ShanDong Airlines Co, ltd. 2011 SEMI-ANNUAL Financial Report
Balance Sheet
Prepared by: Shandong Airlines Co., Ltd. 2011-06-30 Unit: RMB
Amount at period-end Amount at year-begin
Items
Merger Parent Company Merger Parent Company
Current assets:
Monetary funds 255,692,858.12 248,370,812.70 333,572,647.76 328,897,146.25
Settlement
provisions
Capital lent
Transaction finance
7,239,213.88 7,239,213.88 9,290,846.62 9,290,846.62
asset
Notes receivable
Accounts receivable 235,812,484.73 221,438,391.88 192,444,914.49 185,873,337.88
Accounts paid in
41,130,924.31 40,981,995.91 28,353,455.80 28,201,391.84
advance
Insurance receivable
Reinsurance
receivables
Contract reserve of
reinsurance receivable
Interest receivable 1,744,288.87 1,744,288.87 1,409,528.13 1,409,528.13
Dividend receivable 11,365,400.00 11,365,400.00
Other receivables 204,246,505.78 212,615,554.86 224,905,440.68 225,345,428.46
Purchase restituted
finance asset
Inventories 82,939,291.42 82,939,291.42 77,787,249.46 77,787,249.46
Non-current asset
due within one year
Other current assets
Total current assets 840,170,967.11 826,694,949.52 867,764,082.94 856,804,928.64
Non-current assets:
Granted loans and
advances
Finance asset
available for sales
Held-to-maturity
investment
Long-term account
receivable
Long-term equity
88,352,100.00 169,842,785.43 88,352,100.00 169,842,785.43
investment
Investment property
Fixed assets 6,402,643,111.32 6,340,660,080.90 6,616,497,360.85 6,551,672,655.53
Construction in
1,374,715,435.28 1,354,026,601.98 937,253,250.34 925,773,327.54
progress
Engineering
material
0
Disposal of fixed
asset
Productive
biological asset
Oil and gas asset
Intangible assets 46,797,351.24 31,967,824.21 47,146,366.53 32,299,511.53
Expense on
Research and
Development
Goodwill 10,220,816.22 10,220,816.22
Long-term expenses
241,794,440.88 241,480,612.94 229,830,196.19 229,493,082.25
to be apportioned
Deferred income tax
163,662,660.80 163,354,520.06 126,735,195.78 126,425,389.96
asset
Other non-current
asset
Total non-current asset 8,328,185,915.74 8,301,332,425.52 8,056,035,285.91 8,035,506,752.24
Total assets 9,168,356,882.85 9,128,027,375.04 8,923,799,368.85 8,892,311,680.88
Current liabilities:
Short-term loans 994,424,197.43 994,424,197.43 1,001,269,036.73 1,001,269,036.73
Loan from central
bank
Absorbing deposit
and interbank deposit
Capital borrowed
Transaction
3,820,968.44 3,820,968.44 3,865,809.52 3,865,809.52
financial liabilities
Notes payable 28,000,000.00 28,000,000.00 135,042,835.33 135,042,835.33
Accounts payable 1,291,190,642.49 1,288,495,974.81 1,008,600,051.49 1,009,216,769.85
Accounts received
229,456,675.80 226,571,736.57 202,453,668.78 200,972,965.98
in advance
Selling financial
asset of repurchase
Commission charge
and commission payable
Wage payable 144,420,392.92 144,300,213.34 236,150,660.44 236,130,188.66
Taxes payable 233,310,602.31 233,274,302.88 170,115,170.97 169,899,177.32
Interest payable 13,558,435.31 13,471,663.31 9,656,528.23 9,569,756.23
Dividend payable 11,940.00 11,940.00 11,940.00 11,940.00
Other accounts
128,226,156.19 125,076,518.52 140,733,981.14 141,469,803.57
payable
Reinsurance
payables
Insurance contract
reserve
Security trading of
agency
Security sales of
agency
1
Non-current
liabilities due within 1 448,308,016.22 436,008,016.22 476,767,879.05 464,467,879.05
year
Other current liabilities
Total current liabilities 3,514,728,027.11 3,493,455,531.52 3,384,667,561.68 3,371,916,162.24
Non-current liabilities:
Long-term loans 3,086,144,388.48 3,086,144,388.48 3,180,283,177.55 3,180,283,177.55
Bonds payable
Long-term account
807,856,324.31 807,856,324.31 863,013,847.54 863,013,847.54
payable
Special accounts
payable
Projected liabilities
Deferred income tax
1,809,803.47 1,809,803.47 2,322,711.66 2,322,711.66
liabilities
Other non-current
101,282,785.23 101,282,785.23 73,390,628.74 73,390,628.74
liabilities
Total non-current
3,997,093,301.49 3,997,093,301.49 4,119,010,365.49 4,119,010,365.49
liabilities
Total liabilities 7,511,821,328.60 7,490,548,833.01 7,503,677,927.17 7,490,926,527.73
Owner’s equity (or
shareholders’ equity):
Paid-in capital (or
400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
share capital)
Capital public
86,911,168.71 86,911,168.71 84,050,162.84 84,050,162.84
reserve
Less: Inventory
shares
Reasonable reserve
Surplus public
122,944,754.89 122,284,050.36 122,944,754.89 122,284,050.36
reserve
Provision of general
risk
Retained profit 1,033,849,547.63 1,028,283,322.96 799,664,252.17 795,050,939.95
Balance difference of
foreign currency
translation
Total owner’s equity
attributable to parent 1,643,705,471.23 1,637,478,542.03 1,406,659,169.90 1,401,385,153.15
company
Minority interests 12,830,083.02 13,462,271.78
Total owner’s equity 1,656,535,554.25 1,637,478,542.03 1,420,121,441.68 1,401,385,153.15
Total liabilities and
9,168,356,882.85 9,128,027,375.04 8,923,799,368.85 8,892,311,680.88
owner’s equity
2
Profit Statement
Prepared by: Shandong Airlines Co., Ltd. January-June, 2011 Unit: RMB
Amount in this period Amount in last period
Items Parent Parent
Merger Merger
Company Company
I. Total operating income 4,322,532,092.31 4,311,491,445.33 3,133,663,094.58 3,130,557,084.43
Including: Operating
4,322,532,092.31 4,311,491,445.33 3,133,663,094.58 3,130,557,084.43
income
Interest income
Insurance gained
Commission charge
and commission income
II. Total operating cost 3,865,396,800.98 3,855,734,891.23 2,863,871,178.16 2,861,260,458.31
Including: Operating cost 3,324,900,493.51 3,320,114,273.92 2,407,584,188.29 2,406,587,181.10
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
143,039,334.76 142,582,912.25 87,411,121.39 87,244,032.10
extras
Sales expenses 272,496,547.90 272,496,547.90 208,998,341.78 208,998,341.78
Administration
80,241,899.17 76,626,822.73 61,598,497.67 59,897,863.18
expenses
Financial expenses 43,934,555.41 43,123,703.92 97,703,103.83 97,957,114.95
Losses of devaluation
783,970.23 790,630.51 575,925.20 575,925.20
of asset
Add: Changing income
of fair value(Loss is -2,006,791.66 -2,006,791.66 238,547.62 238,547.62
listed with “-”)
Investment income (Loss
7,275,314.20 7,275,314.20 645,329.07 645,329.07
is listed with “-”)
Including: Investment
income on affiliated
company and joint
venture
Exchange income (Loss
is listed with “-”)
III. Operating profit
462,403,813.87 461,025,076.64 270,675,793.11 270,180,502.81
(Loss is listed with “-”)
3
Add: Non-operating
17,819,973.11 17,819,973.11 6,438,539.47 6,438,539.47
income
Less: Non-operating
8,337,604.52 7,868,539.08 2,983,400.20 2,983,400.20
expense
Including: Disposal loss
7,667,031.42 7,667,031.42 2,860,149.01 2,860,149.01
of non-current asset
IV. Total Profit (Loss is
471,886,182.46 470,976,510.67 274,130,932.38 273,635,642.08
listed with “-”)
Less: Income tax expense 118,333,075.76 117,744,127.66 68,488,541.33 68,408,910.50
V. Net profit (Net loss is
353,553,106.70 353,232,383.01 205,642,391.05 205,226,731.58
listed with “-”)
Net profit attributable to
owner’s of parent 354,185,295.46 353,232,383.01 205,570,723.33 205,226,731.58
company
Minority shareholders’
-632,188.76 71,667.72
gains and losses
VI. Earnings per share
i. Basic earnings per
0.89 0.51
share
ii. Diluted earnings per
0.89 0.51
share
VII. Other consolidated
income
VIII. Total consolidated
353,553,106.70 353,232,383.01 205,642,391.05 205,226,731.58
income
Total consolidated
income attributable to
354,185,295.46 353,232,383.01 205,570,723.33 205,226,731.58
owners of parent
company
Total consolidated
income attributable to -632,188.76 71,667.72
minority shareholders
Cash Flow Statement
Prepared by: Shandong Airlines Co., Ltd. January-June, 2011 Unit: RMB
Amount in this period Amount in last period
Items
Merger Parent Company Merger Parent Company
I. Cash flows arising
from operating activities:
Cash received from
selling commodities and 4,311,495,703.81 4,301,263,995.38 3,103,986,764.56 3,102,782,754.30
providing labor services
Net increase of
customer deposit and
interbank deposit
Net increase of loan
from central bank
Net increase of capital
4
borrowed from other
financial institution
Cash received from
original insurance
contract fee
Net cash received from
reinsurance business
Net increase of
insured savings and
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
Other cash received
concerning operating 64,896,819.96 64,884,259.15 12,474,129.71 12,219,005.89
activities
Subtotal of cash
inflow arising from 4,376,392,523.77 4,366,148,254.53 3,116,460,894.27 3,115,001,760.19
operating activities
Cash paid for
purchasing commodities
2,561,325,472.28 2,561,230,007.91 1,976,453,214.03 1,976,441,336.34
and receiving labor
service
Net increase of
customer 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 guarantee slip
Cash paid to/for
501,914,224.17 499,680,602.95 353,667,841.00 352,019,777.48
staff and workers
Taxes paid 453,095,121.29 450,288,640.47 250,766,690.79 250,270,593.38
5
Other cash paid
concerning operating 26,736,517.36 34,349,045.94 53,959,573.55 53,713,743.78
activities
Subtotal of cash
outflow arising from 3,543,071,335.10 3,545,548,297.27 2,634,847,319.37 2,632,445,450.98
operating activities
Net cash flows arising
833,321,188.67 820,599,957.26 481,613,574.90 482,556,309.21
from operating activities
II. Cash flows arising
from investing activities:
Cash received from
recovering investment
Cash received from
1,097,573.07 1,097,573.07
investment income
Net cash received from
disposal of fixed,
167,143.06 167,143.06 9,380.00 9,380.00
intangible and other
long-term assets
Net cash received
from disposal of
subsidiaries and other
units
Other cash received
concerning investing
activities
Subtotal of cash inflow
167,143.06 167,143.06 1,106,953.07 1,106,953.07
from investing activities
Cash paid for
purchasing fixed,
555,500,516.86 546,245,829.36 465,535,817.20 465,439,336.20
intangible and other
long-term assets
Cash paid for
12,255,000.00 12,255,000.00
investment
Net increase of
mortgaged loans
Net cash received
from subsidiaries and
other units
Other cash paid
concerning investing 2,914,720.42 2,914,720.42
activities
Subtotal of cash outflow
570,670,237.28 561,415,549.78 465,535,817.20 465,439,336.20
from investing activities
Net cash flows arising
-570,503,094.22 -561,248,406.72 -464,428,864.13 -464,332,383.13
from investing activities
III. Cash flows arising
from financing activities
Cash received from
absorbing investment
6
Including: Cash
received from absorbing
minority shareholders’
investment by
subsidiaries
Cash received from
417,738,410.49 417,738,410.49 859,816,241.77 859,816,241.77
loans
Cash received from
issuing bonds
Other cash received
concerning financing 66,740,000.00 66,740,000.00
activities
Subtotal of cash inflow
484,478,410.49 484,478,410.49 859,816,241.77 859,816,241.77
from financing activities
Cash paid for settling
484,958,885.00 484,958,885.00 568,804,717.16 568,804,717.16
debts
Cash paid for
dividend and profit
189,987,656.41 189,167,656.41 154,943,882.25 154,943,882.25
distributing or interest
paying
Including: Dividend
and profit of minority
shareholder paid by
subsidiaries
Other cash paid
concerning financing 83,410,798.44 83,410,798.44 108,107,155.39 108,107,155.39
activities
Subtotal of cash
outflow from financing 758,357,339.85 757,537,339.85 831,855,754.80 831,855,754.80
activities
Net cash flows
arising from financing -273,878,929.36 -273,058,929.36 27,960,486.97 27,960,486.97
activities
IV. Influence on cash and
cash equivalents due to
-78,954.73 -78,954.73 -30,532.87 -30,532.87
fluctuation in exchange
rate
V. Net increase of cash
-11,139,789.64 -13,786,333.55 45,114,664.87 46,153,880.18
and cash equivalents
Add: Balance of
cash and cash equivalents 148,606,284.51 143,930,783.00 49,333,429.81 35,081,676.95
at the period -begin
VI. Balance of cash and
cash equivalents at the 137,466,494.87 130,144,449.45 94,448,094.68 81,235,557.13
