Shandong Airlines Co., Ltd
FINANCIAL STATEMENTS AND AUDITORS’ REPORT
FOR THE YEAR ENDED DECEMBER 31st, 2011
REANDA SHEN ZI [2012] No. 1137
To the Shareholders of Shandong Airlines Co., Ltd.:
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (“the
Company”), including balance sheet as of 31st December 2011 and the related consolidated balance
sheet, profit statement of 2011 and related consolidated profit statement, cash flow statement and
related consolidated cash flow statement, statement on changes of shareholders equity and related
consolidated statement on changes of shareholders equity and other explanatory notes.
I. Management's responsibility for the financial statements
The Company's management is responsible for the preparation and fair presentation of the financial
statements in accordance with the Accounting Standards for Business Enterprises. This
responsibility includes: (1) designing, performing and maintaining internal control related to the
preparation and fair presentation of the financial statements that are free from material
misstatements, whether due to frauds or errors; (2) selecting and applying appropriate accounting
policies; and (3) making accounting estimates that are reasonable in the circumstances.
II. Auditor's responsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit.
We performed our audit in accordance with the Standards on Accounting for Certified Public
Accountants. Those standards require that we comply with ethical requirements, and to plan and
perform our audit so as to obtain reasonable assurance whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on auditor's judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to frauds or errors. In making those risk assessments, the auditor consider internal control
related to the entitys preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriated in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the
appropriateness of accounting policies adopted and the reasonableness of the accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
III. Auditing opinion
In our opinion, the financial statements give a true and fair view of the financial position of the
Company as of 31 December 2011, and of its financial performance and its cash flows for the year
then ended in accordance with the Accounting Standards for Business Enterprises.
Reanda CPA Co., Ltd. Chinese CPA: Yan Yunhui
Beijing China Tao Liang
21 March 2012
0
Balance Sheet
Prepared by: Shandong Airlines Co., Ltd. 2011-12-31 Unit: RMB
Amount at period-end Amount at year-begin
Items
Merger Parent Company Merger Parent Company
Current assets:
Monetary funds 248,185,747.48 243,921,301.34 333,572,647.76 328,897,146.25
Settlement provisions
Capital lent
Transaction finance
9,290,846.62 9,290,846.62
asset
Notes receivable
Accounts receivable 185,700,185.84 179,188,885.98 192,444,914.49 185,873,337.88
Accounts paid in
41,348,446.65 40,940,314.17 28,353,455.80 28,201,391.84
advance
Insurance receivable
Reinsurance receivables
Contract reserve of
reinsurance receivable
Interest receivable 1,409,528.13 1,409,528.13
Dividend receivable
Other receivables 189,156,268.92 203,763,094.81 224,905,440.68 225,345,428.46
Purchase restituted
finance asset
Inventories 116,270,780.19 116,270,780.19 77,787,249.46 77,787,249.46
Non-current asset due
within one year
Other current assets
Total current assets 780,661,429.08 784,084,376.49 867,764,082.94 856,804,928.64
Non-current assets:
Granted loans and
advances
Finance asset available
for sales
Held-to-maturity
investment
Long-term account
receivable
Long-term equity
88,352,100.00 194,352,785.43 88,352,100.00 169,842,785.43
investment
Investment property
Fixed assets 6,683,456,551.61 6,623,652,373.64 6,616,497,360.85 6,551,672,655.53
Construction in progress 1,644,924,919.38 1,621,968,762.03 937,253,250.34 925,773,327.54
Engineering material
Disposal of fixed asset
Productive biological
asset
Oil and gas asset
Intangible assets 79,187,122.04 64,374,922.89 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 to
255,780,389.23 255,600,868.72 229,830,196.19 229,493,082.25
be apportioned
Deferred income tax
230,402,218.41 230,083,720.58 126,735,195.78 126,425,389.96
asset
1
Other non-current asset
Total non-current asset 8,992,324,116.89 8,990,033,433.29 8,056,035,285.91 8,035,506,752.24
Total assets 9,772,985,545.97 9,774,117,809.78 8,923,799,368.85 8,892,311,680.88
Current liabilities:
Short-term loans 767,636,239.20 767,636,239.20 1,001,269,036.73 1,001,269,036.73
Loan from central bank
Absorbing deposit and
interbank deposit
Capital borrowed
Transaction financial
2,145,521.10 2,145,521.10 3,865,809.52 3,865,809.52
liabilities
Notes payable 129,547,193.34 129,547,193.34 135,042,835.33 135,042,835.33
Accounts payable 1,373,857,875.23 1,372,067,599.53 1,008,600,051.49 1,009,216,769.85
Accounts received in
292,846,652.42 291,086,272.00 202,453,668.78 200,972,965.98
advance
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 263,739,110.65 263,558,230.63 236,150,660.44 236,130,188.66
Taxes payable 168,132,279.57 166,980,287.94 170,115,170.97 169,899,177.32
Interest payable 8,048,176.38 8,048,176.38 9,656,528.23 9,569,756.23
Dividend payable 11,940.00 11,940.00 11,940.00 11,940.00
Other accounts payable 161,746,628.41 168,068,512.20 140,733,981.14 141,469,803.57
Reinsurance payables
Insurance contract
reserve
Security trading of
agency
Security sales of agency
Non-current liabilities
384,557,360.39 384,557,360.39 476,767,879.05 464,467,879.05
due within 1 year
Other current liabilities
Total current liabilities 3,552,268,976.69 3,553,707,332.71 3,384,667,561.68 3,371,916,162.24
Non-current liabilities:
Long-term loans 3,007,009,638.54 3,007,009,638.54 3,180,283,177.55 3,180,283,177.55
Bonds payable
Long-term account
1,004,200,349.34 1,004,200,349.34 863,013,847.54 863,013,847.54
payable
Special accounts
payable
Projected liabilities
Deferred income tax
2,322,711.66 2,322,711.66
liabilities
Other non-current liabilities 160,261,661.59 160,261,661.59 73,390,628.74 73,390,628.74
Total non-current liabilities 4,171,471,649.47 4,171,471,649.47 4,119,010,365.49 4,119,010,365.49
Total liabilities 7,723,740,626.16 7,725,178,982.18 7,503,677,927.17 7,490,926,527.73
Owners equity (or
shareholders equity):
Paid-in capital (or share
400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
capital)
Capital public reserve 75,410,363.70 86,911,168.71 84,050,162.84 84,050,162.84
Less: Inventory shares
Reasonable reserve
Surplus public reserve 199,414,021.75 198,753,317.22 122,944,754.89 122,284,050.36
2
Provision of general risk
Retained profit 1,374,420,534.36 1,363,274,341.67 799,664,252.17 795,050,939.95
Balance difference of foreign
currency translation
Total owners equity
attributable to parent 2,049,244,919.81 2,048,938,827.60 1,406,659,169.90 1,401,385,153.15
company
Minority interests 13,462,271.78
Total owners equity 2,049,244,919.81 2,048,938,827.60 1,420,121,441.68 1,401,385,153.15
Total liabilities and owners
9,772,985,545.97 9,774,117,809.78 8,923,799,368.85 8,892,311,680.88
equity
Profit Statement
Prepared by: Shandong Airlines Co., Ltd. January-December, 2011 Unit: RMB
Amount in this period Amount in last period
Items Parent Parent
Merger Merger
Company Company
I. Total operating income 9,666,969,745.20 9,646,749,445.02 7,292,615,957.10 7,284,474,069.23
Including: Operating income 9,666,969,745.20 9,646,749,445.02 7,292,615,957.10 7,284,474,069.23
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 8,673,994,733.22 8,662,218,936.93 6,461,293,024.92 6,454,275,861.75
Including: Operating cost 7,263,251,881.75 7,258,022,848.04 5,487,590,890.83 5,484,462,677.17
Interest expense
Commission charge and
commission expense
Cash surrender value
Net amount of expense of
compensation
Net amount of withdrawal of
insurance contract reserve
Bonus expense of
guarantee slip
Reinsurance expense
Operating tax and extras 319,511,430.44 318,499,180.24 205,209,128.98 204,810,196.58
Sales expenses 621,566,178.55 621,566,178.55 480,347,949.12 480,347,949.12
Administration
188,365,620.87 182,797,444.37 136,465,813.62 133,056,074.42
expenses
Financial expenses 86,035,967.94 85,320,836.52 150,515,922.36 150,659,261.66
Losses of devaluation of
195,263,653.67 196,012,449.21 1,163,320.01 939,702.80
asset
Add: Changing income of
fair value(Loss is listed with -7,570,558.20 -7,570,558.20 -5,916,809.38 -5,916,809.38
“-”)
Investment income (Loss is
8,549,475.93 8,549,475.93 -1,720,112.18 -1,720,112.18
listed with “-”)
Including: Investment
income on affiliated
company and joint venture
Exchange income (Loss is
listed with “-”)
III. Operating profit (Loss
993,953,929.71 985,509,425.82 823,686,010.62 822,561,285.92
is listed with “-”)
3
Add: Non-operating
55,609,548.52 55,609,548.52 29,012,243.89 29,012,243.84
income
Less: Non-operating
18,547,260.62 18,076,510.82 8,153,807.83 8,068,071.01
expense
Including: Disposal loss of
17,320,987.51 17,320,987.51 7,708,562.86 7,622,991.01
non-current asset
IV. Total Profit (Loss is
1,031,016,217.61 1,023,042,463.52 844,544,446.68 843,505,458.75
listed with “-”)
Less: Income tax expense 260,243,745.35 258,349,794.94 209,969,159.25 209,818,600.17
V. Net profit (Net loss is
770,772,472.26 764,692,668.58 634,575,287.43 633,686,858.58
listed with “-”)
Net profit attributable to
771,225,549.05 764,692,668.58 634,364,547.92 633,686,858.58
owners of parent company
Minority shareholders
-453,076.79 0.00 210,739.51 0.00
gains and losses
VI. Earnings per share
i. Basic earnings per share 1.93 1.59
ii. Diluted earnings per share 1.93 1.59
VII. Other consolidated
income
VIII. Total consolidated
770,772,472.26 764,692,668.58 634,575,287.43 633,686,858.58
income
Total consolidated income
attributable to owners of 771,225,549.05 764,692,668.58 634,364,547.92 633,686,858.58
parent company
Total consolidated income
attributable to minority -453,076.79 0.00 210,739.51 0.00
shareholders
Cash Flow Statement
Prepared by: Shandong Airlines Co., Ltd. January- December, 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 providing 9,862,481,548.80 9,841,918,121.78 7,352,842,476.95 7,338,125,353.04
labor services
Net increase of
customer deposit and
interbank deposit
Net increase of loan from
central bank
Net increase of capital
borrowed from other
financial institution
Cash received from original
insurance contract fee
Net cash received from
reinsurance business
Net increase of insured
savings and investment
Net increase of disposal
of transaction financial asset
Cash received from interest,
commission charge and
commission
4
Net increase of capital
borrowed
Net increase of returned
business capital
Write-back of tax
received
Other cash received
concerning operating 100,218,711.14 105,768,674.93 97,024,882.28 100,423,221.27
activities
Subtotal of cash inflow
arising from operating 9,962,700,259.94 9,947,686,796.71 7,449,867,359.23 7,438,548,574.31
activities
Cash paid for
purchasing commodities and 5,788,881,664.53 5,792,830,488.54 4,295,519,127.79 4,291,454,969.98
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 staff
1,090,515,615.99 1,086,926,998.30 827,331,854.08 824,315,034.77
and workers
Taxes paid 655,361,409.83 650,829,922.59 497,696,065.27 496,457,992.65
Other cash paid
concerning operating 182,890,904.69 196,797,149.55 154,241,682.28 154,456,869.48
activities
Subtotal of cash outflow
arising from operating 7,717,649,595.04 7,727,384,558.98 5,774,788,729.42 5,766,684,866.88
activities
Net cash flows arising from
2,245,050,664.90 2,220,302,237.73 1,675,078,629.81 1,671,863,707.43
operating activities
II. Cash flows arising from
investing activities:
Cash received from
recovering investment
Cash received from
11,841,382.42 11,841,382.42 2,853,033.15 2,853,033.15
investment income
Net cash received from
disposal of fixed, intangible 26,638,335.14 26,638,335.14 26,880.00 26,880.00
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 from
38,479,717.56 38,479,717.56 2,879,913.15 2,879,913.15
investing activities
Cash paid for 1,495,212,313.66 1,483,183,573.11 1,085,247,694.21 1,073,446,055.08
5
purchasing fixed, intangible
and other long-term assets
Cash paid for
24,510,000.00
investment
Net increase of mortgaged
loans
Net cash received from
6,937,426.46 6,937,426.46 43,095,223.17 50,740,053.00
subsidiaries and other units
Other cash paid
concerning investing 3,291,906.49 3,291,906.49 15,902,881.83 15,902,881.83
activities
Subtotal of cash outflow
1,505,441,646.61 1,517,922,906.06 1,144,245,799.21 1,140,088,989.91
from investing activities
Net cash flows arising from
-1,466,961,929.05 -1,479,443,188.50 -1,141,365,886.06 -1,137,209,076.76
investing activities
III. Cash flows arising from
financing activities
Cash received from
absorbing investment
Including: Cash
received from absorbing
minority shareholders
investment by subsidiaries
Cash received from loans 1,092,744,152.40 1,092,744,152.40 1,619,256,428.26 1,619,256,428.26
Cash received from
issuing bonds
Other cash received
concerning financing 180,327,369.12 180,327,369.12 11,459,417.00 11,459,417.00
activities
Subtotal of cash inflow from
1,273,071,521.52 1,273,071,521.52 1,630,715,845.26 1,630,715,845.26
financing activities
Cash paid for settling debts 1,482,346,801.17 1,470,046,801.17 1,543,956,930.32 1,535,656,930.32
Cash paid for dividend
and profit distributing or 269,449,515.31 268,618,773.32 228,396,529.91 228,062,165.48
interest paying
Including: Dividend and
profit of minority
shareholder paid by
subsidiaries
Other cash paid
concerning financing 207,567,204.67 183,057,204.67 292,679,544.51 292,679,544.51
activities
Subtotal of cash outflow
1,959,363,521.15 1,921,722,779.16 2,065,033,004.74 2,056,398,640.31
from financing activities
Net cash flows arising
-686,291,999.63 -648,651,257.64 -434,317,159.48 -425,682,795.05
from financing activities
IV. Influence on cash and
cash equivalents due to -217,273.25 -217,273.25 -122,729.57 -122,729.57
fluctuation in exchange rate
V. Net increase of cash and
91,579,462.97 91,990,518.34 99,272,854.70 108,849,106.05
cash equivalents
Add: Balance of cash
and cash equivalents at the 148,606,284.51 143,930,783.00 49,333,429.81 35,081,676.95
period -begin
VI. Balance of cash and cash
240,185,747.48 235,921,301.34 148,606,284.51 143,930,783.00
equivalents at the period -end
6
Statement of Change in Owners’ Equity (Consolidated)
Prepared by: Shandong Airlines Co., Ltd. Year 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
Paid-up Minor Paid-up Minor
Less: Provisi Total Less: Provisi Total
capital( Capital Reason Surplus shareho capital( Capital Reason Surplus shareho
Items invento on of Retaine owners invento on of Retaine owners
or reserve able reserve Others lders or reserve able reserve Others lders
ry general d profit equity ry general d profit equity
share s reserve s equity share s reserve s equity
shares risk shares risk
capital) capital)
400,00 122,94 799,66 1,420,1 400,00 308,66 865,54
I. Balance at the end of last 84,050, 13,462, 84,050, 59,576, 13,251,
0,000.0 4,754.8 4,252.1 21,441. 0,000.0 8,390.1 6,154.2
year 162.84 271.78 162.84 069.03 532.27
0 9 7 68 0 1 5
Plus: Change of accounting
policy
Correcting of previous errors
Others
400,00 122,94 799,66 1,420,1 400,00 308,66 865,54
II. Balance at the beginning 84,050, 13,462, 84,050, 59,576, 13,251,
0,000.0 4,754.8 4,252.1 21,441. 0,000.0 8,390.1 6,154.2
of current year 162.84 271.78 162.84 069.03 532.27
0 9 7 68 0 1 5
574,75 629,12 490,99 554,57
III. Changed in current -8,639, 76,469, -13,462 63,368, 210,73
6,282.1 3,478.1 5,862.0 5,287.4
term(Loss is listed with “-”) 799.14 266.86 ,271.78 685.86 9.51
9 3 6 3
771,22 770,77 634,36 634,57
-453,07 210,73
(I) Net profit 5,549.0 2,472.2 4,547.9 5,287.4
6.79 9.51
5 6 2 3
(II) Other consolidated
income
771,22 770,77 634,36 634,57
-453,07 210,73
Subtotal of (I) and (II) 5,549.0 2,472.2 4,547.9 5,287.4
6.79 9.51
5 6 2 3
(III) Owners input and -8,639, -13,009 -21,648
withdraw of share capital 799.14 ,194.99 ,994.13
7
1. Capital input by owners
2. Share payment
accounted into owners
equity
-8,639, -13,009 -21,648
3. Others
799.14 ,194.99 ,994.13
-196,46 -120,00 -143,36
76,469, 63,368, -80,000
(IV) Profit distribution 9,266.8 0,000.0 8,685.8
266.86 685.86 ,000.00
6 0 6
1. Providing of surplus 76,469, -76,469 63,368, -63,368
reserves 266.86 ,266.86 685.86 ,685.86
2. Common risk
provision
-120,00 -120,00
3. Dividend to owners(or -80,000 -80,000
0,000.0 0,000.0
shareholders) ,000.00 ,000.00
0 0
4. Others
(V) Internal 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
IV. Balance at the end of this 400,00 75,410, 199,41 1,374,4 2,049,2 400,00 84,050, 122,94 799,66 13,462, 1,420,1
term 0,000.0 363.70 4,021.7 20,534. 44,919. 0,000.0 162.84 4,754.8 4,252.1 271.78 21,441.
