) Non-cash-flow related significant investing and financing activities 1,671,863,707.43 1,316,997,339.42
Conversion of debt to equity
Conversion debt instruction of maturity less than 1 year
Non-current assets under financial leases
(3) Net change of cash and cash equivalents
Cash carried forward
Less: Cash brought forward 143,930,783.00 35,081,676.95
Add: Cash equivalents carried forward 35,081,676.95 30,712,242.02
Less: Cash equivalents brought forward 0.00 0.00
Net increase of cash and cash equivalents 0.00 0.00
Net profits 108,849,106.05 4,369,434.93
Note 12. Supplemental information
12.1. Details of extraordinary gains and losses for the current reporting period
Items Amount (CNY) Comment
Gains from disposals of non-current assets after expending impairment
-7,700,920.17
provisions
Exceeded-authority approved, non-official approved or accidental tax
0.00
repayment and relief
Government grants recognised through profit or loss for the current reporting Flight-route government subsidy,
16,013,518.70
period, excluding grants which are closely related to the Company’s operating etc
83
Items Amount (CNY) Comment
activities and of which the quota or approval is eligible for automatic renewal
in accordance with relevant regulations
Financial resource usage fees charged on non-financial institution recognised
0.00
through profit or loss for the current reporting period
Gains arising from bargain purchase in business combination and investments
0.00
in associates and joint ventures
Non-monetary asset exchange 0.00
Consigned investment and asset management 0.00
Impairment provision resulting from force majeure, eg. natural desasters 0.00
Reorganisation 0.00
Reorganisation expenditure 0.00
Unfair transactions 0.00
Net profits or losses achieved by an acquired under-common-control entity
0.00
during the period from the start of the period to the acquisition date
Gains or losses arising from contingent events unconnected with the
0.00
Company’s daily operating activities
Fair value changes of tradable financial assets and tradable financial liabilities
held and gains or losses arising from disposals of tradable financial assets,
-8,872,312.71
tradable financial liabilities and available-for-sale financial assets, excluding
hedging contracts relevant to the Company’s daily operating activities
Reversal of impairment provision for accounts receivables eligible for
0.00
individual impairment assessment
Gains or losses arising from consigned borrowings 0.00
Fair value changes of property investments subsequently measured at fair value 0.00
One-off adjustment of profit or loss for the current reporting period in
0.00
accordance with tax and accounting laws and regulations
Consignment income arising from consigned operations 0.00
Flight-route subsidy from airports
Income and expenses other than items listed above 12,545,837.53 and other non-recurring
income/expenses
Other gains or losses satisfying the definition of extraordinary gains or losses 0.00
Subtotal 11,986,123.35
Less: Impact of income tax 3,071,587.08
Less: Impact on non-controlling interest -49.49
Total 8,914,585.76
12.2. Yield rate of net assets and earnings per share
84
Earnings per share
Weighted average
Net profits for the current reporting period
of returns on equity (%)
Basic earnings per share (%) Diluted earnings per share (%)
Net profits attributable to ordinary
shareholders 56.84% 1.59 1.59
Net profits attributable to ordinary
shareholders after deducting extraordinary
gains or losses 56.04% 1.56 1.56
Computation of earnings per share:
12.2.1. Basic earnings per share
Current reporting period Last reporting period
After deducting After deducting
Items Computation extraordinary extraordinary
Amount(CNY) Amount(CNY)
gains or gains or
losses(CNY) losses(CNY)
Net profits attributable to ordinary (1) 634,364,547.92 625,449,962.16 302,282,325.68 203,597,306.19
shareholders
Number of listed ordinary shares brought (2) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
forward
Number of listed ordinary share equivalents (3) 0.00 0.00 0.00 0.00
increased in year
Number of listed ordinary share equivalents (4) 0.00 0.00 0.00 0.00
decreased in year
Weighted average of listed ordinary shares (5)=(2)+(3)-(4) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
Basic earnings per share (6)=(1)÷(5) 1.59 1.56 0.76 0.51
12.2.2. Diluted earnings per share
Current reporting period Last reporting period
After After
Items Computation deducting deducting
Amount(CNY) extraordinary Amount(CNY) extraordinary
gains or gains or
losses(CNY) losses(CNY)
Net profits attributable to ordinary
(1) 634,364,547.92 625,449,962.16 302,282,325.68 203,597,306.19
shareholders
Potential dilutive ordinary dividends
(2) 0.00 0.00 0.00 0.00
recognised as expenses
Potential dilutive ordinary share
(3) 0.00 0.00 0.00 0.00
conversion expenses
Income tax rate (4) 25.00% 25.00% 25.00% 25.00%
Net profits attributable to ordinary
(5)=(1)+[(2)-(3)]×[1-(4)] 634,364,547.92 625,449,962.16 302,282,325.68 203,597,306.19
shareholders after adjustment
Weighted average of ordinary shares
for basic earnings per share (6) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
computation
Weighted average of dilutive ordinary
(7) 0.00 0.00 0.00 0.00
share conversion
Weighted average of ordinary shares
(8)=(6)+(7) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
for diluted earnings per share
Diluted earnings per share (9)=(5)÷(8) 1.59 1.56 0.76 0.51
Note 13. Approval of financial statements
T
his financial statements are approved and authorised for issuance by the Board of Directors on March
25, 2011.
85