period -end
7
Statement of Change in Owners’ Equity (Consolidated)
Prepared by: Shandong Airlines Co., Ltd. Semi-annual of 2011 Unit: RMB
Amount of the Current Term Amount of Last Year
Owners’ equity attributable to parent company Owners’ equity attributable to parent company
Mino Mino
Paid- Paid-
Provi r Total Provi r Total
up Less: Reas up Less: Reas
Capit Surpl sion share owne Capit Surpl sion share owne
capit inven onabl Retai capit inven onabl Retai
Items al us of Other holde rs’ al us of Other holde rs’
al(or tory e ned al(or tory e ned
reser reser gener profit s rs’ equit reser reser gener profit s rs’ equit
share share reser share share reser
ves ves al equit y ves ves al equit y
capit s ve capit s ve
risk y risk y
al) al)
400,0 84,05 122,9 799,6 13,46 1,420, 400,0 84,05 59,57 308,6 13,25 865,5
I. Balance at the end
00,00 0,162. 44,75 64,25 2,271. 121,4 00,00 0,162. 6,069. 68,39 1,532. 46,15
of last year
0.00 84 4.89 2.17 78 41.68 0.00 84 03 0.11 27 4.25
Plus: Change of
accounting policy
Correcting of
previous errors
Others
II. Balance at the 400,0 84,05 122,9 799,6 13,46 1,420, 400,0 84,05 59,57 308,6 13,25 865,5
beginning of current 00,00 0,162. 44,75 64,25 2,271. 121,4 00,00 0,162. 6,069. 68,39 1,532. 46,15
year 0.00 84 4.89 2.17 78 41.68 0.00 84 03 0.11 27 4.25
III. Changed in 2,861, 234,1 236,4 63,36 490,9 554,5
-632,1 210,7
current term(Loss is 005.8 85,29 14,11 8,685. 95,86 75,28
88.76 39.51
listed with “-”) 7 5.46 2.57 86 2.06 7.43
354,1 353,5 634,3 634,5
-632,1 210,7
(I) Net profit 85,29 53,10 64,54 75,28
88.76 39.51
5.46 6.70 7.92 7.43
(II) Other
8
consolidated income
354,1 353,5 634,3 634,5
-632,1 210,7
Subtotal of (I) and (II) 85,29 53,10 64,54 75,28
88.76 39.51
5.46 6.70 7.92 7.43
(III) Owners’ input 2,861, 2,861,
and withdraw of share 005.8 005.8
capital 7 7
1. Capital input by
owners
2. Share payment
accounted into
owners’ equity
2,861, 2,861,
3. Others 005.8 005.8
7 7
-120,0 -120,0 63,36 -143,3 -80,00
(IV) Profit
00,00 00,00 8,685. 68,68 0,000.
distribution
0.00 0.00 86 5.86 00
63,36 -63,36
1. Providing of
8,685. 8,685.
surplus reserves
86 86
2. Common risk
provision
3. Dividend to -120,0 -120,0 -80,00 -80,00
owners’(or 00,00 00,00 0,000. 0,000.
shareholders) 0.00 0.00 00 00
4. Others
(V) Internal
9
settlement of owners’
equity
1. Capital reserves
transferred to share
capital
2. Surplus reserves
transferred to share
capital
3. Making up losses
by surplus reserves
4. Others
(VI) Reasonable
reserve
1. Withdrawal in the
report period
2. Usage in the report
period
(VII) Other
400,0 86,91 122,9 1,033, 12,83 1,656, 400,0 84,05 122,9 799,6 13,46 1,420,
IV. Balance at the
00,00 1,168. 44,75 849,5 0,083. 535,5 00,00 0,162. 44,75 64,25 2,271. 121,4
end of this term
0.00 71 4.89 47.63 02 54.25 0.00 84 4.89 2.17 78 41.68
10
Statement of Change in Owners’ Equity (Parent Company)
Prepared by: Shandong Airlines Co., Ltd. Semi-annual of 2011 Unit: RMB
Amount of the Current Term Amount of Last Year
Paid-u Paid-u
p Less: Surplu Provisi Total p Less: Surplu Provisi Total
Capital Reason Retain Capital Reason Retain
Items capital( invento s on of owners capital( invento s on of owners
reserve able ed reserve able ed
or ry reserve general ’ or ry reserve general ’
s reserve profit s reserve profit
share shares s risk equity share shares s risk equity
capital) capital)
1,401,3
I. Balance at the end 400,000 84,050, 122,284 795,050 400,000 84,050, 58,915, 304,732 847,698
85,153.
of last year ,000.00 162.84 ,050.36 ,939.95 ,000.00 162.84 364.50 ,767.23 ,294.57
15
Plus: Change of
accounting policy
Correcting of
previous errors
Others
II. Balance at the 1,401,3
400,000 84,050, 122,284 795,050 400,000 84,050, 58,915, 304,732 847,698
beginning of current 85,153.
,000.00 162.84 ,050.36 ,939.95 ,000.00 162.84 364.50 ,767.23 ,294.57
year 15
III. Changed in
2,861,0 233,232 236,093 63,368, 490,318 553,686
current term(Loss is
05.87 ,383.01 ,388.88 685.86 ,172.72 ,858.58
listed with “-”)
353,232 353,232 633,686 633,686
(I) Net profit
,383.01 ,383.01 ,858.58 ,858.58
(II) Other
consolidated income
353,232 353,232 633,686 633,686
Subtotal of (I) and (II)
,383.01 ,383.01 ,858.58 ,858.58
11
(III) Owners’ input
2,861,0 2,861,0
and withdraw of share
05.87 05.87
capital
1. Capital input by
owners
2. Share payment
accounted into
owners’ equity
2,861,0 2,861,0
3. Others
05.87 05.87
-120,00 -120,00 -143,36
(IV) Profit 63,368, -80,000,
0,000.0 0,000.0 8,685.8
distribution 685.86 000.00
0 0 6
1. Providing of 63,368, -63,368,
surplus reserves 685.86 685.86
2. Common risk
provision
3. Dividend to -120,00 -120,00
-80,000, -80,000,
owners’(or 0,000.0 0,000.0
000.00 000.00
shareholders) 0 0
4. Others
(V) Internal
settlement of owners’
equity
1. Capital reserves
transferred to share
capital
2. Surplus reserves
12
transferred to share
capital
3. Making up losses
by surplus reserves
4. Others
(VI) Reasonable
reserve
1. Withdrawal in the
report period
2. Usage in the report
period
(VII) Other
1,028,2 1,637,4 1,401,3
IV. Balance at the 400,000 86,911, 122,284 400,000 84,050, 122,284 795,050
83,322. 78,542. 85,153.
end of this term ,000.00 168.71 ,050.36 ,000.00 162.84 ,050.36 ,939.95
96 03 15
13
Shandong Airlines Co., Ltd.
Notes to the financial statements
As at 30st June 2011
（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 26 th,
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;
14
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,
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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.
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
16
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
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
17
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.
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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
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
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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.
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:
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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
following procedures:
① Financial assets or financial liabilities are subsequently measured at fair value through profit
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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
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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 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;
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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:
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;
24
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.
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
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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:
26
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
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.
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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:
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
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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 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
29
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
30
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.
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.
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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 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
32
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 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
33
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
34
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 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
35
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 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:
36
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.
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
37
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
38
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;
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
39
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 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
40
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 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:
41
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
42
income is 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
43
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
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
44
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
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
45
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
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
46
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)
Actual investment value Ending balances of projects
Name of subsidiary Shareholding proportion (%) Voting right (%)
as at June 30,2011 constituting net investment
47
in the subsidiary
Qingdao Logistics 23,813,205.97 0.00 70.00 70.00
(Continued)
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 12,830,083.02 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 June 30,2011 net investment in the proportion (%)
subsidiary
48
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
Note 5. Main items of the consolidated financial statements
5.1. Monetary funds
2011.6.30 2010.12.31
Currency Original Exchange Presentation Original Exchange Presentation
currency rate currency currency rate currency
Cash on hand
CNY 400,975.89 1.000000 400,975.89 351,682.13 1.000000 351,682.13
HKD 13,386.60 0.831600 11,132.29 4,386.60 0.850930 3,732.69
USD 2,173.70 6.471600 14,067.32 21,819.25 6.622700 144,502.35
GBP 1,868.55 10.398598 19,430.30 1,377.70 10.218200 14,077.61
CAD 10.00 6.672000 66.72 10.00 6.603100 66.03
JPY 912,000.00 0.080200 73,142.40 582,000.00 0.081260 47,293.32
49
2011.6.30 2010.12.31
Currency Original Exchange Presentation Original Exchange Presentation
currency rate currency currency rate currency
EUR 1,000.00 9.361190 9,361.19 514.00 8.806500 4,526.54
TWD 1,680.00 0.224450 377.08 1,680.00 0.226180 379.98
Subtotal 528,553.19 566,260.65
Bank
CNY 119,079,666.69 1.000000 119,079,666.69 143,126,509.59 1.000000 143,126,509.59
USD 2,711,685.52 6.471600 17,548,943.77 627,267.34 6.622700 4,154,203.41
KRW 27,948,065.00 0.005945 166,151.25 40,902,359.18 0.005823 238,174.43
TWD 543,866.00 0.224450 122,070.72 1,038,562.00 0.226180 234,901.82
JPY 263,207.60 0.080200 21,109.25 3,522,454.00 0.081260 286,234.61
Subtotal 136,937,941.68 148,040,023.86
Other monetary funds
CNY 118,226,363.25 1.000000 118,226,363.25 184,966,363.25 1.000000 184,966,363.25
Subtotal 118,226,363.25 184,966,363.25
Total 255,692,858.12 333,572,647.76
Other monetary funds as at June 30st, 2011 include monetary funds with
restriction-on-movement imposed amounting to 118,226,363.25, within which guarantee deposits
for bankers’ acceptance and guarantee deposits for Hui Li Da financing contracts amount to
8,400,000.00 and 109,826,363.25 respectively.
5.2. Financial assets held for trading
Item Fair value as at 2011.6.30 (CNY) Fair value as at 2010.12.31 (CNY)
50
Interest rate swaps 7,239,213.88 9,290,846.62
Total 7,239,213.88 9,290,846.62
The notional principal of immature interest rate swaps held as at June 30st, 2011amounted to
USD 164,754,724.00; and, the market value of the swaps as at June 30st, 2011 quoted by the bank
amounted to CNY7,239,213.88 .