8
0 5 36 81 0 9 7 68
Statement of Change in Owners’ Equity (Parent Company)
Prepared by: Shandong Airlines Co., Ltd. Year of 2011 Unit: RMB
Amount of the Current Term Amount of Last Year
Paid-up Provision Paid-up Provision
Less: Total Less: Total
Items capital(or Capital Reasonab Surplus of Retained capital(or Capital Reasonab Surplus of Retained
inventory owners inventory owners
share reserves le reserve reserves general profit share reserves le reserve reserves general profit
shares equity shares equity
capital) risk capital) risk
I. Balance at the end of last 400,000,0 84,050,16 122,284,0 795,050,9 1,401,385 400,000,0 84,050,16 58,915,36 304,732,7 847,698,2
year 00.00 2.84 50.36 39.95 ,153.15 00.00 2.84 4.50 67.23 94.57
Plus: Change of accounting
policy
Correcting of previous errors
Others
II. Balance at the beginning 400,000,0 84,050,16 122,284,0 795,050,9 1,401,385 400,000,0 84,050,16 58,915,36 304,732,7 847,698,2
of current year 00.00 2.84 50.36 39.95 ,153.15 00.00 2.84 4.50 67.23 94.57
III. Changed in current 2,861,005 76,469,26 568,223,4 647,553,6 63,368,68 490,318,1 553,686,8
term(Loss is listed with “-”) .87 6.86 01.72 74.45 5.86 72.72 58.58
764,692,6 764,692,6 633,686,8 633,686,8
(I) Net profit
68.58 68.58 58.58 58.58
(II) Other consolidated
income
764,692,6 764,692,6 633,686,8 633,686,8
Subtotal of (I) and (II)
68.58 68.58 58.58 58.58
(III) Owners input and 2,861,005 2,861,005
withdraw of share capital .87 .87
1. Capital input by owners
2. Share payment
accounted into owners
equity
9
2,861,005 2,861,005
3. Others
.87 .87
76,469,26 -196,469, -120,000, 63,368,68 -143,368, -80,000,0
(IV) Profit distribution
6.86 266.86 000.00 5.86 685.86 00.00
1. Providing of surplus 76,469,26 -76,469,2 63,368,68 -63,368,6
reserves 6.86 66.86 5.86 85.86
2. Common risk
provision
3. Dividend to owners(or -120,000, -120,000, -80,000,0 -80,000,0
shareholders) 000.00 000.00 00.00 00.00
4. Others
(V) Internal 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
IV. Balance at the end of this 400,000,0 86,911,16 198,753,3 1,363,274 2,048,938 400,000,0 84,050,16 122,284,0 795,050,9 1,401,385
term 00.00 8.71 17.22 ,341.67 ,827.60 00.00 2.84 50.36 39.95 ,153.15
10
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
As at 31st December 2011
（All amounts are expressed in CNY unless otherwise stated）
(English version for reference only)
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 Peoples Republic of China. The Company was incorporated through the restructuring project jointly
initiated by Shandong Airlines Group Co., Ltd. (hereafter, SDA Group), Inspur Co., Ltd. (previously known as
Inspur Electronic Information Industry Group Company (浪潮电子信息产业集团公司)), Shandong Hualu Group
Co., Ltd, Shandong Group Corp. of Fisheries Enterprises and Luyin Investment Group (鲁银投资集团股份有限
公司) following the approval (LuTiGaiQiZi(1999)No.88 (鲁体改企字（1999）第 88 号)) granted by the Economic
Reform Commission of Shandong Province (山东省经济体制改革委员会) on July 29th, 1999.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares (国有法人股), with CNY
1.00 at par, of the Company by transferring its air transportation operation and the related assets and liabilities to
the Company on November 25th, 1999. Inspur Co., Ltd., Shandong Hualu Group Co., Ltd. and Shandong Group
Corp. of Fisheries Enterprises each acquired 199,000 state-owned corporate shares, with CNY 1.00 at par, by cash
investment of CNY 200,000.00 each on November 26th, 1999. Luyin Investment Group acquired 199,000
domestic corporate shares (国内法人股), with CNY 1.00 at par, by cash investment of CNY 200,000.00 on
November 26th, 1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign currency (境内上市外资股)
(hereafter, B share(s)), with par value at CNY 1.00 each and issue price at HKD 1.58 each, on August 28th, 2000
upon the approval (ZhengJianFaXingZi[2000]No.116 (证监发行字[2000]116 号)) granted by the China Securities
Regulatory Commission on August 22nd, 2000; and, the Company was listed on the Shenzhen Stock Exchange on
September 12th, 2000. Immediately after the issuance of the B shares, the capital of the Company increased to
CNY 400,000,000.00.
The Agreement of Share Transfer 《股份转让协议》 signed by SDA Group and China National Aviation Holding
Company (hereafter, China Aviation Group) on February 28th, 2004 authorised the transfer of 91,200,000 shares
of the Company, equal to 22.8% shareholding, from SDA Group to China Aviation Group. Immediately after the
share transfer, SDA Groups 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
11
attributable to China Aviation Group as specified in the Agreement of Share Transfer shall be afforded by Air
China. The change of share ownership was registered at the China Securities Depository and Clearing Corporation
Limited Shenzhen Office by SDA Group and Air China on December 3rd, 2004; And, 91,200,000 shares of the
Company then became held by Air China.
Legal representative of the Company: ZHANG, Xingfu
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746 – East 2nd Ring Road, Jinan, Shandong
1.2. Industry of operation
The Company operates in the industry of transportation.
1.3. Operating capacity
The Company is permitted to undertake international and domestic passenger and cargo transportation, hotel and
beverage related operation (limited to operation through branch); provision of aircraft maintenance, training of
civil aviation pilots and air crew, insurance brokerage (limited to air accident insurance, with period of operation
valid until September 3rd, 2012); inter-airline agenting, and principal operation related ground services; sales of
airborne material and equipments, non-food grocery, art work, souvenir, etc.; retailing of tobacco products
(limited to Qingdao Red-Crowned Crane Hotel); lease of airborne material and equipments; business services;
conference services; transportation agency; air cargo storage; and aviation pilot provision (for other domestic
airlines). The operating activities listed herein does not involve operation related to commodity that are subject to
State Administered Trading (国营贸易管理).
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 Companys accounting year is the calendar year, ie. from 1 January to 31 December each year.
2.4. Presentation (functional) currency
12
The presentation (functional) currency of the Company is Chinese Yuan (hereafter, CNY).
2.5. Business acquisitions
2.5.1. Acquiring business under common control
The Company measures the identifiable assets acquired and liabilities assumed at their acquisition-date book
values in the accounts of the acquiree. The excess of the consideration transferred in the form of book value or
shares issued over the acquisition-date book values in the acquirees 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 entitys operation by virtue of that power. Where it is clearly demonstrated that
the Companys 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 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
Companys share of the net fair value of the subsidiarys 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
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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
Companys 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 subsidiarys identifiable
assets and liabilities where they are able and obliged to contribute to the excess; the excess is otherwise
attributable to the Company.
2.7. Cash equivalents
Cash equivalents are short-term (usually with a maturity date within three months from the date of acquisition),
highly liquid investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
2.8. Foreign currency transactions and foreign currency translation
2.8.1. Foreign currency transactions
The Companys 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 Peoples 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.
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Exchange differences arising from the translation methods specified in paragraph 2.8.2① and ② are separately
presented in Shareholders equity.
③ The cash flows of a foreign subsidiary are translated at the exchange rates at the dates of the cash flows. The
effect of exchange rate changes on cash and cash equivalents held or due in foreign currencies is reported in the
cash flow statement by presenting separately the amount of the unrealised exchange differences arising from
changes in foreign currency exchange rates
2.9. Financial instruments
2.9.1. Categorisation of financial assets and financial liabilities
The Company categorises its financial assets and financial liabilities, with reference to their objectives of
investments and economic nature, as financial assets or financial liabilities at fair value through profit or loss,
held-to-maturity investments, loans and receivables, available-for-sale financial assets, and other financial
liabilities.
① Financial assets or financial liabilities at fair value through profit or loss include the financial assets or
financial liabilities classified as held for trading and the financial assets or financial liabilities designated by the
Company as at fair value through profit or loss on their initial recognition.
A financial asset or financial liability is classified as held for trading if it meets either of the following conditions:
a. it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
b. on initial recognition it is part of a portfolio of identified financial instruments that are managed together and
for which there is evidence of a recent actual pattern of short-term profit-taking; or
c. it is a derivative (except for a derivative that is a designated and effective hedging instrument, a financial
guarantee contract, or linked to and only settled by delivery of an equity instrument that does not have a quoted
market price in an active market and whose fair value cannot be reliably measured).
A financial asset or financial liability is designated by the Company as at fair value through profit or loss if it
meets either of the following conditions:
a. the designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases;
or
b. a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair
value basis, in accordance with an officially documented risk management or investment strategy, and information
about the group is provided internally on that basis to the Companys 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.
15
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 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
16
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 arms length transaction. The parties to an arms length transaction shall be going concerns,
not subject to or intended to enter the procedures of liquidation or significant reduction in operating capacity, or
forced to enter the transaction. The fair value of a financial asset or financial liability for which there is an active
market shall be measured at the quoted market price in the active market; the fair value of a financial asset or
financial liability for which there is not an active market shall be established by the Company using a valuation
technique.
The Company measures initially and subsequently the fair value of an interest rate swap at the value of a
competitors interest rate swap quoted by a recognised financial institution as at the Companys balance sheet date
in accordance with the principle of consistency.
⑦ The residual cost of a financial asset is the residual value after deducting the sum of impairment losses and
the principal amount that has been repaid from the sum of its value measured on its initial recognition and the
cumulative amortisation of the difference between its value measured on its initial recognition and its value on its
maturity determined using the effective interest method. The residual cost of a financial liability is the residual
value after deducting the sum of the principal amount that has been repaid and the cumulative amortisation of the
difference between its value measured on its initial recognition and its value on its maturity determined using the
effective interest method from its value measured on its initial recognition.
⑧ The effective interest rate method is a valuation method for determining the residual value and interest
income or/and expense of a financial instrument (or a group of financial instruments) using the effective interest
rate. An effective interest rate is the interest rate used to discount the cash flows of a financial instrument (or a
group of financial instruments) over its expected life, or a shorter period if it is relevant, to determine its current
carrying value. The effective interest rate applicable to a financial intrument (or a group of financial instruments)
shall be determined with reference to its future cash flows estimated by taking into account the whole of its
contract terms (including but not limited to early repayment rights, call options and option equivalents, but
excluding future credit losses).
2.9.3. Transfer and de-recognition of financial assets
① The Company de-recognises a financial asset if it meets either of the following conditions:
a. the contractual rights to the cash flows from the financial asset expire;
b. the financial asset has been transferred and all the risks and rewards of ownership of the financial asset have
been substantially transferred to the transferee; or
c. the financial asset has been transferred and the Company has neither transferred nor retained substantially all
the risks and rewards of ownership of the financial asset and not retained control of the financial asset.
② Where the transfer of the whole of a financial asset satisfies the conditions for de-recognition set out in
paragraph 2.9.3①, the Company recognises through profit or loss for the current period the difference between:
a. the carrying value of the financial asset; and
b. the sum of the proceeds from the transfer and the cumulative gains or losses recognised in Shareholders
17
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;
c. the lender, for economic or legal reasons relating to the obligors 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 assets carrying amount
and the present value of its estimated future cash flows.
18
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
Receivables of individual significance 5% of total receivables are classified as
receivables of individual significance.
Receivables of individual significance are
individually assessed for impairment. If it is
objectively evidential that a receivable of
individual significance is subject to
Method of recognition of provision for bad debts for
impairment, the excess of the carrying amount
receivables of individual significance
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
Categorisation by nature of receivables
actual rate of loss 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
19
Categorisation by nature of receivables Percentage of carrying amount
Categories of receivables subject to provision for bad debts by percentage of carrying amount:
Percentage of carrying Percentage of carrying
amount for recognition amount for recognition
Category of provision for bad of provision for bad
debts applicable to debts applicable to other
accounts 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 insignificance bears differing credit risk
Justification for individual assessment for
characteristics to other receivables of individual
impairment
insignificance, the receivable is subject to individual
assessment for impairment.
The provision for bad debts for an receivable of
Method of recognition of provision for bad individual insignificance subject to individual
debts for receivables of individual assessment for impairment is recognised as the excess
insignificance subject to individual of the carrying amount over the net present value of the
assessment for impairment estimated future cash flows; an impairment loss is
recognised at the same amount.
2.11. Inventories
2.11.1. Categorisation of inventories
The Companys inventories include materials or supplies to be consumed by the Company in the rendering of
services during the Companys ordinary operating activities. The Company categorises its inventories as air
materials and low-value consumables.
2.11.2. Cost of inventories
The cost of inventories at their acquisition is measured at their actual cost of purchase. The cost of inventories at
their issue is determined using the first-in, first-out (FIFO) cost formula.
2.11.3. Net realisable value and impairment of inventories
① Determination of net realisable value of inventories
The net realisable value of finished goods, products and sellable materials is measured as the residual value after
deducting the estimated sales expense and related taxes and fees from the estimated selling price. The net
realisable value of an item of inventories subject to further processing is measured as the residual value after
deducting the sum of the estimated costs of completion, sales expense and related taxes and fees from the
estimated selling price of the sellable item. The net realisable value of the quantity of inventories held to satisfy
firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory
quantities held, the net realisable value of the excess is based on general selling prices.
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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
The Company amortises consumables in full when they are issued for use.
2.12. Long-term equity investments
The Companys long-term equity investments include the Companys equity investments in an investee which
constitute the Companys control, joint control or significant influence over the investee and the Companys
equity investments in an investee which do not constitute the Companys 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 acquirees 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
21
date. The excess of the initially measured cost over the net of the carrying values of the identifiable assets
acquired and the liabilities assumed as at the acquisition date is recognised as goodwill. The excess of the net of
the carrying values of the identifiable assets acquired and the liabilities assumed as at the acquisition date over the
initially measured cost is recognised through profit or loss for the current period in Non-operating revenue. Fees
paid to advisers including auditors, solicitors, valuers, consultants, etc. and other related administrative expenses
are accounted for through profit or loss for the reporting period during which they are incurred; transaction costs
incurred by the acquirer directly attributable to the issuance of equity instruments or debt instruments, which are
consideration for the acquisition, are capitalised as part of the initial measurement of the relevant equity
instruments or debt instruments.
Differing accounting treatments shall be applied to the consolidated financial statements and the acquirers
separate financial statements for a business combination not under common control achieved in stages:
(I) In the acquirers separate financial statements, the cost of investment of a business combination not under
common control achieved in stages is initially measured as the sum of the carrying amount of the investment
immediately before the addition investment and the cost of the additional investment; if the carrying amount of
the investment immediately before the additional investment includes other comprehensive income, the related
other comprehensive income (such as changes in fair value of available-for-sale financial assets accounted for in
capital reserves, hereafter the same applied) is transferred to investment income for the reporting period during
which the investment is disposed.
(II) In the consolidated financial statements, the carrying amount of the investment immediately before the
additional investment is adjusted to the fair value of the existing investment as at the acquisition date of the
additional investment and the difference between the carrying amount of the investment immediately before the
addition investment and the fair value of the existing investment as at the acquisition date of the additional
investment is accounted for in investment income for the reporting period during which the additional investment
is acquired; if the carrying amount of the investment immediately before the additional investment includes other
comprehensive income, the related other comprehensive income is transferred to investment income for the
reporting period during which the additional investment is acquired. The fair value of the existing investment as at
the acquisition date of the additional investment and the gain or loss arising from the fair value adjustment are
disclosed in the notes to the financial statements.
② Initial measurement of long-term equity investments acquired not through business combination
a. The cost of a long-term equity investment acquired by the Company by payments in cash is initially
measured at the sum of the consideration transferred and the fees, taxes and necessary expenses directly
attributable to the acquisition, with the value of declared-but-unpaid cash dividends included in the consideration
separately recognised as receivables.
b. The cost of a long-term equity investment acquired by the Company by share issues is initially measured at
the fair value of shares issued for the acquisition as at the issuance date.
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
22
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 investees debt restructuring
is initially measured at the fair values of the equity instruments acquired, with the difference between the initially
measured cost and the carrying value of the original loans to the investee as at the restructuring date recognised
through profit or loss for the current period.
2.12.2. Subsequent measurement and recognition and measurement of gains or losses
Long-term equity investments in subsidiaries are subsequently measured at cost. In preparing consolidated
financial statements, the long-term equity investments in subsidiaries are adjusted using the equity method.
Long-term equity investments which do not constitute the Companys 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 Companys 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 investees 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 investees 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
23
at the acquisition using the straight line method; the amortisation is recognised through profit or loss for the
current period.
2.12.3. Joint control and significant influence
① The Company has joint control over an investee if the investment meets one of the following conditions:
a. neither of the investors can individually influence the operation of the investee;
b. decisions of the investees 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
investees 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 investees 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 investees Board of Directors or similar body;
b. the Company participates in the investees 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 investees 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
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;
24
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 supports of
5.00 15-20 4.75-6.33
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 devices and
0-5.00 4-10 9.5-23.75
furniture
High value rotables 0.00 15-18 5.56-6.67
Transportation vehicles 5.00 5-10 9.5-19.00
2.13.3. Impairment
The Company assesses each non-current asset for impairment on the balance sheet date. If it is objectively
evidential that the net recoverable value of a non-current asset is lower than its carrying value as at the balance
sheet date, its carrying value is reduced to the net recoverable value and the reduction accounted for through profit
for the current period and recognised as impairment provision. A recognised impairment loss of a non-current
asset is not recoverable in subsequent periods. A non-current asset is impaired if one of the following is evidential:
① its fair value decreased significantly during the current period with a decrease rate significantly higher than
the rate estimated on the basis of time or normal usage;
② the economic, technological or legal environment, in which the Company operates or in which 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 assets 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 assets 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 assets fair value as at the
25
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 assets 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 assets own expected useful life.
2.14. Construction-in-progress
2.14.1. Categorisation
The Company categorises construction-in-progress on the basis of project approval.
2.14.2. Conversion of construction -in-progress to fixed assets
A construction-in-progress is recognised as a fixed asset when it satisfied the predetermined usable state. A
converted construction-in-progress is initially measured at its full construction cost. A converted
construction-in-progress of which the construction cost is not fully recognised is initially measured at a reasonable
estimate; and, the initial measured cost is adjusted to its full construction cost when the construction is fully
recognised; but, its recognised depreciation as at the full recognition is not adjusted.
2.14.3. Impairment
The Company assesses each construction-in-progress for impairment on the balance sheet date. If it is objectively
evidential that the net recoverable value of a construction-in-progress is lower than its carrying value as at the
balance sheet date, its carrying value is reduced to the net recoverable value and the reduction accounted for
through profit for the current period and recognised as impairment provision. A recognised impairment loss of a
construction-in-progress is not recoverable in subsequent periods. A construction-in-progress is impaired if one or
more of the following are evidential:
① the project has been suspended for a substantially long period of time and of which the construction is not to
be re-activated within three years;
② either the capability or the technology of the project is obsolete and the economic benefit associated with the
project is highly indeterminable; or
③ there is other evidence which suggests the project has been impaired.
2.15. Borrowing costs
2.15.1. Capitalisation of borrowing costs
The borrowing costs directly attributable to asset construction or production are capitalised into cost of asset when
they meet the following conditions:
① the asset construction or production expense has been incurred;
② the borrowing costs have been incurred; and
③ the construction or production which directly contributes to the usable state of the asset has been activated.
Other borrowing costs, discounts, premiums and exchange differences are accounted for through profit or loss of
the period in which they are incurred.
26
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 actual cost.
2.16.2. Useful life and amortization
The period during which an intangible asset is reasonably capable of generating economic benefits for the
Company with reference to its contractual rights and other legal rights, industry practice, historical experience,
and professional evidence is determined as the assets 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 assets 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 Companys other assets.
② An intangible asset with undeterminable useful life is amortised using a reasonable method determined by
27
the realisation process of the assets expected economic benefit. Where a reasonable amortisation method is
undeterminable, the asset is amortised using the straight line method.
2.16.3. Impairment of intangible assets with undeterminable useful life
① The Company assesses the useful life of each intangible asset with undeterminable useful life on the balance
sheet date. If the useful life of an asset remains undeterminable, the asset is assessed for impairment on the
balance sheet date. If it is objectively evidential that the net recoverable value of an intangible asset with
undeterminable useful life is lower than its carrying value as at the balance sheet date, its carrying value is
reduced to the net recoverable value and the reduction accounted for through profit for the current period and
recognised as impairment provision. A recognised impairment loss of an intangible asset with undeterminable
useful life is not recoverable in subsequent periods. An intangible asset with undeterminable useful life is assessed
for impairment if one or more of the following are evidential:
a. the asset has been replaced by another new technology which renders its ability to generate economic benefit
for the Company being significantly devastated;
b. the assets 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:
assets arising from the project are either for sale or for internal use and it is technically viable to complete the
project;
② the Company has clear intention to complete the intangible asset and to use or sell the asset;
③ it is objectively evidential that products produced by the intangible or the intangible asset itself are
marketable or that the intangible asset is employable if used internally;
④ it is practical, in terms of technology, finance and other resources, to complete the development of the
intangible asset and to use or sell the intangible asset; and
⑤ development expenses of the development of the intangible asset can be measured reliably.
2.17. Regular repair and substantial repair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is accounted for through
profit or loss for the period in which it is incurred. Substantial repair expenditure eligible for capitalisation is
capitalised when incurred and recognised as replacement cost of non-current assets and depreciated over a
reasonable length of time. Substantial repair expenditure of aircrafts under an operating lease incurred before the
lease expiry date is amortised using the straight line method or on the basis of air hours over the lease period.
2.18. Long-term deferred expenses
The Companys long-term deferred expenses refer to expense which has been incurred but which generates
28
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 Companys loss contract and restructuring liabilities
undertaken satisfied above conditions.
2.19.2. The measurement of accrued liabilities
The accrued liabilities are initially measured in accordance with the best estimated outflow of economic benefits
to fulfill the current obligation as well as related risks regarding the contingencies, uncertainties and time value of
money. Significant impact on the time value of money the best estimation is determined through the related
discounted future cash outflows. The increase of book value of accrued liability caused due to the passage of time
is recognized as interest.
2.19.3. Optimum evaluation of accrued liabilities
If the necessary payments have scopes, the optimum evaluation shall be determined based on the average amount
between the upper and lower limit amount of scope ; if the necessary payments do not have such scopes, the
optimum evaluation shall be determined in the following method:
① If the contingent event is involved in an individual project, the optimum evaluation amount will be determined
based on the possible amount;
② If the contingent event is involved in some projects, the optimum evaluation amount shall be determined based
on possible amount and occurrence probability. In case of all or part of payments about the confirmed liquidation
liabilities are expected to be compensated by the third parties or other parties, and the compensation amounts are
surely received, then such amounts shall be separately recognized. The confirmed compensation amounts shall not
exceed book values of confirmed liabilities
2.20. Revenue
2.20.1. Service rendering
① The Company recognise revenue from rendering of air service for carriage of passengers when the service is
rendered or when an unused ticket expires. The sale of a ticket does not constitute revenue. An unused ticket
expires on the annual anniversary of its sale. Tickets sold but of which the service is not yet rendered are
recognised in current liabilities as Advances from customers. If service is rendered through code sharing, revenue
arising from the service provision is apportioned amongst parties to the code sharing agreement. The revenue
29
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.
Revenue arising from other air service rendering is recognised when the service rendering is completed.
2.20.2. Transfer of asset use rights
Revenue is recognised when the inflow of the economic benefit associated with the transfer is probable and when
the amount of the inflow can be measured reliably. Revenue arising from transfer of asset use rights is recognised
according to the income category:
① interest income is recognised on the basis of the length of time for which the Companys 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 assets useful life after the asset reaches its usable state. If the asset is disposed,
transferred, scrapped or damaged prior to the end of its useful life, the whole of the remaining deferred income is
accounted for through profit or loss for the period in which the asset is disposed, transferred, scrapped or
damaged.
② A grant compensating expenditure or loss in subsequent periods is initially recognised as deferred income
and subsequently accounted for through profit or loss for the period in which the relevant expenditure of loss is
incurred. A grant compensating expenditure or loss already incurred is accounted for through profit or loss for the
period in which the grant is received.
2.21.3. Measurement
A grant that is in the form of monetary asset is measured at the amount of actual receipt or actual receivable. A
grant that is in the form of non-monetary asset is measured at fair value or at notional value if fair value can not be
obtained.
2.21.4. Repayment of government grants
① If there is deferred income associated with the grant, the carrying value of the deferred income is reduced by
the repayment. The excess of the repayment over the carrying value of the deferred income is accounted for
30
through profit or loss for the period in which the repayment is incurred.
② If there is not deferred income associated with the grant, the repayment is accounted for through profit or loss
for the period in which the repayment is incurred.
2.22. Deferred income tax assets and deferred income tax liabilities
The Company accounts for income taxes by the balance sheet approach.
The Company calculates the value of a deferred income tax asset or deferred income tax liability on the basis of
the difference between the carrying value of an asset or liability and its tax base and the income tax rates
applicable to the period through which the asset or liability is recovered or settled.
2.22.1. Recognition of deferred income tax assets
① A deferred income tax asset is recognised for all deductible temporary differences to the extent that it is
probable that taxable profit will be available against which the deductible temporary difference can be utilised,
unless the deferred income tax asset arises from the initial recognition of an asset or liability in a transaction that:
a. is not a business combination; and
b. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
② A deferred income tax asset is recognised for all deductible temporary differences arising from investments
in subsidiaries, branches and associates, and interests in joint ventures, to the extent that, and only to the extent
that, it is probable that:
a. the temporary difference will reverse in the foreseeable future; and
b. taxable profit will be available against which the temporary difference can be utilised.
③ A deferred income tax asset is recognised for all tax losses and tax credits eligible for being carried forward
to the extent that it is probable that taxable profit will be available against which the tax losses and tax credits can
be utilised.
2.22.2. Recognition of deferred income tax liabilities
A deferred income tax liability is recognised for all taxable temporary differences, except to the extent that the
deferred income tax liability arises from:
① the initial recognition of goodwill; or
② the initial recognition of an asset or liability in a transaction which:
a. is not a business combination; and
b. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
③ A deferred income tax liability is recognised for all taxable temporary differences associated with
investments in subsidiaries, branches and associates, and interests in joint ventures, except to the extent that both
of the following conditions are satisfied:
a. the parent, investor or venturer is able to control the timing of the reversal of the temporary difference; and
b. it is probable that the temporary difference will not reverse in the foreseeable future.
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2.22.3. The carrying value of a deferred income tax asset is assessed on the balance sheet date. It is probable that
there is not enough taxable profit in the future against which the deferred income tax asset can be utilised, the
carrying value of the deferred income tax asset is written off; when it becomes probable again that there is enough
taxable profit in the future against which the deferred income tax asset can be utilised, the write-off is reversed.
2.23. Financial leases and operating leases
2.23.1. Operating leases
① When the Company is the leasee to a operating lease, the total lease expenditure is apportioned over the lease
life using the straight line method or on the basis of the leased asset usage. The apportioned amount is recognised
through profit or loss for the relevant period. Initial expenditure directly attributable to the acquisition of the lease
is recognised in administrative expenses for the period in which the expenditure is incurred or recognised through
profit of loss for the period in which the first lease payment is incurred. If a rent holiday is offered by the leasor,
the total expenditure is apportioned over the whole life of the lease using the straight line method or on a
reasonable basis; the lease expense during the rent holiday is accounted for through profit or loss for the relevant
period and recognised as a liability on the balance sheet. If a part of the total lease expenditure is compensated by
the leasor, the residual amount after deducting the compensation from the total lease expenditure is apportioned
over the lease life.
② When the Company is the leasor to a operating lease, the total lease revenue is apportioned over the lease life.
The apportioned amount is recognised through profit or loss for each year of the lease life. Initial expenditure
directly attributable to the grant of the lease is recognised through profit or loss for the period in which it is
incurred. If the initial expenditure is of significant value, it is capitalised and apportioned over the lease life using
the same method adopted for the apportionment of lease revenue; the apportioned amount is recognised through
profit or loss for each year of the lease life. The initial expenditure of significant value is recognised in full
through profit or loss for the period in which the first lease income is accrued if the recognition is so provided by
an agreement. If a rent holiday is offered, the total lease revenue is apportioned over the whole life of the lease
using the straight line method or on a reasonable basis. The apportioned amount is recognised as lease income for
each year of the lease life, including the years within the rent holiday. If a part the total lease expenditure is
compensated by the leasor, the residual amount after deducting the compensation from the total lease revenue is
apportioned over the lease life.
2.23.2. Financial leases
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 assets 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 assets 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 assets 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 assets own
expected useful life.
32
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 assets 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
Revenue from air service for carriage of goods and passengers and from commission or
Operating tax 3%, 5%
rental service
Enterprise income tax Taxable profit 25%
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 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. 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)
3.3.2. As provided by CaiShui[2011]No.48 (财税[2011]48 号《关于跨境设备租赁合同继续实行过渡性营业税
免税政策的通知》) jointly issued by the Ministry of Finance and the State Adnimistration of Taxation on June
30th, 2011 and approved by the State Council, the transitional operating tax exemption applicable to revenue
received by overseas leasor(s) to lease contracts (applicable to both financing lease and operating lease) of
machinery and equipment import leasing involving domestic leasee(s) and overseas leasor(s) entered into prior to
and remaining in force as at December 31st, 2008 continues to apply from January 1st, 2010 to the expiry date of
the relevant contract. Operating tax over-payment in relation to the subject of the operating tax exemption paid by
either the tax payer or the withholding agent during the period from January 1st, 2010 to the issue date of
33
CaiShui[2011]No.48 (here after, the OTO) shall be utilised against the operating tax payable by the tax payer or
the withholding agent calculated from the issue date of CaiShui[2011]No.48. The OTO remaining utilised as at
December 31st, 2011 shall become repayable to the tax payer or the withholding agent.