5.3. Accounts receivables
5.3.1. Disclosure by classification
2011.6.30
Book value Provision for bad debts
Category
Proportion Proportion
Amount(CNY) Amount(CNY)
(%) (%)
Accounts receivable of individual significance 183,192,340.95 76.60 0.00 0.00
Categorised accounts receivable:
Categorisation by nature of receivables 48,261,132.40 20.18 2,413,056.62 5.00
Subtotal of category 48,261,132.40 20.18 2,413,056.62 5.00
Accounts receivable of individual insignificance
7,688,576.05 3.22 916,508.05 11.92
subject to individual assessment for impairment
Total 239,142,049.40 100.00 3,329,564.67 1.39
(Continued)
Category 2010.12.31
Book value Provision for bad debts
Proportion Proportion
Amount(CNY) Amount(CNY)
(%) (%)
Accounts receivable of individual significance 159,361,519.11 81.68 0.00 0.00
51
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
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
48,261,132.40 5.00 2,413,056.62
receivables
Total 48,261,132.40 2,413,056.62
5.3.2. Accounts receivable of individual insignificance subject to individual assessment for
impairment:
Details Book value(CNY) Bad debts(CNY) Proportion (%) Comment
Individually assessed as
CR Airways 916,508.05 916,508.05 100.00
uncollectable
Individually assessed as
Shandong Provincial Government 6,772,068.00 0.00 0.00
unimpairment
Total 7,688,576.05 916,508.05 11.92
5.3.3. Accounts receivables owed by shareholders with 5% or more voting right during
the reporting period
2011.6.30 2010.12.31
Shareholder
Amount(CNY) Provision for bad debts (CNY) Amount(CNY) Provision for bad debts (CNY)
Air China 53,644,512.08 0.00 66,366,844.88 0.00
Total 53,644,512.08 0.00 66,366,844.88 0.00
52
5.3.4. The top five account receivables
% of total
Name of company Relationship with the Company Amount(CNY) Age accounts
receivables
BSP Non-related parties 76,419,142.66 Within 1 year
31.96
Air China Related parties 53,644,512.08 Within 1 year
22.43
China Civil Aviation Clearing Centre Non-related parties 53,128,686.21 Within 1 year
22.22
Shandong Provincial Government Non-related parties 6,772,068.00 Within 1 year
2.83
China Post, Jinan(济南市邮政局) Non-related parties 3,302,233.20 Within 1 year
1.38
Total
193,266,642.15 80.82
5.3.5. Accounts receivables owed by related parties
Name Relationship with the Company Amount (CNY) % of total accounts receivables
Principal investor
Air China 53,644,512.08 22.43
of the Company
Controlled by principal investors
Shenzhen Airlines Co., Ltd. 1,849,400.00 0.77
of the Company
Total 55,493,912.08 23.20
5.4. Advances to suppliers
5.4.1. Presentation by age
2011.6.30 2010.12.31
Age
Amount (CNY) Proportion (%) Amount (CNY) Proportion (%)
Within 1 year 40,262,490.01 97.89 27,837,071.95 98.18
1 – 2 years 600,641.00 1.46 479,793.30 1.69
2 – 3 years 257,793.30 0.63 27,706.35 0.10
3 - 4 years 10,000.00 0.02 8,884.20 0.03
Total 41,130,924.31 100.00 28,353,455.80 100.00
53
5.4.2. List the top five balance of advances to suppliers
Relationship with Reasons for
Name of company 2011.6.30 (CNY) Age
the Company unsettlement
Advanced
RBS AEROSPACE LIMITED Non-related parties 8,641,515.92 Within 1 year
rental
Advanced
GE CAPITAL AVIATION FUNDING Non-related parties 6,070,703.99 Within 1 year
rental
Advanced
INISHCREAN LEASING LIMITED Non-related parties 4,524,730.00 Within 1 year
rental
Advanced
AERDRAGON AVIATION PARTNERS LIMITED Non-related parties 2,929,818.22 Within 1 year
rental
Advanced
TURFEDLL LIMITED Non-related parties 2,077,599.33 Within 1 year
rental
Total 24,244,367.46
5.4.3. There is no Advance to supplier balance due from shareholders who own five or over
five percent voting rights as at June 30st, 2011.
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 Co., Controlled by principal investors of
1,587,853.44 3.86
Ltd. the Company
Total 1,587,853.44 3.86
5.4.5. The balance carried forward of advances to suppliers increased for 45.06% from the balance
brought forward. The increase mainly resulted from Leased aircraft to increase along with the
increase in prepaid rent.
5.5. Interests receivable
5.5.1. Interests receivable
Item 2010.12.31 Increase in period (CNY) Decrease in period (CNY) 2011.6.30
Interests on bank deposits 1,409,528.13 1,242,410.74 907,650.00 1,744,288.87
Total 1,409,528.13 1,242,410.74 907,650.00 1,744,288.87
54
5.5.2. Note: Interests receivable are interest income from guarantee deposits receivable within
one year.
5.6. Dividends receivable
Item 2010.12.31 Increase in period(CNY) Decrease in period CNY) 2011.6.30
Dividends receivable aged less than 1
year:
China TravelSky Co., Ltd. 0.00 1,365,400.00 0.00 1,365,400.00
Sichuan Airlines Co., Ltd. 0.00 10,000,000.00 0.00 10,000,000.00
Total 0.00 11,365,400.00 0.00 11,365,400.00
5.7. Other receivables
5.7.1. Disclosure by classification
2011.6.30
Category Book value Provision for bad debts
Amount(CNY) Proportion (%) Amount(CNY) Proportion (%)
Other receivable of individual significance 207,800,144.43 65.85 109,051,717.65 52.48
Categorised other receivable:
Categorisation by nature of receivables 44,793,458.87 14.20 2,239,672.94 5.00
Subtotal of category 44,793,458.87 14.20 2,239,672.94 5.00
Other receivable of individual insignificance subject
62,944,293.07 19.95 0.00 0.00
to individual assessment for impairment
Total 315,537,896.37 100.00 111,291,390.59 35.27
(Continued)
2010.12.31
Category Book value Provision for bad debts
Amount(CNY) Proportion (%) Amount(CNY) Proportion (%)
55
Other receivables of individual significance 228,578,538.56 68.01 109,051,717.65 47.71
Categorised other receivables:
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 receivables of individual
insignificance subject to individual 64,955,587.90 19.33 0.00 0.00
assessment for impairment
Total 336,084,686.32 100.00 111,179,245.64 33.08
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 receivables 44,793,458.87 5.00 2,239,672.94
Total 44,793,458.87 2,239,672.94
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
WEST ENGINE FUNDING LLC 174,733.20 0.00 0.00 assessed as
not impaired
Individually
GSI Engine Beta Limited Partnership 708,640.20 0.00 0.00 assessed as
not impaired
Individually
MTU Maintenance Berlin-Brandenburg Gmbh 647,160.00 0.00 0.00 assessed as
not impaired
Individually
Pacific Brihar Corporation Limited 3,417,004.80 0.00 0.00 assessed as
not impaired
56
Individually
Rainier Aircraft Leasing(Ireland) Limited 12,884,883.00 0.00 0.00 assessed as
not impaired
Individually
Bellevue Aircraft Leasing(Ireland) Limited 2,815,146.00 0.00 0.00 assessed as
not impaired
Individually
Shannon Engine Support LTD 808,950.00 0.00 0.00 assessed as
not impaired
Individually
GE Commercial Aviation Services 3,714,698.40 0.00 0.00 assessed as
not impaired
Individually
Babcock ＆ Brown Aircraft Managment LLC 9,577,968.00 0.00 0.00 assessed as
not impaired
Individually
Aviation Captial Group Corporation 8,639,586.00 0.00 0.00 assessed as
not impaired
Individually
Aerdragon Aviation Partners Limited 4,439,517.60 0.00 0.00 assessed as
not impaired
Individually
SDA Group 2,861,005.87 0.00 0.00 assessed as
not impaired
Individually
Funds to purchase equity of Qingdao Logistics 12,255,000.00 0.00 0.00 assessed as
not impaired
Total
62,944,293.07 0.00 0.00
5.7.3. Other receivables owed by shareholders with 5% or more voting rights during the
reporting period
2011.6.30 2010.12.31
Shareholder Amount Provision for bad debts Amount Provision for bad
(CNY) (CNY) (CNY) debts (CNY)
SDA Group 2,861,005.87 0.00 0.00 0.00
Air China 17,045,228.26 0.00 40,503,711.76 0.00
Total 19,906,234.13 0.00 40,503,711.76 0.00
57
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 3-8 years 34.56
Ltd.
CDB Leasing Co., Ltd. Non-related parties 41,354,563.28 Over 5 years 13.11
Beijing FuLaiTe Technology Development
Non-related parties 22,228,155.24 Within 1 year 7.04
Co., Ltd.
Singapore Aircraft Leasing Enterprise Non-related parties 18,120,480.00 Within 6 years 5.74
Air China Related parties 17,045,228.26 Within 2 years 5.40
Total 207,800,144.43 65.85
5.7.5. Other receivables owed by related parties
% of total other
Name of company Relationship with the Company Amount(CNY)
receivables
Principal investor
SDA Group 2,861,005.87 0.91
of the Company
Principal investor
Air China 17,045,228.26 5.40
of the Company
Controlled by principal investors
Shandong XiangYu Air Technology Co., Ltd. 3,867,834.22 1.23
of the Company
Shandong Rainbow Commercial Jet Co., Ltd. Associate 109,051,717.65 34.56
Total 132,825,786.00 42.10
5.8. Inventories
5.8.1. Classification
2011.6.30 2010.12.31
Types Impairment Carrying Impairment Carrying
Cost(CNY) Cost(CNY)
provision(CNY) value(CNY) provision(CNY) value(CNY)
58
Consumable
79,889,560.04 0.00 79,889,560.04 73,805,475.19 0.00 73,805,475.19
air equipments
Low-value
2,228,073.92 0.00 2,228,073.92 3,066,637.08 0.00 3,066,637.08
consumables
Materials 821,657.46 0.00 821,657.46 915,137.19 0.00 915,137.19
Others 0.00 0.00 0.00 0.00 0.00 0.00
Total 82,939,291.42 0.00 82,939,291.42 77,787,249.46 0.00 77,787,249.46
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
11,607,397.55 175,316,331.66 -163,708,934.11 0.00 -383,300.01
Commercial
Jet Co., Ltd.
5.10. Long-term equity investments
5.10.1 Disclosure
Impairment
Changes in Accumulated
provision in
Name of investee 2010.12.31(CNY) period 2011.6.30(CNY) impairment
period
(CNY) provision(CNY)
(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
59
Ⅱ. Long-term equity investments measured by
the equity method
Shandong Rainbow Commercial Jet Co., Ltd 22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
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
period(CNY)
and voting
right
Ⅰ. Long-term equity investments measured
at cost method
China TravelSky Co., Ltd. 6,690,000.00 0.45% 0.45% n/a 1,365,400.00
Sichuan Airlines Co., Ltd. 35,000,000.00 10.00% 10.00% n/a 10,000,000.00
Jinan International Airport Co., Ltd. 46,662,100.00 2.53% 2.53% n/a 0.00
Subtotal 88,352,100.00 11,365,400.00
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 11,365,400.00
5.10.2. Long-term equity investments held as at 30st June 2011 have no limitation on disposal
imposed.