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 Air Warehousing and
Logistics Centre Co., Ltd Holding Shandong Transportation distribution of air
CNY 30,000,000.00
(hereafter, Qingdao subsidiary Qingdao warehousing cargo,
Logistics) E-commerce, etc
(Continued)
Ending balances of projects
Actual investment value as
Name of subsidiary constituting net investment Shareholding proportion (%) Voting right (%)
at December 31,2011
in the subsidiary
Qingdao Logistics 48,323,205.97 0.00 100.00 100.00
(Continued)
The balance of parent companys
Value of minority equity, that is equal to the parent
interest that utilized shareholders equity less the
Financial statement
Name of subsidiary Minority interest to write off the profits subsidiarys current loss undertaken
consolidation
or losses attributed to by the minority shareholders
minority shareholders according their share quotient at the
beginning of the period
Qingdao Logistics Yes 0.00 0.00 0.00
4.2. Subsidiaries acquired through business combination not under common control
Type of Place of
Name of subsidiary Nature of business Registered capital Business scope
subsidiary registration
Development and
Qingdao Feisheng
application of civil
International Aviation
aviation
Training Technology Wholly-owned Shandong
Pilot training CNY 51,545,500.00 technology; pilot
Development Co., Ltd subsidiary Qingdao
training and related
(hereafter, Qingdao
activities and
Feisheng)
consultancy
(Continued)
Actual investment value as Ending balances of projects
Name of subsidiary Shareholding proportion (%) Voting right (%)
at December 31,2011 constituting net investment
34
in the subsidiary
Qingdao Feisheng 57,677,479.46 0.00 100.00 100.00
(Continued)
The balance of parent companys
Value of minority equity, that is equal to the parent
interest that utilized shareholders equity less the
Financial statement
Name of subsidiary Minority interest to write off the profits subsidiarys current loss undertaken
consolidation
or losses attributed to by the minority shareholders
minority shareholders according their share quotient at the
beginning of the period
Qingdao Feisheng Yes 0.00 0.00 0.00
4.3. Change of the scope of consolidation
The scope of consolidation for the year ended December 31st, 2011 remained unchanged from the scope of
consolidation as at December 31st, 2010.
Note 5. Main elements of the consolidated financial statements
5.1. Monetary funds
2011.12.31 2010.12.31
Original Exchange Presentation Original Exchange Presentation
currency rate currency currency rate currency
Cash in hand
CNY 444,053.27 1.000000 444,053.27 351,682.13 1.000000 351,682.13
HKD 106.60 0.810700 86.42 4,386.60 0.850930 3,732.69
USD 1,534.07 6.300900 9,666.02 21,819.25 6.622700 144,502.35
GBP 58.55 9.711600 568.61 1,377.70 10.218200 14,077.61
CAD 10.00 6.177700 61.78 10.00 6.603100 66.03
JPY 130,000.00 0.081100 10,543.00 582,000.00 0.081260 47,293.32
EUR 0.00 8.162500 0.00 514.00 8.806500 4,526.54
TWD 29.00 0.208355 6.04 1,680.00 0.226180 379.98
Subtotal 464,985.14 566,260.65
Demand deposit
CNY 236,879,354.17 1.000000 236,879,354.17 143,126,509.59 1.000000 143,126,509.59
USD 315,249.24 6.300900 1,986,353.94 627,267.34 6.622700 4,154,203.41
KRW 10,003,126.00 0.005476 54,777.12 40,902,359.18 0.005823 238,174.43
TWD 3,840,930.00 0.208355 800,277.11 1,038,562.00 0.226180 234,901.82
JPY 0.00 0.081100 0.00 3,522,454.00 0.081260 286,234.61
35
2011.12.31 2010.12.31
Original Exchange Presentation Original Exchange Presentation
currency rate currency currency rate currency
Subtotal 239,720,762.34 148,040,023.86
Other monetary funds
CNY 8,000,000.00 1.000000 8,000,000.00 184,966,363.25 1.000000 184,966,363.25
Subtotal 8,000,000.00 184,966,363.25
Total 248,185,747.48 333,572,647.76
5.1.1. Restricted other monetary funds amounting to 8 million as at December 31st, 2011 included security deposit
amounting to 7.5 million for bankers acceptance.
5.2. Financial assets held for trading
Fair value as at 2011.12.31 Fair value as at 2010.12.31
Interest rate swaps 0.00 9,290,846.62
Total 0.00 9,290,846.62
36
5.2.1. The balance of financial assets held for trading as at December 31st, 2011 decreased for 100.00% from that
as at December 31st, 2010, mainly due to decrease in fair value of financial assets held for trading held by the
Company.
5.3. Accounts receivable
5.3.1. Disclosure by classification
2011.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Accounts receivable of individual 133,831,501.87 70.68 0.00 0.00
significance
Categorised accounts receivable:
Categorisation by nature of receivables 54,598,614.70 28.84 2,729,930.73 5.00
Subtotal of category 54,598,614.70 28.84 2,729,930.73 5.00
Accounts receivable of individual
insignificance subject to individual 916,508.05 0.48 916,508.05 100.00
assessment for impairment
Total 189,346,624.62 100.00 3,646,438.78 1.93
(continued)
2010.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Accounts receivable of individual
significance 159,361,519.11 81.68 0.00 0.00
Categorised accounts receivable:
Categorisation by nature of receivables 34,824,626.72 17.85 1,741,231.34 5.00
Subtotal of category 34,824,626.72 17.85 1,741,231.34 5.00
Accounts receivable of individual
insignificance subject to individual 916,508.05 0.47 916,508.05 100.00
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 receivables 54,598,614.70 5.00 2,729,930.73
Total 54,598,614.70 5.00 2,729,930.73
5.3.2. Accounts receivable of individual significance subject to individual assessment for impairment:
Provision for bad
Content Book value debts Proportion (%) Reason for provision
Individually assessed as
Air China 54,247,936.00 0.00 0.00 non-impaired
Individually assessed as
BSP 49,694,136.64 0.00 0.00 non-impaired
37
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Individually assessed as
CAAC Settlement Centre 29,889,429.23 0.00 0.00 non-impaired
Total 133,831,501.87 0.00 0.00
5.3.3. Accounts receivable of individual significance subject to individual assessment for impairment:
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Individually assessed as
CR Airways 916,508.05 916,508.05 100.00 uncollectable
Total 916,508.05 916,508.05 100.00
5.3.4. Accounts receivables owed by shareholders with 5% or more voting right during the reporting period
2011.12.31 2010.12.31
Shareholder
Amount Provision for bad debts Amount Provision for bad debts
Air China 54,247,936.00 0.00 66,366,844.88 0.00
Total 54,247,936.00 0.00 66,366,844.88 0.00
5.3.5. Top five accounts receivable
Relationship with the % of total accounts
Name of company Company Amount Age receivable
Air China Related party 54,247,936.00 Within 1 year 28.65
BSP Non-related party 49,694,136.64 Within 1 year 26.24
CAAC Settlement Centre Non-related party 29,889,429.23 Within 1 year 15.79
China Post, Jinan Non-related party 4,380,569.48 Within 1 year 2.31
Air China Cargo Co., Ltd. Related party 3,762,274.92 Within 1 year 1.99
Total 141,974,346.27 74.98
5.3.6. Accounts receivables owed by related parties
% of total accounts
Name of company Relationship with the Company Amount receivable
Air China Principal investor of the Company 54,247,936.00 28.65
Shenzhen Airlines Co., Ltd. Controlled by principal investors of the Company 1,849,400.00 0.97
Air China Cargo Co., Ltd. Controlled by principal investors of the Company 3,762,274.92 1.99
Total 59,859,610.92 31.61
5.4. Advances to suppliers
5.4.1. Disclosure by age
2011.12.31 2010.12.31
Age
Amount Proportion(%) Amount Proportion(%)
Within 1 year 40,518,175.85 97.99 27,837,071.95 98.18
1 to 2 years 343,276.80 0.83 479,793.30 1.69
2 to 3 years 476,994.00 1.15 27,706.35 0.10
3 to 4 years 10,000.00 0.03 8,884.20 0.03
38
2011.12.31 2010.12.31
Age
Amount Proportion(%) Amount Proportion(%)
Total 41,348,446.65 100.00 28,353,455.80 100.00
5.4.2. Top five advances to suppliers
Reason for
Name of company Relationship with the Company Amount Age unsettlement
Prepayment for
RBS AEROSPACE LTD Non-related party 8,261,354.97 Within 1 year aircraft rental
Shandong XiangYu Air Technology Prepayment for
Co., Ltd. Related party 4,511,590.60 Within 1 year purchase
Prepayment for
Inishcrean Leasing Limited Non-related party 4,411,120.00 Within 1 year aircraft rental
ACG ACQUISITION IRELAND III Prepayment for
LIMITED Non-related party 3,864,970.30 Within 1 year aircraft rental
AerDragon Aviation Partners Prepayment for
Limited Non-related party 2,773,022.14 Within 1 year aircraft rental
Total 23,822,058.01
5.4.3. No advance to supplier was paid to shareholders who own 5% or more voting rights as at December 31st,
2011.
5.4.4. Advances to suppliers paid to related parties
% of total accounts
Name of company Relationship with the Company Amount receivables
Shandong XiangYu Air Controlled by principal investors of the Company 4,511,590.60 10.91
Technology Co., Ltd.
Total 4,511,590.60 10.91
5.4.5. The balance of advances to suppliers as at December 31st, 2011 increased for 45.83% from that as at
December 31st, 2010, mainly due to increased prepayment for aircraft rental resulted from the increased number of
leased aircraft.
5.5. Interests receivable
Item 2010.12.31 Increase in year Decrease in year 2011.12.31
Interests on bank deposits 1,409,528.13 0.00 1,409,528.13 0.00
Total 1,409,528.13 0.00 1,409,528.13 0.00
5.5.1. The balance of interests receivable as at December 31st, 2011 decreased for 100.00% from that as at
December 31st, 2010, mainly due receipt of interest during the current reporting period.
5.6. Other receivables
5.6.1. Disclosure by classification
2011.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Other receivables of individual
significance 168,048,800.93 55.87 109,051,717.65 64.89
Categorised other receivables:
Categorisation by nature of receivables 51,848,032.27 17.23 2,592,401.60 5.00
Subtotal of category 51,848,032.27 17.23 2,592,401.60 5.00
39
2011.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Other receivables of individual
insignificance subject to individual 80,903,554.97 26.90 0.00 0.00
assessment for impairment
Total 300,800,388.17 100.00 111,644,119.25 37.12
(continued)
2010.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Other receivables of individual 68.01 109,051,717.65 47.71
significance 228,578,538.56
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 51,848,032.27 5.00 2,592,401.60
Total 51,848,032.27 5.00 2,592,401.60
5.6.2. Other receivables of individual significance subject to individual assessment for impairment:
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Shandong Rainbow Individually assessed as
Commercial Jet Co., Ltd. 109,051,717.65 109,051,717.65 100.00 uncollectable
Individually assessed as
CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00 non-impaired
Singapore Aircraft Leasing Individually assessed as
Enterprise 17,642,520.00 0.00 0.00 non-impaired
Total 168,048,800.93 109,051,717.65 64.89
5.6.3. Other receivables of individual insignificance subject to individual assessment for impairment:
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Air China 13,859,769.26 0.00 0.00 Individually assessed as
non-impaired
Beijing FuLaiTe Technology 12,658,829.43 0.00 0.00 Individually assessed as
40
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Development Co., Ltd. non-impaired
Aviation Captial Group Individually assessed as
Corporation 11,426,518.83 0.00 0.00 non-impaired
Babcock ＆ Brown Aircraft Individually assessed as
Managment LLC 9,325,332.00 0.00 0.00 non-impaired
Rainier Aircraft Individually assessed as
Leasing(Ireland) Limited 8,411,701.50 0.00 0.00 non-impaired
Individually assessed as
KuaiQian Telephone Payment 7,681,177.00 0.00 0.00 non-impaired
Aerdragon Aviation Partners Individually assessed as
Limited 4,322,417.40 0.00 0.00 non-impaired
Rainier Aircraft Individually assessed as
Leasing(Ireland) Limited 4,245,297.00 0.00 0.00 non-impaired
Pacific Brihar Corporation Individually assessed as
Limited 3,326,875.20 0/00 0.00 non-impaired
China Merchants Bank Phone Individually assessed as
Payment 2,094,297.00 0.00 0.00 non-impaired
Individually assessed as
HuiFuTianXia Phone Payment 1,273,565.00 0.00 0/00 non-impaired
Individually assessed as
Shannon Engine Support LTD 787,612.50 0.00 0.00 non-impaired
GSI Engine Beta Limited Individually assessed as
Partnership 689,948.55 0.00 0.00 non-impaired
MTU Maintenance Individually assessed as
Berlin-Brandenburg Gmbh 630,090.00 0.00 0.00 non-impaired
WEST ENGINE FUNDING Individually assessed as
LLC 170,124.30 0.00 0.00 non-impaired
Total 80,903,554.97 0.00 0.00
5.6.4. Other receivables owed by shareholders with 5% or more voting right during the reporting period
2011.12.31 2010.12.31
Shareholder Provision for bad Provision for bad
Amount Amount
debts debts
Air China 13,859,769.26 0.00 40,503,711.76 0.00
Total 13,859,769.26 0.00 40,503,711.76 0.00
5.6.5. Top five other receivables
Relationship with the % of total other
Name of company Company Amount Age receivables
Shandong Rainbow Commercial Related party 109,051,717.65 4 to 8 years 36.25
Jet Co., Ltd.
41
Name of company Relationship with the Amount Age % of total other
Company receivables
CBD-leasing Co., Ltd. Non-related party 41,354,563.28 Over 5 years 13.75
Singapore Aircraft Leasing
Enterprise Non-related party 17,642,520.00 Over 4 years 5.87
Rockwell Collins Non-related party 14,368,919.81 Within 1 year 4.77
Air China Related party 13,859,769.26 Within 1 year 4.61
Total 196,277,490.00 65.25
5.6.6. Other receivables owed by related parties
% of total other
Name of company Relationship with the Company Amount receivables
Air China Principal investor of the Company 13,859,769.26 4.61
Shandong Rainbow Commercial
Jet Co., Ltd. Associate 109,051,717.65 36.25
Total 122,911,486.91 40.86
5.7. Inventories
5.7.1. Disclosure by classification
2011.12.31 2010.12.31
Classification Impairmetn Carrying Impairmetn Carrying
Book value provision amount Book value provision amount
Consumable air 111,200,001.62 0.00 111,200,001.62 73,805,475.19 0.00 73,805,475.19
quipements
Low-value 4,283,702.66 0.00 4,283,702.66 3,066,637.08 0.00 3,066,637.08
consumables
Materials 787,075.91 0.00 787,075.91 915,137.19 0.00 915,137.19
Total 116,270,780.19 0.00 116,270,780.19 77,787,249.46 0.00 77,787,249.46
5.7.2. The balance of inventories as at Decmeber 31st, 2011 increased for 49.47% from that as at December 31st,
2010, mainly due to fleet expansion and airborne materials purchased for aircraft redelivery inspection and aircraft
6C inspection.
5.8. Investment in associate
Type of Place of Legal Scope of Registered Shareholding Voting right
Investee
incorporation registration representative business capital (%) (%)
Shandong Rainbow Limited liability Jinan, Air
ZHAO, Hong 50 million 45.00 45.00
Commercial Jet Co., Ltd. company Shandong transportation
(continued)
Total assets Total liabilities Net Assets Total revenue for the
Investee Net profit for the year
as at 2011.12.31 as at 2011.12.31 as at 2011.12.31 year
Shandong Rainbow
11,569,427.94 175,265,154.52 -163,695,726.58 0.00 -370,092.48
Commercial Jet Co., Ltd.
5.9. Long-term equity investments
5.9.1. Disclosure by classification
42
Impairment
Movement Impairment
Investee 2010.12.31 2011.12.31 provision recognised
in year provision
in year
A. Long-term equity investments measured by the historical
cost convention
China Travelsky Technology 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
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)
Reason for
disagreement between
Investee Cost of investment Shareholding Voting right Cash dividend in year
shareholding and
voting right
A. Long-term equity investments measured by the
historical cost convention
China Travelsky Technology Co., Ltd. 6,690,000.00 0.45% 0.45% No disagreement 1,365,429.00
Sichuan Airlines Co., Ltd. 35,000,000.00 10.00% 10.00% No disagreement 10,000,000.00
Jinan International Airport Co., Ltd. 46,662,100.00 2.53% 2.53% No disagreement 475,953.42
Subtotal 88,352,100.00 11,841,382.42
Long-term equity investments measured by the
equity method
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 45.00% 45.00% No disagreement 0.00
Subtotal 22,500,000.00 0.00
Total 110,852,100.00 11,841,382.42
5.9.2. No long-term equity investment was imposed with limitation on disposal as at December 31st,2011.
5.10. Fixed assets and cumulative depreciation
5.10.1. Disclosure by classification
2010.12.31 Increase in year Decrease in year 2011.12.31
① Total historical cost 9,441,571,584.73 957,810,951.36 125,280,343.04 10,274,102,193.05
Houses and building 220,973,772.50 92,691.60 4,531,679.20 216,534,784.90
Aircrafts and engines 8,634,686,536.61 849,881,572.10 94,682,774.09 9,389,885,334.62
High-value rotables 454,825,178.55 77,859,740.58 18,564,687.34 514,120,231.79
Transportation vehicles 39,730,267.30 11,331,232.00 2,248,087.00 48,813,412.30
43
2010.12.31 Increase in year Decrease in year 2011.12.31
Machinery, equipments and 91,355,829.77 18,645,715.08 5,253,115.41 104,748,429.44
other
② Cumulative depreciation 2,825,074,223.88 669,156,553.70 97,395,216.81 3,396,835,560.77
Houses and building 33,521,100.29 6,240,479.88 368,019.18 39,393,560.99
Aircrafts and engines 2,560,983,059.34 621,717,729.76 84,932,336.58 3,097,768,452.52
High-value rotables 160,762,852.44 29,173,120.36 6,752,888.63 183,183,084.17
Transportation vehicles 20,234,367.71 3,571,410.18 1,991,735.12 21,814,042.77
Machinery, equipments and
other 49,572,844.10 8,453,813.52 3,350,237.30 54,676,420.32
③ Impairment provision 0.00 193,810,080.67 0.00 193,810,080.67
Houses and building 0.00 0.00 0.00 0.00
Aircrafts and engines 0.00 178,336,555.41 0.00 178,336,555.41
High-value rotables 0.00 15,473,525.26 0.00 15,473,525.26
Transportation vehicles 0.00 0.00 0.00 0.00
Machinery, equipments and
other 0.00 0.00 0.00 0.00
④ Carrying amount 6,616,497,360.85 6,683,456,551.61
Houses and building 187,452,672.21 177,141,223.91
Aircrafts and engines 6,073,703,477.27 6,113,780,326.72
High-value rotables 294,062,326.11 315,463,622.33
Transportation vehicles 19,495,899.59 26,999,369.53
Machinery, equipments and 41,782,985.67 50,072,009.12
other
Note: ① Included in the cumulative depreciation increase in year, 669,156,553.70 was recognised during the
current reporting period; cost of fixed assets transferred from construction in progress during the current reporting
period amounting to 359,417,624.59;
② The carrying amount of aircrafts and engines pledged as security for bank loans and financial lease amounting
to 5,189,323,390.34.
5.10.2. Fixed assets acquired under financial lease
Cumulative
Historical cost depreciation Impairment allowance Carrying amount
Aircrafts and engines 1,685,994,438.14 455,927,267.36 0.00 1,230,067,170.78
Total 1,685,994,438.14 455,927,267.36 0.00 1,230,067,170.78
5.10.3. Fixed assets pending ownership registration
Carrying amount Reason for pending ownership registration
44
Carrying amount Reason for pending ownership registration
Jinan cargo arrival and departure 15,172,683.04 Land rented from Jinan Air Control, no
warehouses eligible for ownership registration
Qingdao aircraft maintenance 39,891,174.40 Ownership registration in process
workshops
Yantai terminal building 19,240,557.20 Ownership registration in process
Total 74,304,414.64
5.10.4. Impairment provision for fixed assets
Impairment provision recognised for aircrafts and engines and high-value rotables as at December 31st, 2011
amounting to 178,336,555.41 and 15,473,525.26 respectively. The amount of impairment estimated by Assets
Appraisal Report LuZhengXinPingBaoZi[2012]No.0001 (鲁正信评报字[2012]第 0001 号资产评估报告) that
issued by Shandong Zhengyuan Hexin Assets Appraisal Co., Ltd. (山东正源和信资产评估有限公司).
5.11. Construction in progress
5.11.1. Disclosure by project
2011.12.31 2010.12.31
Project Impairment Impairment
Book value Carrying amount Book value Carrying amount
provision provision
B737-800 aircrafts 1,559,456,551.45 0.00 1,559,456,551.45 863,452,904.96 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
B737NG simulator 100,000.00 0.00 100,000.00 0.00 0.00 0.00
Terminal building 22,956,157.35 0.00 22,956,157.35 11,479,922.80 0.00 11,479,922.80
Other projects 1,634,015.58 0.00 1,634,015.58 1,542,227.58 0.00 1,542,227.58
Total 1,644,924,919.38 0.00 1,644,924,919.38 937,253,250.34 0.00 937,253,250.34
5.11.2. Movement of significant construction projects
Transferred to
Project 2010.12.31 Increase in year fixed assets in Other decrease in 2011.12.31
year year
B737-800 aircrafts 863,452,904.96 1,055,421,271.08 359,417,624.59 0.00 1,559,456,551.45
ARJ21-700 aircrafts 60,778,195.00 0.00 0.00 0.00 60,778,195.00
B737NG simulator 0.00 100,000.00 0.00 0.00 100,000.00
Terminal building 11,479,922.80 11,476,234.55 0.00 0.00 22,956,157.35
Other projects 1,542,227.58 5,051,550.19 0.00 4,959,762.19 1,634,015.58
Total 937,253,250.34 1,072,049,055.82 359,417,624.59 4,959,762.19 1,644,924,919.38
5.11.3. Capitalisation of borrowing costs included in construction in progress
Transferred to
Other decrease
Project 2010.12.31 Increase in year fixed assets in 2011.12.31 Funding souce
in year
year
Financial institution
B737-800 aircrafts -6,630,973.04 -13,228,789.50 -3,097,109.77 0.00 -16,762,652.77
lending
Financial institution
ARJ21-700 aircrafts 487,587.70 0.00 0.00 0.00 487,587.70
lending
45
Transferred to
Other decrease
Project 2010.12.31 Increase in year fixed assets in 2011.12.31 Funding souce
in year
year
Total -6,143,385.34 -13,228,789.50 -3,097,109.77 0.00 -16,275,065.07
5.11.4. The balance of aircraft purchase right pledge as security for bank loans amounted to 1,472,293,822.60 as
at December 31st, 2011.
5.11.5. No impairment provision shall be recognised for construction in progress as at December 31st, 2011.
5.11.6. The balance of construction in progress as at December 31st, 2011 increased for 75.50% from that as at
December 31st, 2010, mainly due to progress payment for aircraft purchase.
5.12. Intangible assets
5.12.1. Disclosure
2010.12.31 Increase in year Decrease in year 2011.12.31
Total historical cost 50,808,133.13 35,400,000.00 2,606,200.00 83,601,933.13
Land use rights 50,808,133.13 35,400,000.00 2,606,200.00 83,601,933.13
Total cumulative amortisation 3,661,766.60 934,030.49 180,986.00 4,414,811.09
Land use rights 3,661,766.60 934,030.49 180,986.00 4,414,811.09
Total book value 47,146,366.53 79,187,122.04
Land use rights 47,146,366.53 79,187,122.04
Total impairment provision 0.00 0.00 0.00 0.00
Land use rights 0.00 0.00 0.00 0.00
Total carrying amount 47,146,366.53 79,187,122.04
Land use rights 47,146,366.53 79,187,122.04
5.12.2. No impairment provision shall be recognised for construction in progress as at December 31st, 2011.
5.12.3. The balance of intangible assets as at December 31st, 2011 increased for 67.96% from that as at December
31st, 2010, mainly due to payment for Xiamen land use rights.
5.13. Goodwill
Impairment
Investee Type of 2010.12.31 Increase in Decrease in 2011.12.31 provision
combination year year as at 2011.12.31
Business
combination
Qingdao Feisheng not under 10,220,816.22 0.00 0.00 10,220,816.22 0.00
common
control
46
Total 10,220,816.22 0.00 0.00 10,220,816.22 0.00
With respect to the operating assets and the audit of financial performance of Qingdao Feisheng and the assets
appraisal report as at December 31st, 2011, the management believes that no impairment shall be recognised for
the respective goodwill as at December 31st, 2011.
5.14. Long-term deferred expenses
2010.12.31 Increase Amortisation in Other decrease in 2011.12.31 Reason for
in year year year other decrease
Pilot recruitment and training
expenditure 229,830,196.19 64,655,783.14 45,381,878.21 0.00 249,104,101.12
Jinan Operation Building
Decoration expenditure 0.00 7,027,671.70 351,383.59 0.00 6,676,288.11
Total 229,830,196.19 71,683,454.84 45,733,261.80 0.00 255,780,389.23
5.15. Deferred income tax assets and deferred income tax liabilities
5.15.1. Recognised deferred income tax assets and deferred income tax liabilities
2011.12.31 2010.12.31
Deferred income tax assets
Provision for bad debts 28,822,639.51 28,459,246.26
Impairment provision for fixed assets 48,452,520.17 0.00
Accrued substantial maintenance expenditure 135,006,662.91 90,795,645.87
Undue wages and salaries 17,388,124.64 6,513,851.27
Unutilised loss 195,890.90 0.00
Changes of fair value of financial liabilities held for trading 536,380.28 966,452.38
Subtotal 230,402,218.41 126,735,195.78
Deferred income tax liabilities
Changes of fair value of financial assets held for trading 0.00 2,322,711.66
Subtotal 0.00 2,322,711.66
5.15.2. Temporary differences
2011.12.31
Temporary differences resulted in deferred tax assets
Provision for bad debts 115,290,558.03
Impairment provision for fixed assets 193,810,080.67
Accrued substantial maintenance expenditure 540,026,651.65
Undue wages and salaries 69,552,498.55
Unutilised loss 783,563.60
47
2011.12.31
Changes of fair value of financial liabilities held for trading 2,145,521.10
Subtotal 921,608,873.60
Temporary differences resulted in deferred tax liabilities
Changes of fair value of financial assets held for trading 0.00
Subtotal 0.00
5.15.3. The balance of deferred income tax assets as at December 31st, 2011 increased for 81.80% from that as at
December 31st, 2010, mainly due to recognition of impairment provision for fixed assets and substantial
maintenance expenditure during the current reporting period.
5.15.4. The balance of deferred income tax liabilities as at December 31st, 2011 decreased for 100.00% from that
as at December 31st, 2010, mainly due to decrease in fair value of financial assets held for trading held by the
Company.
5.16. Impairment provision
Decrease in year
2010.12.31 Inrease in year 2011.12.31
Reverse Derecognised
(1) Provision for bad debts for 2,657,739.39 988,699.39 0.00 0.00 3,646,438.78
accounts receivable
(2) Provision for bad debts for 111,179,245.64 464,873.61 0.00 0.00 111,644,119.25
other receivables
(3) Impairment provision for 0.00 193,810,080.67 0.00 0.00 193,810,080.67
fixed assets
(4) Impairment provision for 22,500,000.00 0.00 0.00 0.00 22,500,000.00
long-term equity investments
Total 136,336,985.03 195,263,653.67 0.00 0.00 331,600,638.70
5.17. Short-term borrowings
2011.12.31 2010.12.31
Secured loans (rights on assets pledged) 0.00 93,173,692.10
Unsecured loans 450,000,000.00 399,412,917.40
Guaranteed loans 317,636,239.20 508,682,427.23
Total 767,636,239.20 1,001,269,036.73
5.18. Financial liabilities held for trading
Fair value as at 2011.12.31 Fair value as at 2010.12.31
Interest rate swaps 2,145,521.10 0.00
HuiLiDa contracts 0.00 3,865,809.52
Total 2,145,521.10 3,865,809.52
5.18.1. The principal of inmature interest rate swaps amounting to USD 157,283,026.20 as at December 31st, 2011.
The bank-quoted fair value of the inmature interest rate swaps as at December 31st, 2011 amounting to
CNY-2,145,521.10 (USD -340,510.26).
48
5.18.2. The balance of financial liabilities held for trading as at December 31st, 2011 decreased for 44.50% from
that as at December 31st, 2010, mainly due to HuiLiDa contract settlement and changes in fair value of interest
rate swaps.
5.19. Notes payable
2011.12.31 2010.12.31
Trade acceptance 104,587,852.86 19,042,835.33
Bankers acceptance 24,959,340.48 116,000,000.00
Total 129,547,193.34 135,042,835.33
5.20. Accounts payable
5.20.1. Disclosure by age
Age 2011.12.31 2010.12.31
Within 1 year 1,342,854,460.06 1,007,699,961.12
Over 1 year 31,003,415.17 900,090.37
Total 1,373,857,875.23 1,008,600,051.49
5.20.2. Accounts payable owed to shareholders with 5% or more voting right during the reporting period
Shareholder Nature of account 2011.12.31 2010.12.31
Air China Ground services, delayed flights, 7,735,879.32 3,437,689.95
indemnity for bagages, etc.
Taikoo (Shandong) Aircraft Substantial maintenance fee and 23,072,537.89 27,829,926.58
Engineering Company Limited routine maintenance fee
Aircraft Maintenance and Engineering Maintenance fee and landing fee 3,825,794.45 0.00
Corporation (Ameco Beijing)
Sichuan International Aero Engine Engine maintenance fee 8,835,970.40 0.00
Maintenance Co., Ltd.
Air China Cargo Co., Ltd. Airport landing fee 417,427.64 414,307.39
Total 43,887,609.70 31,681,923.92
5.20.3. Significant accounts payable aged over 1 year
Name of company Amount Age Reason for Post balance sheet
unsettlement date payment
China Travelsky Technology Co., Ltd. 22,311,672.50 1 to 2 years Pending settlement 10,000,000.00
Total 22,311,672.50
5.20.4. The balance of accounts payable as at December 31st, 2011 increased for 36.21% from that as at December
31st, 2010, mainly due to risen air fuel price and increased unsettled balance resuted from increased operating
costs following operation expansion.
5.21. Advances from customers
5.21.1. Disclosure by age
Age 2011.12.31 2010.12.31
Within 1 year 292,567,049.69 202,271,352.58
49
Age 2011.12.31 2010.12.31
Over 1 year 279,602.73 182,316.20
Total 292,846,652.42 202,453,668.78
5.21.2. The balance of advances from customers as at December 31st, 2011 increased for 44.65% from that as at
December 31st, 2010, mainly due to earlier spring festival, improved transportation capacity, etc.
5.21.3. No advance from customer was received from shareholders who own 5% or more voting rights as at
December 31st, 2011.