5.11. Fixed assets and accumulated depreciation
5.11.1. Classification
60
Types 2010.12.31(CNY) Increased(CNY) Decreased(CNY) 2011.6.30(CNY)
①Total historical cost 9,441,571,584.73 75,613,487.30 30,309,381.84 9,486,875,690.19
Houses and buildings 220,973,772.50 0.00 0.00 220,973,772.50
Aircrafts and aircraft engine 8,634,686,536.61 34,724,294.27 20,448,221.99 8,648,962,608.89
High-value rotables 454,825,178.55 31,382,528.20 8,391,559.85 477,816,146.90
Transportation vehicles 39,730,267.30 5,419,392.00 816,860.00 44,332,799.30
Machinery, equipments and
91,355,829.77 4,087,272.83 652,740.00 94,790,362.60
others
Depreciation during the
current period(CNY)
② Total accumulated
2,825,074,223.88 281,624,782.67 22,466,427.68 3,084,232,578.87
depreciation
Houses and buildings 33,521,100.29 3,195,162.31 0.00 36,716,262.60
Aircrafts and aircraft engine 2,560,983,059.34 258,436,779.99 18,446,135.50 2,800,973,703.83
High-value rotables 160,762,852.44 14,188,244.37 2,828,376.61 172,122,720.20
Transportation vehicles 20,234,367.71 1,724,317.27 764,568.51 21,194,116.47
Machinery, equipments and
49,572,844.10 4,080,278.73 427,347.06 53,225,775.77
others
③Total carrying value 6,616,497,360.85 6,402,643,111.32
Houses and buildings 187,452,672.21 184,257,509.90
Aircrafts and aircraft engine 6,073,703,477.27 5,847,988,905.06
High-value rotables 294,062,326.11 305,693,426.70
Transportation vehicles 19,495,899.59 23,138,682.83
Machinery, equipments and
41,782,985.67 41,564,586.83
others
Note: ①Depreciation increase in year totals CNY281,624,782.67.
②Total value of non-current assets pledged as security for borrowings and leased aircraft engines
with limitation imposed is CNY4,875,902,614.78.
5.11.2. Leased fixed assets under financial leases
Historical cost Accumulated depreciation Impairment Balance as at 2011.6.30
Type
(CNY) (CNY) (CNY) (CNY)
Aircrafts and aircraft engines 1,397,205,573.08 416,970,304.22 0.00 980,235,268.86
Total 1,397,205,573.08 416,970,304.22 0.00 980,235,268.86
61
5.11.3. Fixed assets pending ownership registration
Balance as at 2011.6.30
Types Reasons for pending ownership registration
(CNY)
Land rented from Jinan Air Control, not eligible for
Jinan cargo arrival and departure warehouses 15,368,654.80
ownership registration
Qingdao aircraft maintenance workshops 40,463,630.80 Ownership registration in process
Yantai terminal building 19,516,667.90 Ownership registration in process
Total 75,348,953.50
5.11.4. Impairment
No impairment provision was provided as at 30st June 2011 as no evidence suggests assets has
impaired.
5.12. Construction in progress
5.12.1. Details of construction in progress
2011.6.30 2010.12.31
Impairment Impairment
Types Book value Carrying value Book value Carrying value
provision provision
(CNY) (CNY) (CNY) (CNY) (CNY) (CNY)
B737-800 aircrafts 1,264,020,391.85 0.00 1,264,020,391.85 863,452,904.96 0.00 863,452,904.96
ARJ21-700 aircrafts 60,778,195.00 0.00 60,778,195.00 60,778,195.00 0.00 60,778,195.00
Terminal buildings 21,456,049.24 0.00 21,456,049.24 11,479,922.80 0.00 11,479,922.80
Introduction of engine 22,783,727.35 0.00 22,783,727.35 0.00 0.00 0.00
Other construction projects 5,677,071.84 0.00 5,677,071.84 1,542,227.58 0.00 1,542,227.58
Total 1,374,715,435.28 0.00 1,374,715,435.28 937,253,250.34 0.00 937,253,250.34
5.12.2. Changes of significant construction in progress
Transferred to fixed Other
2010.12.31 Increase in period 2011.6.30
Types assets decreased
(CNY) (CNY) (CNY) (CNY) (CNY)
B737-800 aircrafts 863,452,904.96 400,567,486.89 0.00 0.00 1,264,020,391.85
ARJ21-700 aircrafts 60,778,195.00 0.00 0.00 0.00 60,778,195.00
Maintenance workshops, terminal
buildings and arrival and 11,479,922.80 9,976,126.44 0.00 0.00 21,456,049.24
departure warehouses
62
Introduction of engine 0.00 22,783,727.35 0.00 0.00 22,783,727.35
Other construction projects 1,542,227.58 4,134,844.26 0.00 0.00 5,677,071.84
Total 937,253,250.34 437,462,184.94 0.00 0.00 1,374,715,435.28
5.12.3. Capitalisation of construction in progress
Increase in Transferred to Other
2010.12.31 2011.6.30
Projects period fixed assets decrease Source of finance
(CNY) (CNY)
(CNY) (CNY) (CNY)
B737-800 Loans from financial
-6,630,973.04 -8,680,735.46 0.00 0.00 -15,311,708.50
aircrafts institutions
ARJ21-700 Loans from financial
487,587.70 0.00 0.00 0.00 487,587.70
aircrafts institutions
Total -6,143,385.34 -8,680,735.46 0.00 0.00 -14,824,120.80
5.12.4. The corresponding carrying value of aircraft purchase rights pledged as security for
borrowings in construction in progress as at 30st June 2011 is CNY1,264,020,391.85.
5.12.5. No impairment provision is provided as at 30st June 2011 as no evidence suggests
construction project impairment.
5.12.6. The balance carried forward of construction in progress increased for 46.67% 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
2010.12.31 Increase in period Decrease in period 2011.6.30
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
63
2010.12.31 Increase in period Decrease in period 2011.6.30
Types
(CNY) (CNY) (CNY) (CNY)
B. Total accumulated
3,661,766.60 349,015.29 0.00 4,010,781.89
amortization
Land use rights 3,661,766.60 349,015.29 0.00 4,010,781.89
C. Total net value 47,146,366.53 0.00 0.00 46,797,351.24
Land use rights 47,146,366.53 0.00 0.00 46,797,351.24
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 47,146,366.53 0.00 0.00 46,797,351.24
Land use rights 47,146,366.53 0.00 0.00 46,797,351.24
5.13.2. No impairment provision was provided as at 30st June 2011 as no evidence suggests
intangible asset has impaired.
5.14. Goodwill
Impairment
Increase in Decrease in
Basis for 2010.12.31 2011.6.30 allowance
Name of investee period period
recognition (CNY) (CNY) as at
(CNY) (CNY)
2011.6.30 (CNY)
Business
combination
Qingdao
not under 10,220,816.22 0.00 0.00 10,220,816.22 0.00
Feisheng
common
control
Total 10,220,816.22 0.00 0.00 10,220,816.22 0.00
5.15. Long-term deferred expenses
Type 2010.12.31 Increase Amortisation Other decreased 2011.6.30 Reasons for other
64
(CNY) in period in period (CNY) (CNY) decrease
(CNY) (CNY)
Pilot recruitment
and training 229,830,196.19 33,998,986.63 22,034,741.94 0.00 241,794,440.88
expenditure
Total 229,830,196.19 33,998,986.63 22,034,741.94 0.00 241,794,440.88
5.16. Deferred income tax assets and deferred income tax liabilities
5.16.1. Recognised deferred income tax assets and deferred income tax liabilities
2011.6.30 2010.12.31
Types
(CNY) (CNY)
Deferred income tax assets
Deductable temporary difference resulting from impairment
28,655,238.82 28,459,246.26
provision
Provision for asset substantial repair 126,364,468.46 90,795,645.87
Provision for wages and salaries due 7,687,711.41 6,513,851.27
Financial liabilities held for trading 955,242.11 966,452.38
Total 163,662,660.80 126,735,195.78
Deferred income tax liabilities
Financial assets held for trading 1,809,803.47 2,322,711.66
Total 1,809,803.47 2,322,711.66
5.16.2. Corresponding temporary differences to assets and liabilities causing temporary
differences
Temporary difference balance carried
Types
forward( CNY)
Corresponding temporary differences to assets causing temporary
differences
Deductable temporary difference resulting from impairment provision 114,620,955.26
Provision for substantial asset repair 505,457,873.84
Provision for wages and salaries due 30,750,845.65
Financial liabilities held for trading 3,820,968.44
Total 654,650,643.19
65
Temporary difference balance carried
Types
forward( CNY)
Corresponding temporary differences to liabilities causing temporary
differences
Fair value changes of tradable financial assets 7,239,213.88
Total 7,239,213.88
5.17. Impairment provisions
Increase in
2010.12.31 Decrease in period 2011.6.30
Types period
(CNY) (CNY) Reversal(CNY) Write off(CNY) (CNY)
(1) Impairment provision for accounts
2,657,739.39 671,825.28 0.00 0.00 3,329,564.67
receivables
(2) Impairment provision for other
111,179,245.64 112,144.95 0.00 0.00 111,291,390.59
receivables
(4) Impairment provision for long-term
22,500,000.00 0.00 0.00 0.00 22,500,000.00
equity investments
Total 136,336,985.03 783,970.23 0.00 0.00 137,120,955.26
5.18. Short-term borrowings
5.18.1. Disclosure by classification
2011.6.30 2010.12.31
Types
(CNY) (CNY)
Secured loans (usage right on assets
52,832,524.50 93,173,692.10
pledged surrendered)
Unsecured loans 631,100,258.46 399,412,917.40
Guaranteed loans 310,491,414.47 508,682,427.23
Total 994,424,197.43 1,001,269,036.73
5.19. Financial liabilities held for trading
Fair value as at Fair value as at
Item
2011.6.30 2010.12.31
Hui Li Da financing contract 3,820,968.44 3,865,809.52
66
Total 3,820,968.44 3,865,809.52
5.20. Notes payable
2011.6.30 2010.12.31
Types
(CNY) (CNY)
Trade acceptance 0.00 19,042,835.33
Bankers’ acceptance 28,000,000.00 116,000,000.00
Total 28,000,000.00 135,042,835.33
Note: The closing balance of the notes payable has decreased 79.27% in comparison with the
opening balance, this mainly caused by the payment made to the bank acceptance.
5.21. Accounts payable
5.21.1. Aging analysis
2011.6.30 2010.12.31
Age
(CNY) (CNY)
Within 1 year 1,288,312,052.72 1,007,699,961.12
Over 1 year 2,878,589.77 900,090.37
Total 1,291,190,642.49 1,008,600,051.49
5.21.2. Accounts payables owed to shareholders or related parties with 5% or more voting
right as at 30st June 2011
2011.6.30 2010.12.31
Companies Nature of liability
(CNY) (CNY)
Ground services, delay and claim
Air China 4,090,721.93 3,437,689.95
for loosed baggage
Shandong TaiGu Aircraft Maintenance expense and air route
31,368,307.10 27,829,926.58
Projecting Co., Ltd. subscription
Air China Cargo Co., Ltd. Landing and departure fees 408,569.45 414,307.39
Aircraft Maintenance and
Aircraft maintenance fees 2,193,590.98 0.00
Engineering Corporation
67
Total 38,061,189.46 31,681,923.92
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
2011.6.30 2010.12.31
Type
(CNY) (CNY)
Within 1 year 229,261,099.00 202,271,352.58
Over 1 year 195,576.80 182,316.20
Total 229,456,675.80 202,453,668.78
5.22.2. There is no advances from customers balance due from shareholders who own five or
over five percent voting rights as at June 30, 2011.