5.22. Employment benefits payable
2010.12.31 Increase in year Decrease in year 2011.12.31
(1) Wages and salaries, bonuses, subsidies
and allowances 208,426,962.08 911,776,076.12 892,958,193.91 227,244,844.29
(2) Employee benefits 0.00 31,756,622.52 31,756,622.52 0.00
(3) Social insurance 1,647,821.49 122,930,745.62 121,966,460.39 2,612,106.72
Within: ①Medical insurance 1,647,821.49 23,073,910.21 24,721,731.70 0.00
②Basic retirement insurance 0.00 58,276,819.67 58,276,819.67 0.00
③Annuity fee 0.00 30,749,588.46 28,137,481.74 2,612,106.72
④Unemployment fee 0.00 5,334,800.40 5,334,800.40 0.00
⑤Work injury insurance 0.00 1,481,809.31 1,481,809.31 0.00
⑥Pregnancy insurance 0.00 2,374,591.93 2,374,591.93 0.00
⑦Reserved funds for disable 0.00 1,639,225.64 1,639,225.64 0.00
jobseekers
(4) Housing provident fund 15,784.00 36,146,587.47 36,147,081.07 15,290.40
(5) Labor union fee and employee 26,060,092.87 14,948,711.98 7,141,935.61 33,866,869.24
education fee
(6) Non-monetary benefits 0.00 0.00 0.00 0.00
(7) Redemption of termination of labor
contract 0.00 9,170.00 9,170.00 0.00
(8) Others 0.00 0.00 0.00 0.00
Within: Share-based payments settled by
cash 0.00 0.00 0.00 0.00
Total 236,150,660.44 1,117,567,913.71 1,089,979,463.50 263,739,110.65
5.23. Taxes payable
2011.12.31 2010.12.31
VAT and customs 2,889.52 1,240.40
Operating tax 19,366,568.31 14,137,448.21
Urban maintenance and construction
surcharge 1,116,189.38 1,128,615.52
50
2011.12.31 2010.12.31
Education surcharge 1,456,370.22 816,312.29
Corporate income tax 66,816,641.91 55,944,404.35
Property tax 1,191,811.73 1,474,989.82
Tenure tax 135,237.68 111,187.74
Personal income tax 4,111,680.70 4,647,833.69
Stamp duty 3,679,689.12 5,349,980.35
Infrastructure fund for civil aviation 16,027,672.27 14,415,017.73
Construction fund for civil airports 36,262,303.33 44,049,512.00
Withholding income tax 17,237,385.96 17,811,520.19
Withholding operating Tax 715,315.42 10,218,405.79
Others 12,524.02 8,702.89
Total 168,132,279.57 170,115,170.97
5.24. Interests payable
2011.12.31 2010.12.31
Interests on borrowings 8,048,176.38 9,656,528.23
Total 8,048,176.38 9,656,528.23
5.25. Other payables
5.25.1. Disclosure by age
Age 2011.12.31 2010.12.31
Within 1 year 93,969,022.74 74,998,768.73
Over 1 year 67,777,605.67 65,735,212.41
Total 161,746,628.41 140,733,981.14
5.25.2. Other payables owed to shareholders with 5% or more voting right during the reporting period
Shareholder Nature of account 2011.12.31 2010.12.31
SDA Group Operating balance 1,008,583.74 12,192,570.48
Air China Quality margin 20,000,000.00 20,000,000.00
Taikoo (Shandong) Aircraft
Engineering Company Limited Operating balance 245,400.00 245,400.00
Shenzhen Airlines Co., Ltd. Operating balance 1,850,144.00 1,083,308.00
Total 23,104,127.74 33,521,278.48
5.25.3. Significant other payables aged over 1 year
Name of company Amount Age Reason for unsettlement
51
Wet lease agreement in force, quality
Air China 20,000,000.00 4 to 5 years margin pending settlement
Total 20,000,000.00
5.26. Non-current liaibilities due within one year
5.26.1. Disclosure
2011.12.31 2010.12.31
Long-term borrowings due within one year 258,278,648.16 371,061,574.72
Long-term payables due within one year 207,290,340.48 165,039,834.26
Total 415,568,988.64 536,101,408.98
Less: Unrecognised financial lease expenditure 81,011,628.25 59,333,529.93
Total 384,557,360.39 476,767,879.05
5.26.2. Long-term borrowings due within one year
① Disclosure
2011.12.31 2010.12.31
Secured loans (assets pledged) 258,278,648.16 304,786,981.68
Secured loans (rights on assets pledged) 0.00 53,667,049.45
Guaranteed loans 0.00 12,607,543.59
Total 258,278,648.16 371,061,574.72
② Top five long-term borrowings due within one year
2011.12.31 2010.21.31
Lender Start date Expiry date Currency Origincal Presentation Origincal Presentation
currency currency currency currency
BOC, Jinan Branch 15 Jul 2005 Step USD 11,200,000.00 70,570,080.00 0.00 0.00
repayment
Minsheng Bank, 7 Apr 2005 Step CNY 50,000,000.00 50,000,000.00 0.00 0.00
Jinan Branch repayment
China Development Step
Bank, Shandong 11 Jul 2008 repayment USD 6,600,000.00 41,585,940.00 0.00 0.00
Branch
ICBC, Jinan 30 Jun 2009 Step USD 4,000,000.00 25,203,600.00 0.00 0.00
Dongjiao Branch repayment
Bank of
Communications, 30 May 2006 Step CNY 17,700,000.00 17,700,000.00 0.00 0.00
Jinan Tianqiao repayment
Branch
Total 205,059,620.00 0.00
Note: Interest rates applicable to the borrowings listed above ranged from 1.4945% to 7.0500% as at December
31st, 2011.
5.26.3. No overdue borrowing remained unpaid as at December 31st, 2011.
5.26.4. Long-term payables due within one year
52
Interest
Leasor Term Initial amount rate Interest 2011.12.31 Condition
(%) for landing
June 2005 to June Asset
CBD-lease Co., Ltd. 2020 1,440,000,000.00 7.473 62,342,379.93 112,186,557.02 pledged
CALC Jian Zhao August 2011 to Asset
Limited August 2026 284,290,146.39 7.050 18,669,248.32 14,092,155.21 pledged
Total 1,724,290,146.39 81,011,628.25 126,278,712.23
5.27. Long-term borrowings
5.27.1. Disclosure
2011.12.31 2010.12.31
Secured loans (assets pledged) 161,774,914.40 141,288,880.48
Secured loans (rights on assets pledged) 2,301,107,100.91 2,013,807,266.59
Guaranteed loans 544,127,623.23 1,025,187,030.48
Total 3,007,009,638.54 3,180,283,177.55
5.27.2. Top five long-term borrowings
2011.12.31 2010.21.31
Lender Start date Expiry date Currency Origincal Presentation Origincal Presentation
currency currency currency currency
ICBC, Jinan Step
Dongjiao Branch 30 Jun 2009 repayment USD 26,491,654.64 166,921,266.72 30,491,654.64 201,937,081.18
Step
BOC, Jinan Branch 21 Dec 2005 repayment USD 26,213,260.00 165,167,129.93 26,213,260.00 173,602,557.00
Step
BOC, Jinan Branch 19 Oct 2005 repayment USD 24,315,798.60 153,211,415.40 26,071,798.00 172,665,696.62
Minsheng Bank, Step
Jinan Branch 7 Apr 2005 repayment CNY 150,000,000.00 150,000,000.00 200,000,000.00 200,000,000.00
China Development
Bank, Shandong 9 Mar 2009 Step USD 19,845,450.00 125,044,195.91 19,845,450.00 131,430,461.72
Branch repayment
Total 760,344,007.96 879,635,796.52
Note: Interest rates applicable to the borrowings listed above ranged from 1.4945% to 7.0500% as at December
31st, 2011.
5.28. Long-term payables
5.28.1. Top five long-term payables
Condition
Leasor Term Initial amount Interest rate Interest 2011.12.31 for
(%) landing
June 2005 to June
CBD-lease Co., Ltd. 2020 1,440,000,000.00 7.473 250,546,565.19 751,002,964.49 Asset pledged
August 2011 to
CALC Jian Zhao Limited August 2026 284,290,146.39 7.050 134,578,500.59 253,197,384.85 Asset pledged
Total 1,724,290,146.39 385,125,065.78 1,004,200,349.34
5.28.2. Long-term payables as at December 31st, 2011 were financial lease rentals payable.
53
5.29. Other non-current liabilities
2011.12.31 2010.12.31
CRJ700 post-sale buy-back 0.00 695,774.11
Designated subsidy for snow disaster 3,987,958.34 4,374,958.34
SMS fund 1,000,000.00 1,000,000.00
PhoenixMiles Program 127,562,137.01 53,304,246.55
Desigated subsidy for IT construction 10,000,000.00 0.00
Designated subsidy for civil aviation
energy-saving program 17,711,566.24 14,015,649.74
Total 160,261,661.59 73,390,628.74
5.29.1. Asset-related government grants
2010.12.31 Increase in year Decrease in year 2011.12.31
Designated subsidy for snow disaster 4,374,958.34 0.00 387,000.00 3,987,958.34
SMS fund 1,000,000.00 0.00 0.00 1,000,000.00
Desigated subsidy for IT construction 0.00 10,000,000.00 0.00 10,000,000.00
Designated subsidy for civil aviation 14,015,649.74 4,540,000.00 844,083.50 17,711,566.24
energy-saving program
Total 19,390,608.08 14,540,000.00 1,231,083.50 32,699,524.58
5.29.2. PhoenixMiles Program
2010.12.31 Increase in year Decrease in year 2011.12.31
PhoenixMiles Program 53,304,246.55 80,542,474.93 6,284,584.46 127,562,137.01
Total 53,304,246.55 80,542,474.93 6,284,584.46 127,562,137.01
5.29.3. The balance of other non-current liabilities as at December 31st, 2011 increased for 1.18 times from that as
at December 31st, 2010, mainly due to increased airmiles accrued within the PhoenexMiles Program.
5.30. Share capital
Movement in year Unit: Shares
2010.12.31 Share Bonus Shares converted from Others Subtotal 2011.12.31
allotment issue accumulated fund
(1) Unlisted floating shares
① Promoters 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
54
Movement in year Unit: Shares
Share Bonus Shares converted from
2010.12.31 allotment issue accumulated fund Others Subtotal 2011.12.31
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
② Private placement of 0.00 0.00 0.00 0.00 0.00 0.00 0.00
legal persons 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 0.00 0.00 0.00 0.00 0.00 0.00 0.00
management
② Domestic shares in 140,000,000.00 0.00 0.00 0.00 0.00 0.00 140,000,000.00
foreign currency
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 0.00 0.00 0.00 0.00 0.00 0.00 0.00
imposed 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 Shares listed above has the face value of 1.00 per share.
②The 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.
5.31. Capital reserves
2010.12.31 Increase in year Decrease in year 2011.12.31
Share premium 76,258,081.68 2,861,005.87 11,500,805.01 67,618,282.54
Other capital reserves 7,792,081.16 0.00 0.00 7,792,081.16
Total 84,050,162.84 2,861,005.87 11,500,805.01 75,410,363.70
Note: ① Capital reserves increase in year amounted to 2,861,005.87, mainly due to receipt compensation from
SDA Group for below-expectation performance of Qingdao Feisheng. ② Capital reserves decrease in year
amounted to 11,500,805.01, mainly due to the difference between the consideration paid to acquire minority
interest of Qingdao Logistics and share of movement of the post-acquisition net assets of Qingdao Logistics.
5.32. Surplus reserves
2010.12.31 Increase in year Decrease in year 2011.12.31
Statutory surplus reserves 122,944,754.89 76,469,266.86 0.00 199,414,021.75
Total 122,944,754.89 76,469,266.86 0.00 199,414,021.75
5.33. Undistributed profit
55
2011.12.31 2010.12.31
Balance brought forward 799,664,252.17 308,668,390.11
Add: Profits for the year 771,225,549.05 634,364,547.92
Add: Other transfers 0.00 0.00
Less: Statutory surplus reserve 76,469,266.86 63,368,685.86
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 capital 0.00 0.00
Balance carried forward 1,374,420,534.36 799,664,252.17
5.34. Operating revenue and operating costs
5.34.1. Disclosure by classification
Y/e 2011.12.31 Y/e 2010.12.31
Principle operating revenue 9,562,851,733.23 7,210,784,560.38
Other operating revenue 104,118,011.97 81,831,396.72
Total 9,666,969,745.20 7,292,615,957.10
Principle operating costs 7,256,886,850.82 5,482,183,711.49
Other operating costs 6,365,030.93 5,407,179.34
Total 7,263,251,881.75 5,487,590,890.83
5.34.2. Disclosure by operation
Y/e 2011.12.31 Y/e 2010.12.31
Operation
Operating revenue Operating costs Operating revenue Operating costs
Air transportation 9,523,675,225.67 7,228,984,657.23 7,173,305,400.49 5,459,720,041.47
Cargo and logistics 8,011,904.01 2,773,224.10 13,378,807.87 2,465,292.18
Hospitality 23,081,379.95 21,850,046.48 25,414,051.87 20,815,817.17
Training 17,333,253.52 7,032,351.04 4,592,028.00 1,586,953.63
Rental 607,750.00 117,469.97 88,110.26 0.00
Other 94,260,232.05 2,494,132.93 75,837,558.61 3,002,786.38
56
Y/e 2011.12.31 Y/e 2010.12.31
Operation
Operating revenue Operating costs Operating revenue Operating costs
Total 9,666,969,745.20 7,263,251,881.75 7,292,615,957.10 5,487,590,890.83
5.34.3. Operating revenue from top five customers
Customer Operating revenue % of total operating revenue
Customer 1 683,070,133.01 7.07
Customer 2 31,680,000.00 0.33
Customer 3 9,739,110.00 0.10
Customer 4 7,800,000.00 0.08
Customer 5 7,260,000.00 0.07
Total 739,549,243.01 7.65
5.34.4. Operating revenue for the current year increased for 32.56% from that for the previous year, mainly due to
fleet expansion, risen average ticket price, and increased number of onboard pessengers.
5.34.5. Operating costs for the current year increased for 32.36% from that for the previous year, mainly due to
risen air fuel price and increased costs resulted from business expansion.
5.35. Operating tax and surcharges
Y/e 2011.12.31 Y/e 2010.12.31 Tax rate
Operating tax 285,290,624.53 203,287,379.43 3%, 5%
Urban maintenance and 19,969,488.56 1,121,020.57 7%
construction surcharge
Education surcharge 14,251,317.35 800,728.98 3%, 2%
Total 319,511,430.44 205,209,128.98
5.35.1. Operating tax and surcharges for the current year increased for 55.70% from that for the previous year,
mainly due to increased tax liability recognised resulted from increased revenue.
5.36. Sales expenses
Y/e 2011.12.31 Y/e 2010.12.31
Employment benefits payable 124,727,615.68 79,594,030.14
Depreciation 1,921,967.96 1,892,392.40
Travel expense 3,409,904.23 3,301,618.46
Advertisement 14,123,544.57 9,955,763.45
Brokerage fee 337,884,885.04 290,417,787.76
Electronic booking fee 61,405,065.12 55,399,914.32
Online payment charge 16,886,185.15 9,043,151.60
Ticket printing cost 568,807.44 417,667.00
57
Y/e 2011.12.31 Y/e 2010.12.31
Rentals 10,792,458.84 8,738,843.59
System and network subscription 3,040,272.70 3,742,452.53
BSP data processing fee 1,669,314.66 1,559,369.18
Accommodation and catering expenses for transit
passengers
2,632,475.90 1,451,783.60
General expenses 4,404,781.53 3,869,607.58
Uniforms 1,582,735.70 1,223,500.75
Sales expense for annual subscription 21,224,600.00 3,891,500.00
Others 15,291,564.03 5,848,566.76
Total 621,566,178.55 480,347,949.12
5.37. General and administrative expenses
Y/e 2011.12.31 Y/e 2010.12.31
Employment benefits payable 98,767,664.24 72,979,360.47
Depreciation 6,191,904.84 6,423,636.57
General expenses 4,861,667.01 4,179,326.89
Amortisation of intangible assets 804,633.81 360,516.64
Amortisation of long-term deferred expenses 0.00 424,335.24
Taxes and surcharges 8,179,272.10 6,835,211.03
Entertainment expense 13,820,381.31 10,423,957.05
Pollution treatment cost 1,099,701.05 1,146,850.00
Rentals 9,961,104.37 7,390,683.99
Research expense 7,183,485.10 2,054,276.20
Clearing system subscription 3,973,561.94 3,079,512.95
System and network subscription 954,799.89 1,629,499.60
Heating expense 6,320,986.85 2,768,846.57
Consultation fee 2,120,237.43 677,560.42
Others 24,126,220.93 16,092,240.00
Total 188,365,620.87 136,465,813.62
5.37.1. General and administrative expenses for the current year increased for 38.03% from that for the previous
year, mainly due to increased expenditure resulted from business expansion.
5.38. Financial costs
Y/e 2011.12.31 Y/e 2010.12.31
58
Interest expenses 190,069,387.42 209,880,622.29
Less: Interest income 10,138,950.37 5,012,267.84
Exchange differences -97,589,600.65 -61,316,996.38
Bank charges and others 3,695,131.54 6,964,564.29
Total 86,035,967.94 150,515,922.36
5.38.1. Financial costs for the current year decreased for 42.84% from that for the previous year, mainly due to
financial cost control and increased exchange differences resulted Yuan appreciation.
5.39. Impairment loss on assets
Y/e 2011.12.31 Y/e 2010.12.31
Impairment provision for fixed assets 193,810,080.67 0.00
Provision for bad debts 1,453,573.00 1,163,320.01
Total 195,263,653.67 1,163,320.01
5.39.1. Impairment loss on assets for the current year increased for 166.85 times from that for the previous year,
mainly due to impairment provision for aircrafts and high-value rotables recognised during the current year.