5.22.3. Aging analysis to related parties
Balance carried forward % of total Aging analysis to
Name of company Relationship with the Company
(CNY) suppliers
Controlled by principal investors
Air China Cargo Co., Ltd. 1,066,645.62 0.46
of the Company
Total 1,066,645.62 0.46
5.23. Employment benefits payable
Types
2010.12.31 Increase in period Payments in period 2011.6. 30
(CNY) (CNY) (CNY) (CNY)
(1) Wages and salaries, bonuses, subsidies and
110,465,585.9
allowances 208,426,962.08 313,231,728.84 411,193,104.97
5
(2) Employee benefits 13,354,809.22
0.00 13,354,809.22 0.00
(3) Social insurance 1,647,821.49 57,848,023.67 56,933,791.86 2,562,053.30
68
Types
2010.12.31 Increase in period Payments in period 2011.6. 30
(CNY) (CNY) (CNY) (CNY)
Within: ① Medical insurance 1,647,821.49 10,693,013.80 12,340,835.29 0.00
②Basic retirement insurance 0.00 27,215,041.56 27,215,041.56 0.00
③Annuity fee 0.00 14,142,626.66 11,580,573.36 2,562,053.30
④Unemployment fee 0.00 3,760,980.62 3,760,980.62 0.00
⑤ Work injury insurance 0.00 750,192.40 750,192.40 0.00
⑥Pregnancy insurance 0.00 1,286,168.63 1,286,168.63 0.00
⑦Reserved funds for disable
0.00 0.00 0.00 0.00
jobseekers
(4) Housing provident fund 15,784.00 18,337,845.88 17,929,803.71 423,826.17
(5) Labor union fee and employee education
26,060,092.87 7,411,549.04 2,502,714.41 30,968,927.50
fee
(6) Non-monetary benefits 0.00 0.00 0.00 0.00
(7) Redemption of termination of labor
0.00 0.00 0.00 0.00
contract
(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 236,150,660.44 410,183,956.65 501,914,224.17 144,420,392.92
5.23.1. There is no payroll in arrears within employment benefits payable.
.
5.23.2. The 38.84% in-period decrease of employment benefits payable from the balance
brought forward principally results from the payment of 2010 annual bonus.
69
5.24. Tax payables
2011.6.30 2010.12.31
Types of Tax
(CNY) (CNY)
VAT and customs 2,889.52 1,240.40
Operating tax 23,319,067.99 14,137,448.21
Urban maintenance and construction surcharge 1,629,847.98 1,128,615.52
Education surcharge 1,149,927.69 816,312.29
Enterprise income tax 90,771,413.55 55,944,404.35
Property tax 1,147,061.21 1,474,989.82
Tenure tax 186,782.50 111,187.74
Personal income tax 13,319,666.51 4,647,833.69
Stamp duty 1,100,237.05 5,349,980.35
Infrastructure fund for civil aviation 15,113,165.73 14,415,017.73
Construction fund for civil airports 48,638,829.08 44,049,512.00
Withholding income tax 28,740,888.83 17,811,520.19
Withholding business Tax 8,188,133.57 10,218,405.79
Others 2,691.10 8,702.89
Total 233,310,602.31 170,115,170.97
Note：The closing balance of the tax payable has increased 37.15% in comparison with the
opening balance; this mainly caused by the company income and benefits have increased with the
corresponding of business tax, enterprise income tax increasing.
5.25. Interests payable
2011.6.30 2010.12.31
Type
(CNY) (CNY)
Interest on borrowings 13,558,435.31 9,656,528.23
Total 13,558,435.31 9,656,528.23
Note: The balance carried forward of interests payable increased for 40.41% from the balance
brought forward. The increase mainly resulted from that certain short-term financing arrangements
have a 1-year interest settlement period.
70
5.26. Other payables
5.26.1. Aging analysis
2011.6.30 2010.12.31
Age
(CNY) (CNY)
Within 1 year 65,305,321.20 74,998,768.73
Over 1 year 62,920,834.99 65,735,212.41
Total 128,226,156.19 140,733,981.14
5.26.2. Other payables owed to shareholders or related parties with 5% or more voting
right as at 30st June 2011
2011.6.30 2010.12.31
Companies Nature of liability
(CNY) (CNY)
SDA Group Account balance 4,240,865.18 12,192,570.48
Air China Quality margin 20,000,000.00 20,000,000.00
Shandong TaiGu Aircraft Projecting Co.,
Account balance 245,400.00 245,400.00
Ltd.
Shenzhen Airlines co., Ltd. Account balance 2,385,712.00 1,083,308.00
Total 26,871,977.18 33,521,278.48
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
2011.6.30 2010.12.31
Types
(CNY) (CNY)
Long-term borrowings due within 1 year 339,435,140.50 371,061,574.72
Long-term accounts payables due with 1 year 166,867,234.38 165,039,834.26
71
Subtotal 506,302,374.88 536,101,408.98
Less: Unrecognised financial lease expenditure 57,994,358.66 59,333,529.93
Total 448,308,016.22 476,767,879.05
5.27.2. Long-term borrowings due within one year
① Types
2011.6.30 2010.12.31
Types
(CNY) (CNY)
Secured loans (usage right on assets pledged
274,672,633.32 304,786,981.68
withheld)
Secured loans (usage right on assets pledged
52,442,610.60 53,667,049.45
surrendered)
Guaranteed loans 12,319,896.58 12,607,543.59
Total 339,435,140.50 371,061,574.72
② Details of the top five balances of long-term borrowings due within one year
2011.6.30 2010.12.31
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 72,481,920.00 $11,200,000.00 74,174,240.00
repayment
Bank of China
USD account, Jinan
Branch 2010-10-8 2011-10-11 USD $8,103,500.00 52,442,610.60 $8,103,500.00 53,667,049.45
Bank of China
72
2011.6.30 2010.12.31
Amount Amount
Amount
Companies Start date Due date Currency Amount in reporting in reporting
in foreign
in foreign currency currency currency
currency
(CNY) (CNY)
CNY account, Jinan
Branch
2005-4-7 Installment CNY 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00
China Minsheng
repayment
Banking Corp., Ltd.
USD account,
Shandong Branch Installment
2008-7-11 USD $6,600,000,.00 42,712,560.00 $10,600,000.00 70,200,620.00
China Development repayment
Bank
USD account,
DongJiao Branch
Industrial and 2009-6-30 Installment USD $4,000,000.00 25,886,400.00 $4,000,000.00 26,490,800.00
Commercial Bank repayment
of China
Total 243,523,490.60 274,532,709.45
Note: The interest rates applicable to the above long-term borrowings as at 30st June 2011 are
between 1.1762% and 5.9400%.
5.27.3. There is no borrowing remained unsettled after the due date as at 30st June 2011
5.27.4. Long-term accounts payables due within one year
Interest Balance carried
Credit Original amount Interest rate Conditions of
Companies accrued forward
term (CNY) (%) borrowing
(CNY) (CNY)
CDB Leasing Co., 2005.6-20 Secured by
1,440,000,000.00 6.2964% 57,994,358.66 108,872,875.72
Ltd. 20.6 asset(s) with
73
usage right
withheld
Total 1,440,000,000.00 57,994,358.66 108,872,875.72
5.28. Long-term borrowings
5.28.1. Types
2011.6.30 2010.12.31
Type
(CNY) (CNY)
Secured loans (usage right on
218,355,278.66 141,288,880.48
assets pledged surrendered)
Secured loans (usage right on
2,119,956,667.39 2,013,807,266.59
assets pledged withheld)
Guaranteed loans 747,832,442.43 1,025,187,030.48
Total 3,086,144,388.48 3,180,283,177.55
5.28.2. Details of the top five balances of long-term borrowings
2011.6.30 2010.12.31
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 Minsheng Installment
2004-6-29 CNY 150,000,000.00 150,000,000.00 200,000,000.00 200,000,000.00
Banking Corp., repayment
Ltd.
USD account,
DongJiao Branch
Industrial and Installment
2009-6-30 USD $28,491,654.64 184,386,592.17 $30,491,654.64 201,937,081.18
Commercial repayment
Bank of China
74
2011.6.30 2010.12.31
Amount in Amount in reporting
Company Start date Due date Currency Amount in foreign Amount in foreign
reporting currency currency
currency currency
(CNY) (CNY)
USD account,
Jinan Branch Installment
2005-12-21 USD $26,213,260.00 169,641,733.42 $26,213,260.00 173,602,557.00
Bank of China repayment
USD account,
Jinan Branch Installment
2005-10-19 USD $26,071,798.00 168,726,247.94 $26,071,798.00 172,665,696.61
Bank of China repayment
USD account,
Shandong Branch
Installment
China 2009-8-18 USD $20,000,000.00 129,432,000.00 $20,000,000.00 132,454,000.00
repayment
Development
Bank
Total 802,186,573.53 880,659,334.79
Note: The interest rates applicable to the above long-term borrowings as at 30st June 2011 are
between 1.2781% and 5.9400%.
5.29. Long-term payables
5.29.1. The top five balances of long-term payables
Balance carried
Original amount Interest rate Interest accrued Conditions of
Company Credit term forward
(CNY) (%) (CNY) borrowing
(CNY)
Secured by
CDB Leasing Co., asset(s) with
2005.6-2020.6 1,440,000,000.00 6.2964% 242,866,365.99 807,856,324.31
Ltd. usage right
withheld
Total 1,440,000,000.00 242,866,365.99 807,856,324.31
75
5.29.2. Long-term payables during the current reporting period wholly consisted of financial
lease premium payable.
5.30. Other non-current liabilities
2011.6.30 2010.12.31
Items
(CNY) (CNY)
CRJ700 post-sale buy-back 0.00 695,774.11
Designated subsidy for snow disaster 4,192,708.34 4,374,958.34
SMS fund 1,000,000.00 1,000,000.00
PhoenixMiles Program 82,449,177.25 53,304,246.55
Designated subsidy for civil aviation energy-saving
13,640,899.64 14,015,649.74
program
Total 101,282,785.23 73,390,628.74
5.30.1. Asset-related government grants
Increase in period Decrease in period
Items 2010.12.31(CNY) 2011.6.30 (CNY)
(CNY) (CNY)
Designated subsidy for snow disaster 4,374,958.34 0.00 182,250.00 4,192,708.34
SMS fund 1,000,000.00 0.00 0.00 1,000,000.00
Designated subsidy for civil aviation
14,015,649.74 0.00 374,750.10 13,640,899.64
energy-saving program
Total 19,390,608.08 0.00 557,000.10 18,833,607.98
5.30.2. PhoenixMiles Program
Increase in period Decrease in period
Items 2010.12.31 (CNY) 2011.6.30 (CNY)
(CNY) (CNY)
PhoenixMiles Program 53,304,246.55 44,169,792.98 15,024,862.28 82,449,177.25
Total 53,304,246.55 44,169,792.98 15,024,862.28 82,449,177.25
76
5.30.3. The balance carried forward of other non-current liabilities increased for 38.01% from
the balance brought forward. The increased mainly resulted from the mileages of the
PhoenixMiles Program accumulated .