5.40. Gain from changes in fair value
Source of fair value change Y/e 2011.12.31 Y/e 2010.12.31
Interest rate swaps -11,436,367.72 -2,050,999.86
HuiLiDa Contracts 3,865,809.52 -3,865,809.52
Total -7,570,558.20 -5,916,809.38
5.41. Investment income
5.41.1. Disclosure by classification
Classification Y/e 2011.12.31 Y/e 2010.12.31
Investment arising from long-term equity
investments measure using the historical cost 11,841,382.42 1,235,391.15
convention
Investment arsing from holding of financial
assets held for trading -3,291,906.49 -2,955,503.33
Total 8,549,475.93 -1,720,112.18
5.41.2. Investment arising from long-term equity investments measured using the historical cost convention
Investee Y/e 2011.12.31 Y/e 2010.12.31 Reason for change from the previous year
China Travelsky Technology Co., Ltd. 1,365,429.00 1,165,398.00 Change of profit distribution
Sichuan Airlines Co., Ltd. 10,000,000.00 0.00 Change of profit distribution
Jinan International Airport Co., Ltd. 475,953.42 69,993.15 Change of profit distribution
Total 11,841,382.42 1,235,391.15
5.41.3. No investment income was imposed with limitation on remittance as at December 31st, 2011.
59
5.41.4. Investement income for the current year increased for 5.97 times from that for the previous year, mainly
due to profit distribution by investess.
5.42. Non-operating income
5.42.1. Disclosure by classfication
Classification Y/e 2011.12.31 Y/e 2010.12.31 Recognised in profit or loss
for the current year
Gains from disposals of non-current assets 7,721,097.44 7,642.69 7,721,097.44
Including: Gains from disposals of fixed assets 7,721,097.44 7,642.69 7,721,097.44
Government grants 21,698,008.50 16,013,518.70 21,698,008.50
Airport-funded flight-route subsidy 17,933,800.00 10,118,467.00 17,933,800.00
Others 8,256,642.58 2,872,615.50 8,256,642.58
Total 55,609,548.52 29,012,243.89 55,609,548.52
5.42.2. Government grants
Y/e 2011.12.31 Y/e 2010.12.31 Note
Subsidy granted
Subsidies for branch route aviation 7,690,000.00 9,500,000.00 by the CAAC regional office
for branch route aviation
Designated subsidy for snow disaster 387,000.00 364,500.00 Amortisation of utilised subsidy
Designated subsidy for civil aviation 844,083.50 974,350.26 Amortisation of utilised subsidy
energy-saving program
Others 12,776,925.00 5,174,668.44 Air route subsidies granted
by local governments
Total 21,698,008.50 16,013,518.70
5.42.3. Non-operating income for the current year increased for 91.68% from that for the previous year, mainly
due to increased government grants and airport-funded flight route subsidy.
5.43. Non-operating expenses
Classification Y/e 2011.12.31 Y/e 2010.12.31 Recognised in profit or loss
for the current year
Total losses from disposals of non-current
assets 17,320,987.51 7,708,562.86 17,320,987.51
Including: Losses from disposals of fixed
assets 17,320,987.51 7,708,562.86 17,320,987.51
Charitable donations 17,000.00 61,175.00 17,000.00
Fines 805,456.51 300,224.97 805,456.51
Others 403,816.60 83,845.00 403,816.60
Total 18,547,260.62 8,153,807.83 18,547,260.62
5.43.1. Non-operating expenses for the current year increased for 1.27 times from that for the previous year,
mainly due to derecognition of the carrying amount of replaced engines upon completion of engine substantial
maintenance..
60
5.44. Corporate income tax expenses
Classification Y/e 2011.12.31 Y/e 2010.12.31
Current corporate income tax liability duely recognised 366,233,479.64 245,151,066.64
Adjustment of deferred coporate income tax assets/liabilities -105,989,734.29 -35,181,907.39
Total 260,243,745.35 209,969,159.25
5.45. Computation of basic earnings per share and diluted earnings per share
Y/e 2011.12.31 Y/e 2010.12.31
Profit for the reporting period Basic Diluted Basic Diluted
earnings per share earnings per share earnings per share earnings per share
Profit attributable to ordinary
1.93 1.93 1.59 1.59
shareholders of the Company
Profit after adjustment for
non-operating gain/loss
1.88 1.88 1.56 1.56
attributable to ordinary
shareholders of the Company
Basic earnings per share = P0 ÷S
S = S0 + S1 + Si × Mi ÷M0 － Sj × Mj ÷M0 － Sk
P0: net profits attributable to ordinary shareholders or net profits attributable to ordinary shareholders
after deducting extraordinary gains or losses
S: weighted average of number of listed ordinary shares
S0: number of ordinary shares brought forward
S1: number of shares increased in the reporting period resulting from conversion of accumulated fund
or dividends
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
5.46. Notes to the consolidated statement of cash flows
5.46.1. Other cash receipts in relation to operating activities
Y/e 2011.12.31 Y/e 2010.12.31
61
Y/e 2011.12.31 Y/e 2010.12.31
Government grants received 27,316,925.00 29,664,668.44
Interest income on bank deposits received 11,548,478.50 3,602,739.71
Cash receipt from non-operating income 26,190,442.58 12,991,082.50
Back letter deposit received 0.00 26,935,875.00
Cash receipt from operating balances 35,162,865.06 23,830,516.63
Total 100,218,711.14 97,024,882.28
5.46.2. Other cash payments in relation to operating activities
Y/e 2011.12.31 Y/e 2010.12.31
Cash payment for bank charges 20,581,316.69 16,007,715.89
Cash payment for non-operating expenses 1,226,273.11 445,244.97
Cash payment to operating balances 7,611,441.52 44,345,294.85
Cash payment for sales expenses and general and administrative
expenses 152,971,873.37 93,443,426.57
Security deposits paid 500,000.00 0.00
Total 182,890,904.69 154,241,682.28
5.46.3. Other cash payments in relation to investing activities
Y/e 2011.12.31 Y/e 2010.12.31
Deposit for aircraft purchase 0.00 12,947,378.50
Cash payment upon settlement of interest rate swaps 3,291,906.49 2,955,503.33
Total 3,291,906.49 15,902,881.83
5.46.4. Other cash proceeds in relation to financing activities
Y/e 2011.12.31 Y/e 2010.12.31
Deposit for bankers acceptance received 27,300,000.00 11,459,417.00
Security deposit for borrowings received 150,166,363.25 0.00
Compensation for below-expectation performance received 2,861,005.87 0.00
Total 180,327,369.12 11,459,417.00
5.46.5. Other cash payments in relation to financing activities
Y/e 2011.12.31 Y/e 2010.12.31
Security deposit for borrowings paid 0.00 78,629,342.37
Cash payment for aircraft lease rental 183,057,204.67 214,050,202.14
Cash payment for acquisition of minority interest of subsidiary 24,510,000.00 0.00
Total 207,567,204.67 292,679,544.51
5.47. Supplementary information to the consolidated statement of cash flows
62
5.47.1. Supplementary information to the consolidated statement of cash flows
Y/e 2011.12.31 Y/e 2010.12.31
(1) Cash flows adjusted from net profits
Net profits 770,772,472.26 634,575,287.43
Add: Impairment losses 195,263,653.67 1,163,320.01
Add: Depreciation of non-current assets and productive biological assets and losses of
fuel 669,156,553.70 563,013,991.59
Add: Amortisation of intangible assets 934,030.49 748,706.68
Add: Amortisation of long-term deferred expenses 45,733,261.80 42,636,918.25
Add: Losses on disposals of non-current assets, intangible assets and long-term assets
(minus sign representing gains) -7,721,097.44 -4,106.42
Add: Losses arising from scrapping non-current assets (minus sign representing gains) 17,320,987.51 7,705,026.59
Add: Losses arising from fair value changes (minus sign representing gains) 7,570,558.20 5,916,809.38
Add: Financial costs (minus sign representing income) 92,697,060.02 148,686,355.48
Add: Investment losses (minus sign representing income) -8,549,475.93 1,720,112.18
Add: Decrease of deferred income tax assets (minus sign representing increase) -103,667,022.63 -34,669,157.43
Add: Increase of deferred income tax liabilities (minus sign representing decrease) -2,322,711.66 -512,749.96
Add: Decrease of inventories (minus sign representing increase) -38,483,530.73 -12,165,928.57
Add: Decrease of operating accounts receivables (minus sign representing increase) 9,169,602.80 -68,957,632.45
Add: Increase of operating accounts payables (minus sign representing decrease) 597,176,322.84 385,221,677.05
Add: Others 0.00 0.00
Net cash flows from operating activities 2,245,050,664.90 1,675,078,629.81
(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 267,289,540.06 0.00
(3) Net change of cash and cash equivalents
Cash carried forward 240,185,747.48 148,606,284.51
Less: Cash brought forward 148,606,284.51 49,333,429.81
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 91,579,462.97 99,272,854.70
5.47.2. Composition of cash and cash equivalents
63
Y/e 2011.12.31 Y/e 2010.12.31
Ⅰ. Cash 240,185,747.48 148,606,284.51
Including: Cash on hand 464,985.14 566,260.65
Bank deposit capable of immediate payments 239,720,762.34 148,040,023.86
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 240,185,747.48 148,606,284.51
Including: Cash and cash equivalents with imposed usage limitation 0.00 0.00
Note 6: Related parties and related party transaction
6.1. Principle investor of the Company
Shareholding Voting right
Type of Place of Legal Nature of Institution
Investor Relationship in the in the
incorporation registration representative business code
Compnay Company
Investment
and
SDA Largest Limited liability MA,
Jinan management 42.00% 42.00% 61407164-7
Group shareholder company Chongxian
of air
transportation
Second largest Joint stock WANG, Air
Air China Beijing 22.80% 22.80% 71787100-6
shareholder company Changshun transportation
Note: SDA Group and Air China is the first and second largest shareholder of the Company respectively. Air
China is the largest shareholder of SDA Group; Air Chinas shareholding and voting right in SDA Group is
49.406％ and 49.406％ respectively. Both SDA Group and Air China exercise significant influence over the
Company.
6.2. Subsidiaries of the Company
See Note 4 for details.
6.3. Associates of the Company
See Note 5.9 for details.
6.4. Other related parties
Related party Relationship Institution Code
Taikoo (Shandong) Aircraft Engineering Company Controlled by principal investors of the
Limited Company 70588297-1
Controlled by principal investors of the
Shandong XiangYu Air Technology Co., Ltd. Company 720736454
Shandong Rainbow Commercial Jet Co., Ltd. Associate 72497146
64
Related party Relationship Institution Code
Shenzhen Airlines Co., Ltd. Controlled by principal investors of the 19221129-0
Company
Air China Cargo Co., Ltd. Controlled by principal investors of the 71093205-6
Company
China National Aviation Finance Co., Ltd. Controlled by principal investors of the 10113699
Company
Sichuan International Aero Engine Maintenance Controlled by principal investors of the 71188088-4
Co., Ltd. Company
Aircraft Maintenance and Engineering Corporation Controlled by principal investors of the 62591162-1
(Ameco Beijing) Company
6.5. Related party transaction
6.5.1. Purchase of goods and services from related parties
Y/e 2011.12.31 Y/e 2010.12.31
Pricing % %
Type of Subject
Related party method and of trasaction of trasaction
transaction of transaction Amount Amount
procedure of the same of the same
type type
Taikoo (Shandong) Aircraft Engineering Purchase Aircraft Market
95,242,721.31 17.94 78,337,964.62 16.75
Company Limited of services maintenance price
Purchase Office rental, Market
SDA Group 18,831,262.82 38.77 11,804,053.41 28.98
of services food and housing price
Purchase Market
Shandong XiangYu Air Technology Co., Ltd. Repair 33,646,853.93 6.34 29,942,894.08 6.40
of services price
Purchase Market
Qingdao Feisheng Training 0.00 0.00 4,211,763.00 5.56
of services price
Aircraft Maintenance and Engineering Purchase Market
Maintenance 14,016,265.65 2.64 0.00 0.00
Corporation (Ameco Beijing) of services price
Purchase Market
Shenzhen Airlines Co., Ltd. Training 1,332,744.00 7.77 3,408,580.00 4.50
of services price
Purchase Market
Air China Ground service 11,365,926.74 1.37 14,118,424.93 2.14
of services price
Purchase Market
Air China Maintenance 534,348.24 0.10 0.00 0.00
of services price
Purchase Market
Air China Cargo Co., Ltd. Ground service 2,502,943.35 0.30 2,193,175.76 0.33
of services price
Sichuan International Aero Engine Maintenance Purchase Market
Maintenance 49,122,192.42 9.25 27,036,322.41 5.78
Co., Ltd. of services price
Total 226,595,258.46 171,053,178.21
6.5.2. Sales goods and services to related parties
Y/e 2011.12.31 Y/e 2010.12.31
Pricing % %
Type of Subject
Related party method and of trasaction of trasaction
transaction of transaction Amount Amount
procedure of the same of the same
type type
Rendering of By
Air China Services 12,565,524.20 88.26 13,000,000.00 76.70
services agreement
Total 12,565,524.20 13,000,000.00
6.5.3. Guarantee among relatied parties
Guarantor Guarantee Guaranteed balance Start date Expiry date Performance
completion
65
Guarantor Guarantee Guaranteed balance Start date Expiry date Performance
completion
SDA Group The Company 42,629,495.06 31 May 2007 28 Mar 2022 No
SDA Group The Company 113,131,525.34 2 Jul 2007 28 Mar 2022 No
SDA Group The Company 23,627,114.82 1 Aug 2007 28 Mar 2022 No
SDA Group The Company 93,939,488.01 28 Sep 2007 28 Mar 2022 No
SDA Group The Company 100,000,000.00 18 Dec 2006 17 Dec 2018 No
SDA Group The Company 2,200,000.00 5 Jun 2008 17 Dec 2018 No
SDA Group The Company 2,100,000.00 18 Jun 2008 17 Dec 2018 No
SDA Group The Company 123,000,000.00 19 Jun 2008 17 Dec 2018 No
SDA Group The Company 13,500,000.00 1 Jul 2008 17 Dec 2018 No
SDA Group The Company 30,000,000.00 19 Aug 2008 17 Dec 2018 No
SDA Group The Company 2,268,893.85 10 Feb 2011 10 Feb 2012 No
SDA Group The Company 1,101,397.32 10 Feb 2011 10 Feb 2012 No
SDA Group The Company 2,331,333.00 14 Feb 2011 14 Feb 2012 No
SDA Group The Company 1,101,397.32 16 Feb 2011 16 Feb 2012 No
SDA Group The Company 1,984,783.50 16 Feb 2011 16 Feb 2012 No
SDA Group The Company 1,984,783.50 17 Feb 2011 16 Feb 2012 No
SDA Group The Company 76,710,622.10 22 Feb 2011 22 Feb 2012 No
SDA Group The Company 2,201,915.03 22 Feb 2011 22 Feb 2012 No
SDA Group The Company 1,101,397.32 23 Feb 2011 23 Feb 2012 No
SDA Group The Company 2,268,893.85 24 Feb 2011 24 Feb 2012 No
SDA Group The Company 2,296,476.23 24 Feb 2011 24 Feb 2012 No
SDA Group The Company 2,453,337.33 24 Feb 2011 24 Feb 2012 No
SDA Group The Company 2,161,492.68 28 Feb 2011 28 Feb 2012 No
SDA Group The Company 2,331,333.00 28 Feb 2011 28 Feb 2012 No
SDA Group The Company 1,108,958.40 28 Feb 2011 28 Feb 2012 No
SDA Group The Company 2,201,915.03 28 Feb 2011 28 Feb 2012 No
SDA Group The Company 51,775,755.48 1 Mar 2011 29 Feb 2012 No
SDA Group The Company 2,205,315.00 1 Mar 2011 29 Feb 2012 No
SDA Group The Company 1,101,397.32 1 Mar 2011 29 Feb 2012 No
66
Guarantor Guarantee Guaranteed balance Start date Expiry date Performance
completion
SDA Group The Company 2,205,315.00 1 Mar 2011 29 Feb 2012 No
SDA Group The Company 2,449,570.65 1 Mar 2011 29 Feb 2012 No
SDA Group The Company 2,455,797.20 1 Mar 2011 29 Feb 2012 No
SDA Group The Company 1,101,397.32 7 Mar 2011 6 Mar 2012 No
SDA Group The Company 2,268,893.85 9 Mar 2011 8 Mar 2012 No
SDA Group The Company 2,247,299.79 9 Mar 2011 8 Mar 2012 No
SDA Group The Company 45,350,910.48 21 Jul 2011 20 Jul 2012 No
SDA Group The Company 98,865,657.65 3 Aug 2011 2 Aug 2012 No
Total 861,763,862.43
6.5.4. Lending among related parties
Related party Amount Start date Expirty date Note
Lender
China National Aviation Finance Co., Ltd. 50,000,000.00 25.7.2011 20.7.2012
China National Aviation Finance Co., Ltd. 50,000,000.00 27.7.2011 27.7.2012
China National Aviation Finance Co., Ltd. 50,000,000.00 16.8.2011 16.8.2012
China National Aviation Finance Co., Ltd. 50,000,000.00 23.8.2011 23.8.2012
China National Aviation Finance Co., Ltd. 50,000,000.00 30.8.2011 30.8.2012
Total 250,000,000.00
6.5.5. Asset transferred among related parties
Y/e 2011.12.31 Y/e 2010.12.31
Subject of Type of Pricing % of % of
Related party trasaction trasaction
transaction transaction method Amount Amount
of the same of the same
type type
Airborne
Shandong XiangYu Air Technology Co., Sales By
materials and 4,598,783.00 100.00 3,851,850.53 100.00
Ltd. of goods agreement
equipments
Total 4,598,783.00 3,851,850.53
6.5.6. Lease among related parties
Y/e 2011.12.31 Y/e 2010.12.31
Subject of Type of Pricing % of % of
Related party trasaction trasaction
transaction transaction method Amount Amount
of the same of the same
type type
By
Air China Engine Lease 10,418,918.18 31.42 0.00 0.00
agreement
67
Y/e 2011.12.31 Y/e 2010.12.31
Subject of Type of Pricing % of % of
Related party trasaction trasaction
transaction transaction method Amount Amount
of the same of the same
type type
By
Air China Simulator Lease 3,286,500.00 100.00 0.00 0.00
agreement
Total 13,705,418.18 0.00
6.5.7. Other related party transaction
Y/e 2011.12.31 Y/e 2010.12.31
% of % of
Related party Pricing method Subject of transaction trasaction trasaction
Amount Amount
of the of the
same type same type
Air China By agreement Wet lease 659,331,863.00 100.00 637,573,253.00 100.00
SDA Group By agreement Guarantee 240,000.00 100.00 1,445,100.00 100.00
SDA Group By agreement Purchase of assets 1,482,899.66 0.15 0.00 0.00
Airborne materials
Shandong XiangYu Air Technology
By agreement and equipments 2,369,193.93 100.00 0.00 0.00
Co., Ltd.