5.31. Share capital
2010.12.31 Change of number of shares in period (+/–) 2011.6.30
Shares
converted
Items 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
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
Type 2010.12.31 Increase in period Decrease in period 20116.30
77
(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 2,861,005.87 0.00 10,653,087..03
Total 84,050,162.84 2,861,005.87 0.00 86,911,168.71
5.33. Surplus reserve
2010.12.31 Increase in period Decrease in period 2011.6.30
Type
(CNY) (CNY) (CNY) (CNY)
Statutory surplus reserve 122,944,754.89 0.00 0.00 122,944,754.89
Total 122,944,754.89 0.00 0.00 122,944,754.89
5.34. Undistributed profits
Current reporting period Last reporting period
Type
(CNY) (CNY)
Balance brought forward 799,664,252.17 308,668,390.11
Add: Profits for the year 354,185,295.46 205,570,723.33
Add: Other transfers 0.00 0.00
Less: Statutory surplus reserve 0.00 0.00
Less: Employee bonus and benefit fund 0.00 0.00
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 120,000,000.00 80,000,000.00
Less: Ordinary dividends converted to
0.00 0.00
capital
Balance carried forward 1,033,849,547.63 434,239,113.44
5.35. Operating revenue and operating costs
78
5.35.1. Operating revenue from principal operations and operating costs
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income from principal activities 4,272,221,904.81 3,101,291,683.51
Income from other activities 50,310,187.50 32,371,411.07
Total operating income 4,322,532,092.31 3,133,663,094.58
Principal activity costs 3,320,941,161.16 2,407,154,567.97
Other activity costs 3,959,332.35 429,620.32
Total operating costs 3,324,900,493.51 2,407,584,188.29
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 4,250,871,074.52 3,308,417,132.42 3,084,521,679.18 2,395,348,014.45
Cargos and logistics 3,824,790.35 1,514,242.72 3,341,785.85 1,238,224.39
Hospitality 10,730,618.42 10,161,010.85 12,991,318.48 10,397,011.21
Training services 10,168,503.63 4,615,212.55 436,900.00 171,317.92
Others 46,937,105.39 192,894.97 32,371,411.07 429,620.32
Total 4,322,532,092.31 3,324,900,493.51 3,133,663,094.58 2,407,584,188.29
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. 338,581,256.73 7.83
Shandong Provincial Government 6,772,068.00 0.16
China Post, Jinan(济南市邮政局) 6,118,307.21 0.14
City friendship air freight limited company(石狮友谊航
4,240,795.90 0.10
空货运有限公司)
Xiamen city in Northeast Air Freight Forwarding
3,847,406.30 0.09
Company Limited(厦门市东北航货运代理有限公司)
Total 359,559,834.14 8.32
5.35.4. Operating revenue from principal operations for the current reporting period increased
for 37.94% from the last reporting period. The increase mainly resulted from the increased
79
capacity, the increased transportation capacity, the increased average fare rates and the increased
PLF. Operating costs for the current reporting period increased for 38.10% from the last reporting
period. The increase mainly resulted from the increased average fuel price and other cost increased
by the scale of the company.
5.36. Operating tax and surcharges
Current reporting period Last reporting period
Item Rate
(CNY) (CNY)
Operating tax 127,686,577.18 87,411,121.39 3%、5%
Urban maintenance and construction
9,009,168.71 0.00 7%
surcharge
Education surcharge 6,343,588.87 0.00 3%、2%
Total 143,039,334.76 87,411,121.39
Note：Operating tax and surcharges for the current reporting period increased for 63.64%
from the last reporting period. The increase mainly resulted from the increased business taxes
caused by the income of the company and the increase of the urban maintenance and construction
surcharge and education surcharge.
5.37. Sales expenses
Current reporting period Last reporting period
Item
(CNY) (CNY)
Employment benefits payable 44,288,037.72 33,418,878.36
Depreciation 936,591.47 867,040.21
Travel expense 1,433,860.05 1,488,147.78
Advertisement 5,607,341.81 4,541,141.34
Brokerage fee 159,510,738.05 127,260,827.99
Electronic booking fee 28,090,898.24 23,559,749.59
Online payment charge 8,051,040.81 3,869,717.35
Ticket printing cost 191,143.00 165,300.00
Rentals 4,898,068.77 4,300,533.19
Accommodation and catering expenses for
transit passengers 993,068.40 761,025.20
80
General expenses 2,290,428.66 1,004,652.54
Uniforms 861,202.20 928,429.00
Others 15,344,128.72 6,832,899.23
Total 272,496,547.90 208,998,341.78
Note: Sales expenses for the current reporting period increased for30.38% from the last reporting
period. The increase mainly resulted from the increased ticket brokerage fees due to the expansion
of the scale of the company.
5.38. General and administrative expenses
Current reporting period Last reporting period
Item
(CNY) (CNY)
Employment benefits payable 39,179,511.52 33,192,140.52
Depreciation 3,083,526.10 2,857,565.20
General expenses 419,817.11 2,225,097.00
Amortisation of intangible assets 1,642,979.30 1,634,542.76
Amortisation of long-term deferred
1,288,889.02 2,289,897.32
expenses
Taxes and surcharges 2,852,670.84 765,718.42
Entertainment expense 5,637,555.59 4,080,545.66
Pollution treatment cost 923,418.85 527,158.45
Rentals 4,136,244.55 3,317,401.38
Research expense 1,752,235.10 951,821.10
Clearing system subscription 1,728,974.00 1,298,700.80
System and network subscription 1,416,413.40 61,608.00
Heating expense 4,537,754.57 2,511,022.36
Consultation fee 993,492.92 441,446.39
Others 10,648,416.30 5,443,832.31
Total 80,241,899.17 61,598,497.67
Note: General and administrative expenses for the current reporting period increased for30.27%
from the last reporting period. The increase mainly resulted from the increased fees due to the
81
expansion of the scale of the company.
5.39. Financial costs
Items Current reporting period (CNY) Last reporting period (CNY)
Interest expenses 94,387,468.42 106,432,475.70
Less: Interest income 6,468,534.12 1,259,265.11
Exchange differences -45,441,888.30 -10,569,658.99
Bank charges and others 1,457,509.41 3,099,552.23
Total 43,934,555.41 97,703,103.83
Note: Financial costs for the current reporting period decreased for 55.03% 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 and the financial cost savings.
5.40. Impairment loss on assets
Current reporting period Last reporting period
Item
(CNY) (CNY)
Bad and doubtful debt expenses 783,970.23 575,925.20
Total 783,970.23 575,925.20
Note：Impairment loss on assets for the current reporting period increased for 36.12% from the last
reporting period. The increase mainly resulted from the increase of the allowance for doubtful
accounts due to the increase of the accounts receivables.
5.41. Gains from changes in fair value
Current reporting period Last reporting period
Source of fair value changes
(CNY) (CNY)
Interest rate swaps -2,051,632.74 238,547.62
Hui Li Da financing contract 44,841.08 0.00
Total -2,006,791.66 238,547.62
Note：Gains from changes in fair value for the current reporting period decreased for
941.25% from the last reporting period. The decrease mainly resulted from the changes in fair
82
value of the Interest rate swaps.
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 11,365,400.00 1,165,398.00
Gains from possession of Hui Li Da financing contract -1,175,365.38 0.00
Gains from possession of tradable financial assets -2,914,720.42 -520,068.93
Total 7,275,314.20 645,329.07
5.42.2. Income from long-term equity investments measured at cost
Current reporting period Last reporting period
Investee Reasons for change
(CNY) (CNY)
China TravelSky Co., Ltd. 1,365,400.00 1,165,398.00 Change of profit distribution
Sichuan Airlines Co., Ltd. 10,000,000.00 0.00 Change of profit distribution
Total
11,365,400.00 1,165,398.00
5.42.3. As at 30st June 2011, there is no investment of which income remittance is imposed with
limitation.
5.42.4. The 1027.38% increase of investment income from last reporting period principally
results from the distribution of dividends by Sichuan Airlines Co., Ltd.
5.43. Non-operating income
5.43.1. Details of non-operating income
Non-recurring gain or loss for
Current reporting period Last reporting period
Items the current reporting period
(CNY) (CNY)
(CNY)
Gains from disposals of non-current 167,143.06 20,091.15 167,143.06
83
assets
Including: Gains from disposals of
167,143.06 20,091.15 167,143.06
non-current assets
Government grants 4,631,000.10 5,805,916.00 4,631,000.10
Airport-funded flight-route subsidy 12,202,002.00 0.00 12,202,002.00
Others 819,827.95 612,532.32 819,827.95
Total 17,819,973.11 6,438,539.47 17,819,973.11
5.43.2. Government grants
Current reporting
Last reporting period
Items period Comment
(CNY)
(CNY)
Subsidy for depreciation of assets
Designated subsidy for snow disaster 182,250.00 182,250.00 designated for snow disaster for the
current reporting period
Subsidy for depreciation of side wing
Designated subsidy for civil aviation
374,750.10 0.00 installation for the current reporting
energy-saving program
period
Air route subsidies granted by local
Others 4,074,000.00 5,623,666.00
governments
Total 4,631,000.10 5,805,916.00
5.43.3. The 176.77% increase of non-operating income from last reporting period principally
results from the reception of airport route subsidies.
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 7,667,031.42 2,860,149.01 7,667,031.42
84
assets
Within: Losses from disposals of non-current
7,667,031.42 2,860,149.01 7,667,031.42
assets
Charitable donations 0.00 0.00 0.00
Fines 0.00 0.00 0.00
Others 670,573.10 123,251.19 670,573.10
Total 8,337,604.52 2,983,400.20 8,337,604.52
Note：Non-operating expenses for the current reporting period increased for 179.47% from the last
reporting period. The increase mainly resulted from the increase of Material scrap.
5.45. Corporate income tax expenses
Current reporting period Last reporting period
Items
(CNY) (CNY)
Income tax for current period computed in accordance with
155,773,448.97 94,402,707.37
tax laws and regulations
Adjustments of deferred income tax -37,440,373.21 -25,914,166.04
Total 118,333,075.76 68,488,541.33
Note：Corporate income tax expenses for the current reporting period increased for 72.78%
from the last reporting period. The increase mainly resulted from the increase of income tax
expenses due to the increase of the profits of the company.
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 0.89 0.89 0.51 0.51
Net profits attributable to ordinary shareholders after
0.88 0.88 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
85
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
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 8,834,000.00 5,805,916.00
Interest income from bank deposits 6,468,534.12 1,259,265.11
Cash received from non-operating activities 819,827.95 612,532.32
Cash received from accounts balances 48,774,457.89 4,796,416.28
Total 64,896,819.96 12,474,129.71
86
5.47.2. Other cash payments in relation to operating activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Bank charges 1,964,238.04 4,489,465.26
Cash paid from non-operating activities 670,573.10 123,251.19
Cash paid from accounts balances 11,117,420.96 35,481,268.53
Cash paid from sales expenses and administrative
12,984,285.26 13,865,588.57
expenses
Total 26,736,517.36 53,959,573.55
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 2,914,720.42 0.00
Total 2,914,720.42 0.00
5.47.4. Other cash proceeds in relation to financing activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Cash received from guarantee bank acceptance and Hui
66,740,000.00 0.00
Li Da financing contract
Total 66,740,000.00 0.00
5.47.5. Other cash payments in relation to financing activities
Current reporting period Last reporting period
Items
(CNY) (CNY)
Cash paid to guarantee bank acceptance 0.00 4,048,648.60
Cash paid for financial leases of aircrafts 83,410,798.44 104,058,506.79
87
Current reporting period Last reporting period
Items
(CNY) (CNY)
Total 83,410,798.44 108,107,155.39
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 353,553,106.70 205,642,391.05
Add: Impairment losses 783,970.23 575,925.20
Add: Depreciation of non-current assets and productive biological assets and
281,624,782.67 276,910,836.91
losses of fuel
Add: Amortisation of intangible assets 349,015.29 392,451.93
Add: Amortisation of long-term deferred assets 22,034,741.94 21,768,358.51
Add :Losses on disposals of non-current assets, intangible assets and
-167,143.06 -20,091.15
long-term assets (minus sign representing gains)
Add: Losses arising from scrapping non-current assets (minus sign
7,667,031.42 2,860,149.01
representing gains)
Add: Losses arising from fair value changes (minus sign representing gains) 2,006,791.66 -238,547.62
Add: Financial costs (minus sign representing income) 47,425,192.08 94,116,034.06
Add: Investment losses (minus sign representing income) -7,275,314.20 -645,329.07
Add: Decrease of deferred income tax assets (minus sign representing
-36,927,465.02 -25,973,802.95
increase)
Add: Increase of deferred income tax liabilities (minus sign representing
-512,908.19 59,636.90
decrease)
Add: Decrease of inventories (minus sign representing increase) -5,152,041.96 -4,164,019.18
Add: Decrease of operating accounts receivables (minus sign representing
-21,488,828.95 -112,229,409.63
increase)
Add: Increase of operating accounts payables (minus sign representing
189,400,258.06 22,558,990.93
decrease)
Add: Others 0.00 0.00
Net cash flows from operating activities 833,321,188.67 481,613,574.90
(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 94,448,094.68
137,466,494.87
Less: Cash brought forward 148,606,284.51 49,333,429.81
Add: Cash equivalents carried forward 0.00 0.00
88
Less: Cash equivalents brought forward 0.00 0.00
Net increase of cash and cash equivalents -11,139,789.64 45,114,664.87
5.48.2. Composition of cash and cash equivalents
Current reporting period Last reporting period
Items
(CNY) (CNY)
Ⅰ. Cash 137,466,494.87 94,448,094.68
Including: Cash on hand 528,553.19 1,516,323.56
Bank deposit capable of immediate payments 136,937,941.68 92,931,771.12
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 137,466,494.87 94,448,094.68
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
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.
89
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
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
Controlled by principal investors of the
Aircraft Maintenance and Engineering Corporation 62591162-1
Company
6.5. Transactions with related parties
6.5.1. Acceptance of goods and service
Pricing Current reporting period Last reporting period
and
Type of Transaction % of % of
Related parties decision
transaction description transaction transaction
making Amount(CNY) Amount(CNY)
within within
process
Same type Same type
Aircraft
Shandong TaiGu Aircraft Projecting Co., Receipt of Market
maintenance 49,538,490.52 16.90 33,011,989.96 14.88
Ltd. service price
fees
Rental fees and
Receipt of food and Market
SDA Group 6,349,652.29 23.15 5,848,250.05 30.13
service accommodation price
fees
90
Shandong XiangYu Air Technology Co., Receipt of Repair Market
12,666,040.33 4.32 16,179,314.44 7.29
Ltd. service expenditure price
Receipt of Expenses for Market
Air China 5,195,193.86 0.31 0.00 0.00
service ground services price
Receipt of Expenses for Market
Air China Cargo Co., Ltd. 1,252,713.41 0.08 0.00 0.00
service ground services price
Sichuan S Aero-engine Maintenance Co., Receipt of Repair Market
15,793,624.02 5.39 0.00 0.00
Ltd. service expenditure price
Aircraft
Aircraft Maintenance and Engineering Receipt of Market
maintenance 7,423,638.68 2.53 0.00 0.00
Corporation service price
fees
Total 98,219,353.11 55,039,554.45
6.5.2. Supply of goods and service
Pricing Current reporting period Last reporting period
Type Transaction and
Related parties Amount % of transaction Amount % of transaction
of transaction description decision making
(CNY) within same type (CNY) Within same type
process
Air China Supply of service Service fees Agreed price 6,000,000.00 85.07 5,100,000.00 48.35
Total 6,000,000.00 85.07 5,100,000.00 48.35
6.5.3. Guarantee
Secured amount
Name of Guarantor Secured party Start date Expiry date Completion of guarantee
(CNY)
SDA Group The Company 12,022,535.95 2010-7-13 2011-7-13 No
SDA Group The Company 6,011,269.27 2010-7-13 2011-7-13 No
SDA Group The Company 73,322,386.69 2010-7-13 2011-7-13 No
SDA Group The Company 99,926,228.27 2010-8-3 2011-8-3 No
SDA Group The Company 2,261,567.92 2010-10-22 2011-10-24 No
SDA Group The Company 2,330,361.29 2010-10-22 2011-10-24 No
SDA Group The Company 2,394,492.00 2010-10-27 2011-10-27 No
SDA Group The Company 2,261,567.92 2010-10-27 2011-10-27 No
SDA Group The Company 2,522,328.10 2010-11-1 2011-11-1 No
91
Secured amount
Name of Guarantor Secured party Start date Expiry date Completion of guarantee
(CNY)
SDA Group The Company 2,265,060.00 2010-11-1 2011-11-1 No
SDA Group The Company 2,265,060.00 2010-11-1 2011-11-1 No
SDA Group The Company 78,990,408.12 2010-11-2 2011-11-2 No
SDA Group The Company 1,131,235.68 2010-11-8 2011-11-8 No
SDA Group The Company 2,308,182.21 2010-11-9 2011-11-9 No
SDA Group The Company 2,330,361.29 2010-11-10 2011-11-10 No
SDA Group The Company 2,394,492.00 2010-11-15 2011-11-15 No
SDA Group The Company 1,131,235.68 2010-11-16 2011-11-16 No
SDA Group The Company 2,038,554.00 2010-11-16 2011-11-16 No
SDA Group The Company 1,131,235.68 2010-11-16 2011-11-16 No
SDA Group The Company 12,651,978.00 2010-11-18 2011-11-18 No
SDA Group The Company 2,038,554.00 2010-11-19 2011-11-21 No
SDA Group The Company 2,261,567.92 2010-11-22 2011-11-22 No
SDA Group The Company 1,131,235.68 2010-11-23 2011-11-23 No
SDA Group The Company 2,330,361.29 2010-11-24 2011-11-25 No
SDA Group The Company 1,139,001.60 2010-11-27 2011-11-28 No
SDA Group The Company 2,220,050.48 2010-11-26 2011-11-28 No
SDA Group The Company 120,000,000.00 2008-7-16 2022-3-28 No
SDA Group The Company 116,196,413.11 2007-7-2 2022-3-28 No
SDA Group The Company 114,000,000.00 2009-4-21 2022-3-28 No
SDA Group The Company 96,484,437.24 2007-9-28 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 2008-4-1 2022-3-28 No
SDA Group The Company 52,300,000.00 2008-6-2 2022-3-28 No
SDA Group The Company 43,784,386.39 2007-5-31 2022-3-28 No
SDA Group The Company 27,600,000.00 2007-12-3 2022-3-28 No
SDA Group The Company 24,267,205.68 2007-8-1 2022-3-28 No
92
Secured amount
Name of Guarantor Secured party Start date Expiry date Completion of guarantee
(CNY)
SDA Group The Company 17,200,000.00 2008-7-1 2022-3-28 No
Total 1,070,643,753.48
6.5.4. Inter-related-party borrowings
Related parties Amount Start date Expiry date Note
China National Aviation Finance Co.,
50,000,000.00 2010-6-21 2011-6-20 Repaid on 9 October 2010
Ltd.
China National Aviation Finance Co.,
50,000,000.00 2010-6-28 2011-6-27 Repaid on 7March 2011
Ltd.
China National Aviation Finance Co.,
50,000,000.00 2010-7-14 2011-7-13
Ltd.
China National Aviation Finance Co.,
50,000,000.00 2010-7-21 2011-7-20
Ltd.
China National Aviation Finance Co.,
150,000,000.00 2010-12-15 2011-12-14
Ltd.
Total 350,000,000.00
6.5.5. Other transactions with related parties
Current reporting period Last reporting period
Pricing Transaction % of transaction % of transaction
Related parties Amount Amount
policy description within same within
(CNY) (CNY)
type same type
Air China Agreed price Wet lease 327,335,613.00 100.00 310,474,477.00 100.00
Air China Agreed price Route sharing 11,245,643.73 100.00 11,985,479.03 100.00
Cargo
Air China Cargo Co., Ltd. Agreed price transportation 702,186.56 100.00 0.00 0.00
alliance
Shandong Rainbow Commercial
Agreed price Payment for 0.00 0.00 115,769.84 0.00
Jet Co., Ltd.
debt
Total 339,283,443.29 322,575,725.87
6.6. The balance of accounts payables and receivables among related parties:
93
2011.6.30 2010.12.31
Items Related party
(CNY) (CNY)
Accounts receivable
Air China 53,644,512.08 66,366,844.88
Shenzhen Airlines Co., Ltd. 1,849,400.00 1,849,400.00
Air China Cargo Co., Ltd. 0.00 3,275,079.39
Total 55,493,912.08 71,491,324.27
Advances to suppliers
Shandong XiangYu Air Technology Co.,
1,587,853.44 1,918,266.76
Ltd.
Total 1,587,853.44 1,918,266.76
Other receivable
SDA Group 2,861,005.87 0.00
Air China 17,045,228.26 40,503,711.76
Shandong XiangYu Air Technology Co.,
3,867,834.22 3,864,597.95
Ltd.
Shandong Rainbow Commercial Jet Co.,
109,051,717.65 109,051,717.65
Ltd
Total 132,825,786.00 153,420,027.36
Accounts payable
Air China 4,090,721.93 3,437,689.95
Shandong TaiGu Aircraft Projecting Co.,
31,368,307.10 27,829,926.58
Ltd.
Air China Cargo Co., Ltd. 408,569.45 414,307.39
Aircraft Maintenance and Engineering
2,193,590.98 0.00
Corporation
Total 38,061,189.46 31,681,923.92
Other payable
Air China Co., Ltd. 20,000,000.00 20,000,000.00
SDA Group Co., Ltd. 4,240,865.18 12,192,570.48
94
2011.6.30 2010.12.31
Items Related party
(CNY) (CNY)
Shandong TaiGu Aircraft Projecting Co.,
245,400.00 245,400.00
Ltd.
Shenzhen Airlines Co., Ltd. 2,385,712.00 1,083,308.00
Total 26,871,977.18 33,521,278.48
Aging analysis
AirChina Cargo Co., Ltd. 1,066,645.62 0.00
Total 1,066,645.62 0.00
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 30st June 2011 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 600,787.27 577,022.39 560,007.26 2,891,988.47 4,629,805.39
Capital 1,984,244.50 1,884,082.61 1,943,112.54 3,434,562.10 9,246,001.75
Total 2,585,031.77 2,461,105.00 2,503,119.80 6,326,550.57 13,875,807.14
Note 9. Post balance sheet date events
By 30/6/2011the company has no non-adjusting events occurring after the balance sheet date that
need to be disclosed.
95
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 2010.12.31 value recognised for the 2011.6.30
current reporting
accounted for current reporting
period
in equity period
Financial assets
Financial derivatives 9,290,846.62 -2,051,632.74 0.00 0.00 7,239,213.88
Subtotal of financial
9,290,846.62 -2,051,632.74 0.00 0.00 7,239,213.88
assets
Financial liabilities 3,865,809.52 -44,841.08 0.00 0.00 3,820,968.44
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 2010.12.31 fair value for the current 2011.6.30
value accounted current reporting
reporting period
for in equity period
Financial assets
Financial derivatives 9,290,846.62 -2,051,632.74 0.00 0.00 7,239,213.88
Subtotal of financial
9,290,846.62 -2,051,632.74 0.00 0.00 7,239,213.88
assets
Financial liabilities 3,865,809.52 -44,841.08 0.00 0.00 3,820,968.44
10.3 Other significant events
No other significant events as the balance sheet date.
Note 11. Main notes to financial statements of parent company
11.1. Accounts receivables
11.1.1. Disclosure by classification
2011.6.30
Category
Book value Provision for bad debts
96
Amount(CNY) Proportion(%) Amount(CNY) Proportion(%)
Accounts receivable of individual
183,192,340.95 82.11 0.00 0.00
significance
Categorised accounts receivable:
Categorisation by nature of receivables 33,130,508.35 14.85 1,656,525.42 5.00
Subtotal of category 33,130,508.35 14.85 1,656,525.42 5.00
Accounts receivable of individual
insignificance subject to individual 6,772,068.00 3.04 0.00 0.00
assessment for impairment
Total 223,094,917.30 100.00 1,656,525.42 0.74
(Continued):
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 0.00
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
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 33,130,508.35 5.00 1,656,525.42
97
Category Book value Proportion (%) Provision for bad debts
receivables
Total 33,130,508.35 1,656,525.42
11.1.2. Accounts receivable owed by shareholders with 5% or more voting right during the
reporting period
2011.6.30 2010.12.31
Shareholder Amount Provision for bad debts Amount Provision for bad debts
(CNY) (CNY) (CNY) (CNY)
Air China 53,644,512.08 0.00 66,366,844.88 0.00
Total 53,644,512.08 0.00 66,366,844.88 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
Non-related
BSP 76,419,142.66 Within 1 year Balance pending settlement
party 34.25
Wet lease premium
receivable and balance
Air China Related party 53,644,512.08 Within 1 year
receivable from joint 24.05
operations
Non-related
China Civil Aviation Clearing Centre 53,128,686.21 Within 1 year Offset balance receivable
party 23.81
Non-related
Shandong Provincial Government 6,772,068.00 Within 1 year Charter section
party 3.04
Non-related Receivables from cabin
China Post, Jinan(济南市邮政局) 3,302,233.20 Within 1 year 1.48
party charter
Total 86.63
193,266,642.15
11.1.4. Accounts receivables owed by related parties
Name Relationship with the Company Amount (CNY) % of total accounts receivables
Air China Co., Ltd. Principal investor of the 53,644,512.08 24.05
98
Company
Qingdao Logistics Partially-owned subsidiary 1,111,530.00 0.50
Total 54,756,042.08 24.55
11.2. Other receivables
11.2.1. Disclosure by classification
2011.6.30
Category Book value Provision for bad debts
Amount(CNY) Proportion(%) Amount(CNY) Proportion(%)
207,800,144.43 64.07 109,051,717.65 52.48
Other receivable of individual
significance
Categorised other receivable:
53,602,984.22 16.53 2,680,149.21 5.00
Categorisation by nature of receivables
53,602,984.22 16.53 2,680,149.21 5.00
Subtotal of category
62,944,293.07 19.40 0.00 0.00
Other receivable of individual
insignificance subject to individual
assessment for impairment
324,347,421.72 100.00 111,731,866.86 34.45
Total
(Continued):
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 64,955,587.90 19.30 0.00 0.00
99
insignificance subject to individual
assessment for impairment
Total 336,547,831.35 100.00 111,202,402.89 33.04
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
53,602,984.22 5.00 2,680,149.21
receivables
Total 53,602,984.22 2,680,149.21
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
WEST ENGINE FUNDING LLC 174,733.20 0.00 0.00
impaired
Individually assessed as not
GSI Engine Beta Limited Partnership 708,640.20 0.00 0.00
impaired
Individually assessed as not
MTU Maintenance Berlin-Brandenburg Gmbh 647,160.00 0.00 0.00
impaired
Individually assessed as not
Pacific Brihar Corporation Limited 3,417,004.80 0.00 0.00
impaired
Individually assessed as not
Rainier Aircraft Leasing(Ireland) Limited 12,884,883.00 0.00 0.00
impaired
Individually assessed as not
Bellevue Aircraft Leasing(Ireland) Limited 2,815,146.00 0.00 0.00
impaired
Individually assessed as not
Shannon Engine Support LTD 808,950.00 0.00 0.00
impaired
Individually assessed as not
GE Commercial Aviation Services 3,714,698.40 0.00 0.00
impaired
Individually assessed as not
Babcock ＆ Brown Aircraft Managment LLC 9,577,968.00 0.00 0.00
impaired
Aviation Captial Group Corporation 8,639,586.00 0.00 0.00 Individually assessed as not
100
Bad and
Book Proportion
Details doubtful Comment
value(CNY) (%)
debt(CNY)
impaired
Individually assessed as not
Aerdragon Aviation Partners Limited 4,439,517.60 0.00 0.00
impaired
Individually assessed as not
SDA Group 2,861,005.87 0.00 0.00
impaired
Individually assessed as not
Qingdao Logistics 12,255,000.00 0.00 0.00
impaired
Total 62,944,293.07 0.00 0.00
11.2.3. Other receivables owed by shareholders with 5% or more voting right during the
reporting period
2011.6.30 2010.12.31
Bad and doubtful debt Bad and doubtful debt
Shareholder Amount Amount
provision provision
(CNY) (CNY) (CNY) (CNY)
SDA Group 2,861,005.87 0.00 0.00 0.00
Air China 17,045,228.26 0.00 40,503,711.76 0.00
Total 19,906,234.13 0.00 40,503,711.76 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 3-8 years 33.62
parties receivable
Non-related
CDB Leasing Co., Ltd. Guarantee deposit 41,354,563.28 Over 5 years 12.75
parties
Beijing FuLaiTe Technology Development Co., Non-related
Guarantee deposit 22,228,155.24 Within 1 year 6.85
Ltd. parties
Non-related
Singapore Aircraft Leasing Enterprise Guarantee deposit 18,120,480.00 Within 6 years 5.59
parties
Air China Related Operating 17,045,228.26 Within 2 years 5.26
101
parties receivable
Total 207,800,144.43 64.07
11.2.5. Other receivables owed by related parties
% of total other
Name of company Relationship with the Company Amount(CNY)
receivables
SDA Group Principal investor of the Company 2,861,005.87 0.88
Air China Principal investor of the Company 17,045,228.26 5.26
Controlled by principal investors of
Shandong XiangYu Air Technology Co., Ltd. 3,867,834.22 1.19
the Company
Shandong Rainbow Commercial Jet Co., Ltd. Associate 109,051,717.65 33.62
Qingdao Logistics Partially-owned subsidiary 9,697,669.58 2.99
Total 142,523,455.58 43.94
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：
102
Impairment
Changes in Accumulated
Balance brought Balance carried provision Cash
Name of investee period impairment
forward(CNY) forward(CNY) in period dividends
(CNY) provision(CNY)
(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 1,365,400.00
Sichuan Airlines Co., Ltd. 35,000,000.00 0.00 35,000,000.00 0.00 0.00 10,000,000.00
Jinan International Airport Co.,
46,662,100.00 0.00 46,662,100.00 0.00 0.00 0.00
Ltd.
Qingdao Feisheng 57,677,479.46 0.00 57,677,479.46 0.00 0.00 0.00
Shandong Rainbow
22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00 0.00
Commercial Jet Co., Ltd
Total 192,342,785.43 0.00 192,342,785.43 22,500,000.00 0.00 11,365,400.00
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 4,261,187,760.83 3,098,191,114.86
Income from other activities 50,303,684.50 32,365,969.57
Total operating income 4,311,491,445.33 3,130,557,084.43
Principal activity costs 3,316,154,941.57 2,406,157,560.78
Other activity costs 3,959,332.35 429,620.32
Total operating costs 3,320,114,273.92 2,406,587,181.10
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 4,250,871,074.52 3,308,417,132.42 3,084,762,896.38 2,395,589,231.65
103
Hospitality 10,730,618.42 10,161,010.85 12,991,318.48 10,397,011.21
Training services 2,959,150.00 1,343,235.68 436,900.00 171,317.92
Others 46,930,602.39 192,894.97 32,365,969.57 429,620.32
Total 4,311,491,445.33 3,320,114,273.92 3,130,557,084,43 2,406,587,181.10
11.4.3. Details of operating revenues from top five clients
Clients Operating income (CNY) % of total operating income
Air China Co., Ltd. 338,581,256.73 7.85
Shandong Provincial Government 6,772,068.00 0.16
China Post, Jinan(济南市邮政局) 6,118,307.21 0.14
City friendship air freight limited company(石狮友谊航
4,240,795.90 0.10
空货运有限公司)
Xiamen city in Northeast Air Freight Forwarding
3,847,406.30 0.09
Company Limited(厦门市东北航货运代理有限公司)
Total 359,559,834.14 8.34
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
11,365,400.00 1,165,398.00
cost
Gains from possession of Hui Li Da financing
-1,175,365.38 0.00
contract
Gains from possession of tradable financial assets -2,914,720.42 -520,068.93
Total 7,275,314.20 645,329.07
11.5.2. Income from long-term equity investments measured at cost
Current reporting period Last reporting period
Investee Reasons for change
(CNY) (CNY)
China TravelSky Co., Ltd. 1,365,400.00 1,165,398.00 Dividend announced
104
Current reporting period Last reporting period
Investee Reasons for change
(CNY) (CNY)
by the investee
Dividend announced
Sichuan Airlines Co., Ltd. 10,000,000.00 0.00
by the investee
Total 11,365,400.00 1,165,398.00
11.5.3. As at 30st June 2011, 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 353,232,383.01 205,226,731.58
Add: Impairment losses 790,630.51 575,925.20
Add: Depreciation of non-current assets and productive biological
278,737,330.77 276,467,176.11
assets and losses of fuel
Add: Amortisation of intangible assets 331,687.32 375,123.96
Add: Amortisation of long-term deferred assets 22,011,455.94 21,754,936.31
Add: Losses on disposals of non-current assets, intangible assets
-167,143.06 -20,091.15
and long-term assets (minus sign representing gains)
Add: Losses arising from scrapping non-current assets (minus sign
7,667,031.42 2,860,149.01
representing gains)
Add: Losses arising from fair value changes (minus sign
2,006,791.66 -238,547.62
representing gains)
Add: Financial costs (minus sign representing income) 46,605,192.08 94,116,034.06
Add: Investment losses (minus sign representing income) -7,275,314.20 -645,329.07
Add: Decrease of deferred income tax assets (minus sign
-36,929,130.10 -25,973,802.95
representing increase)
Add: Increase of deferred income tax liabilities (minus sign -512,908.19 59,636.90
105
Current reporting period Last reporting period
(1) Cash flows adjusted from net profits
(CNY) (CNY)
representing decrease)
Add: Decrease of inventories (minus sign representing increase) -5,152,041.96 -4,164,019.18
Add: Decrease of operating accounts receivables (minus sign
-21,625,169.84 -109,351,948.57
representing increase)
Add: Increase of operating accounts payables (minus sign
180,879,161.90 21,514,334.61
representing decrease)
Add: Others 0.00 0.00
Net cash flows from operating activities 820,599,957.26 482,556,309.21
(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 130,144,449.45 81,235,557.13
Less: Cash brought forward 143,930,783.00 35,081,676.95
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 -13,786,333.55 46,153,880.18
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
-7,499,888.36
provisions
Exceeded-authority approved, non-official approved or accidental tax
0.00
repayment and relief
106
Items Amount (CNY) Comment
Government grants recognised through profit or loss for the current
reporting period, excluding grants which are closely related to the Flight-route government
4,631,000.10
Company’s operating activities and of which the quota or approval is subsidy, etc
eligible for automatic renewal in accordance with relevant regulations
Financial resource usage fees charged on non-financial institution
0.00
recognised through profit or loss for the current reporting period
Gains arising from bargain purchase in business combination and
0.00
investments 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, tradable financial liabilities and available-for-sale financial -6,096,877.46
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
0.00
value
107
Items Amount (CNY) Comment
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
Income and expenses other than items listed above 12,351,256.85 airports and other non-recurring
income/expenses
Other gains or losses satisfying the definition of extraordinary gains or
0.00
losses
Subtotal 3,385,491.13
Less: Impact of income tax 967,043.16
Less: Impact on non-controlling interest -140,719.63
Total 2,559,167.60
12.2. Yield rate of net assets and earnings per share
Weighted average Earnings per share
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
22.94% 0.89 0.89
Net profits attributable to ordinary
shareholders after deducting extraordinary
gains or losses
22.78% 0.88 0.88
Computation of earnings per share:
12.2.1. Basic earnings per share
Current reporting period Last reporting period
After deducting After deducting
Items Computation
Amount(CNY) extraordinary Amount(CNY) extraordinary
gains or gains or
108
losses(CNY) losses(CNY)
Net profits attributable to ordinary
(1) 354,185,295.46 351,626,127.86 205,570,723.33 203,190,509.86
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) 0.89 0.88 0.51 0.51
12.2.2. Diluted earnings per share
Current reporting period Last reporting period
After After
deducting deducting
Items Computation
Amount(CNY) extraordinary Amount(CNY) extraordinary
gains or gains or
losses(CNY) losses(CNY)
Net profits attributable to ordinary
(1) 354,185,295.46 351,626,127.86 205,570,723.33 203,190,509.86
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)] 354,185,295.46 351,626,127.86 205,570,723.33 203,190,509.86
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) 0.89 0.88 0.51 0.51
Note 13. Approval of financial statements
This financial statements are approved and authorised for issuance by the Board of Directors on
August 18, 2011.
109