repair agenting
Air China By agreement Code-share 11,172,745.81 100.00 14,985,479.03 100.00
Air China Cargo Co., Ltd. By agreement Code-share 3,006,710.77 100.00 4,489,317.15 100.00
Total 677,603,413.17 658,493,149.18
6.6. Accounts balance due from and to related parties
6.6.1. Accounts balance due from and to related parties
Account Related party 2011.12.31 2010.12.31
Accounts receivable
Air China 54,247,936.00 66,366,844.88
Shenzhen Airlines Co., Ltd. 1,849,400.00 1,849,400.00
Air China Cargo Co., Ltd. 3,762,274.92 3,275,079.39
Total 59,859,610.92 71,491,324.27
Advances to suppliers
Shandong XiangYu Air Technology Co., Ltd. 4,511,590.60 1,918,266.76
Total 4,511,590.60 1,918,266.76
Other receivables
Air China 13,859,769.26 40,503,711.76
Shandong XiangYu Air Technology Co., Ltd. 0.00 3,864,597.95
Shandong Rainbow Commercial Jet Co., Ltd. 109,051,717.65 109,051,717.65
68
Account Related party 2011.12.31 2010.12.31
Total 122,911,486.91 153,420,027.36
Accounts payable
Aircraft Maintenance and Engineering
Corporation (Ameco Beijing) 3,825,794.45 0.00
Sichuan International Aero Engine Maintenance
Co., Ltd. 8,835,970.40 000
Air China 7,735,879.32 3,437,689.95
Taikoo (Shandong) Aircraft Engineering 23,072,537.89 27,829,926.58
Company Limited
Air China Cargo Co., Ltd. 417,427.64 414,307.39
Total 43,887,609.70 31,681,923.92
Other payables
Air China 20,000,000.00 20,000,000.00
SDA Group 1,008,583.74 12,192,570.48
Taikoo (Shandong) Aircraft Engineering 245,400.00 245,400.00
Company Limited
Shenzhen Airlines Co., Ltd. 1,850,144.00 1,083,308.00
Total 23,104,127.74 33,521,278.48
Note 7: Contingencies
No contingency was subject to disclosure as at December 31st, 2011.
Note 8: Commitments
8.1. Commitments of which performance in progress as at December 31st, 2011
2011.12.31
000
Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total
Operating lease 597,506.81 552,070.63 535,458.93 2,474,462.01 4,159,498.38
Capital commitments 1,239,617.71 2,161,284.87 1,767,028.90 2,736,488.53 7,904,420.01
Total 1,837,124.52 2,713,355.50 2,302,487.83 5,210,950.54 12,063,918.39
69
Note 9: Post-balance-sheet-date events
As provided by the Profit Distribution Proposal (利润分配预案) approved by the 6th Meeting of the 4th Term of
Boad of Directors on March 21st, 2012, a cash dividend of CNY4.00 (including tax) per 10 shares for the 400
million shares as at December 31st, 2011 was declared.
Note 10: Other significant issues
10.1. Assets and liabilities measured by fair value
Gain or loss from Cumulative Impairment
change change provision
2010.12.31 in fair value in fair value recognised during 2011.12.31
during the current recognised in the current year
year capital reserve
Financial assets
Financial derivatives 9,290,846.62 -9,290,846.62 0.00 0.00 0.00
Subtotal 9,290,846.62 -9,290,846.62 0.00 0.00 0.00
Financial liabilities
Financial derivative 3,865,809.52 -1,720,288.42 0.00 0.00 2,145,521.10
Subtotal 3,865,809.52 -1,720,288.42 0.00 0.00 2,145,521.10
10.2. Financial assets and financial liabilities denominated in foregn currency
Gain or loss from Cumulative Impairment
change change provision
2010.12.31 in fair value in fair value recognised during 2011.12.31
during the current recognised in the current year
year capital reserve
Financial assets
Financial derivatives 9,290,846.62 -9,290,846.62 0.00 0.00 0.00
Subtotal 9,290,846.62 -9,290,846.62 0.00 0.00 0.00
Financial liabilities
Financial derivative 3,865,809.52 -1,720,288.42 0.00 0.00 2,145,521.10
Subtotal 3,865,809.52 -1,720,288.42 0.00 0.00 2,145,521.10
Note 11: Notes to the main elements of the separate financial statements
11.1. Accounts receivable
11.1.1. Disclosure by classification
2011.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Accounts receivable of individual
significance 133,831,501.87 73.71 0.00 0.00
Categorised accounts receivable:
Categorisation by nature of receivables 47,744,614.85 26.29 2,387,230.74 5.00
70
2011.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Subtotal of category 47,744,614.85 26.29 2,387,230.74 5.00
Accounts receivable of individual
insignificance subject to individual 0.00 0.00 0.00 0.00
assessment for impairment
Total 181,576,116.72 100.00 2,387,230.74 1.31
(continued)
2010.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount 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 receivables 47,744,614.85 5.00 2,387,230.74
Total 47,744,614.85 5.00 2,387,230.74
11.1.2. Accounts receivable of individual significance subject to individual assessment for impairment:
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Air China 54,247,936.00 0.00 0.00 Individually assessed as
non-impaired
BSP 49,694,136.64 0.00 0.00 Individually assessed as
non-impaired
CAAC Settlement Centre 29,889,429.23 0.00 0.00 Individually assessed as
non-impaired
Total 133,831,501.87 0.00 0.00
11.1.3. Accounts receivables owed by shareholders with 5% or more voting right during the reporting period
2011.12.31 2010.12.31
Shareholder Provision for bad
Amount Amount Provision for bad debts
debts
Air China 54,247,936.00 0.00 66,366,844.88 0.00
71
2011.12.31 2010.12.31
Shareholder Provision for bad
Amount debts Amount Provision for bad debts
Total 54,247,936.00 0.00 66,366,844.88 0.00
11.1.4. Top five accounts receivable
Relationship with Nature % of total
Name of company the Company Amount Age of account accounts
receivable
Air China Related party 54,247,936.00 Within 1 year Mixed lease, 29.88
Code-share
BSP Non-related party 49,694,136.64 Within 1 year Settlement 27.37
Differrence
CAAC Settlement Centre Non-related party 29,889,429.23 Within 1 year settlement 16.46
China Post, Jinan Non-related party 4,380,569.48 Within 1 year Cabin charter 2.41
Air China Cargo Co., Ltd. Related party 3,762,274.92 Within 1 year Code-share 2.07
Total 141,974,346.27 78.19
11.1.5. Accounts receivables owed by related parties
% of total accounts
Name of company Relationship with the Company Amount receivable
Air China Principal investor of the Company 54,247,936.00 29.88
Air China Cargo Co., Ltd. Controlled by principal investors of the 3,762,274.92 2.07
Company
Qingdao Logistics Wholly-owned subsidiary 1,494,350.00 0.82
Total 59,504,560.92 32.77
11.2. Other receivables
11.2.1. Disclosure by classification
2011.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Other receivables of individual significance 168,048,800.93 53.15 109,051,717.65 64.89
Categorised other receivables:
Categorisation by nature of receivables 67,223,638.48 21.26 3,361,181.92 5.00
Subtotal of category 67,223,638.48 21.26 3,361,181.92 5.00
Other receivables of individual insignificance 80,903,554.97 25.59 0.00 0.00
subject to individual assessment for impairment
Total 316,175,994.38 100.00 112,412,899.57 35.55
(continued)
2010.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Other receivables of individual significance 228,578,538.56 67.92 109,051,717.65 47.71
72
2010.12.31
Classification Book value Provision for bad debts
Amount Proportion(%) Amount Proportion(%)
Categorised other receivables:
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 receivables of individual insignificance
subject to individual assessment for impairment 64,955,587.90 19.30 0.00 0.00
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 receivables 67,223,638.48 5.00 3,361,181.92
Total 67,223,638.48 5.00 3,361,181.92
11.2.2. Other receivables of individual significance subject to individual assessment for impairment:
Content Book value Provision for bad Proportion Reason for provision
debts (%)
Shandong Rainbow Commercial Jet Co., Individually assessed as
Ltd. 109,051,717.65 109,051,717.65 100.00 uncollectable
Individually assessed as
CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00 non-impaired
Individually assessed as
Singapore Aircraft Leasing Enterprise 17,642,520.00 0.00 0.00 non-impaired
Total 168,048,800.93 109,051,717.65 64.89
11.2.3. Other receivables of individual insignificance subject to individual assessment for impairment:
Provision for bad
Content Book value debts Proportion (%) Reason for provision
Air China 13,859,769.26 0.00 0.00 Individually assessed as
non-impaired
Beijing LaiFuTe Technology 12,658,829.43 0.00 0.00 Individually assessed as
Development Co., Ltd. non-impaired
Aviation Captial Group 11,426,518.83 0.00 0.00 Individually assessed as
Corporation non-impaired
Babcock ＆Brown Aircraft 9,325,332.00 0.00 0.00 Individually assessed as
Managment LLC non-impaired
Rainier Aircraft Leasing(Ireland) 8,411,701.50 0.00 0.00 Individually assessed as
Limited non-impaired
73
Content Book value Provision for bad Proportion (%) Reason for provision
debts
Individually assessed as
KuqiQian Telephone Payment 7,681,177.00 0.00 0.00 non-impaired
Aerdragon Aviation Partners Individually assessed as
Limited 4,322,417.40 0.00 0.00 non-impaired
Rainier Aircraft Leasing(Ireland) Individually assessed as
Limited 4,245,297.00 0.00 0.00 non-impaired
Individually assessed as
Pacific Brihar Corporation Limited 3,326,875.20 0.00 0.00 non-impaired
China Merchants Bank Phone Individually assessed as
Payment 2,094,297.00 0.00 0.00 non-impaired
Individually assessed as
HuiFuTianXia Phone Payment 1,273,565.00 0.00 0.00 non-impaired
Individually assessed as
Shannon Engine Support LTD 787,612.50 0.00 0.00 non-impaired
GSI Engine Beta Limited Individually assessed as
Partnership 689,948.55 0.00 0.00 non-impaired
MTU Maintenance Individually assessed as
Berlin-Brandenburg Gmbh 630,090.00 0.00 0.00 non-impaired
Individually assessed as
WEST ENGINE FUNDING LLC 170,124.30 0.00 0.00 non-impaired
Total 80,903,554.97 0.00 0.00
11.2.4. Other receivables owed by shareholders with 5% or more voting right during the reporting period
2011.12.31 2010.12.31
Shareholder Provision for bad Provision for bad
Amount Amount
debts debts
Air China 13,859,769.26 0.00 40,503,711.76 0.00
Total 13,859,769.26 0.00 40,503,711.76 0.00
11.2.5. Top five other receivables
Relationship
Name of company with the Amount Nature of Age % of total other
Company account receivables
Shandong Rainbow Operating
Commercial Jet Co., Ltd. Related party 109,051,717.65 balance 4 to 8 years 34.49
Non-related
CBD-leasing Co., Ltd. party 41,354,563.28 Deposit Over 5 years 13.08
Singapore Aircraft Leasing Non-related
Enterprise party 17,642,520.00 Deposit Over 4 years 5.58
Non-related
Rockwell Collins party 14,368,919.81 Deposit Within 1 year 4.55
Air China Related party 13,859,769.26 Deposit Within 1 year 4.38
Total 196,277,490.00 62.08
11.2.6. Other receivables owed by related parties
% of total other
Name of company Relationship with the Company Amount receivables
Air China Principal investor of the Company 13,859,769.26 4.38
Qingdao Logistics Wholly-owned subsidiary 11,816,152.60 3.74
74
% of total other
Name of company Relationship with the Company Amount receivables
Qingdao Feisheng Wholly-owned subsidiary 3,717,575.10 1.18
Shandong Rainbow Commercial
Jet Co., Ltd. Associate 109,051,717.65 34.49
Total 138,445,214.61 43.79
11.3. Long-term equity investments
11.3.1. Disclosure by classification
Reason for
Shareholding Voting right disagreement between
Investee Measurement Cost of investment
(%) (%) shareholding and
voting right
Historical cost
Qingdao Logistics 48,323,205.97 100.00 100.00 No disagreement
convention
Historical cost
China Travelsky Technology Co., Ltd. 6,690,000.00 0.45 0.45 No disagreement
convention
Historical cost
Sichuan Airlines Co., Ltd. 35,000,000.00 10.00 10.00 No disagreement
convention
Historical cost
Jinan International Airport Co., Ltd. 46,662,100.00 2.53 2.53 No disagreement
convention
Historical cost
Qingdao Feisheng 57,677,479.46 100.00 100.00 No disagreement
convention
Shandong Rainbow Commercial Jet Co., Ltd. Equity method 22,500,000.00 45.00 45.00 No disagreement
Total 216,852,785.43
(continued)
Impairment
Movement Impairment provision
Investee 2010.12.31 2011.12.31 Cash dividend
in year provision recognised
in year
Qingdao Logistics 23,813,205.97 24,510,000.00 48,323,205.97 0.00 0.00 0.00
China Travelsky Technology Co., Ltd. 6,690,000.00 0.00 6,690,000.00 0.00 0.00 1,365,429.00
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., Ltd. 46,662,100.00 0.00 46,662,100.00 0.00 0.00 475,953.42
Qingdao Feisheng 57,677,479.46 0.00 57,677,479.46 0.00 0.00 0.00
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00 0.00
Total 192,342,785.43 24,510,000.00 216,852,785.43 22,500,000.00 0.00 11,841,382.42
11.4. Operating revenue and operating costs
11.4.1. Disclosure by classification
Y/e 2011.12.31 Y/e 2010.12.31
Principle operating revenue 9,542,640,118.55 7,202,653,930.01
Other operating revenue 104,109,326.47 81,820,139.22
Total 9,646,749,445.02 7,284,474,069.23
75
Y/e 2011.12.31 Y/e 2010.12.31
Principle operating costs 7,251,657,817.11 5,479,055,497.83
Other operating costs 6,365,030.93 5,407,179.34
Total 7,258,022,848.04 5,484,462,677.17
11.4.2. Disclosure by operation
Y/e 2011.12.31 Y/e 2010.12.31
Operation
Operating revenue Operating costs Operating revenue Operating costs
Air transportation 9,523,675,225.67 7,228,984,657.23 7,179,220,348.49 5,459,720,041.47
Hospitality 23,081,379.95 21,850,046.48 25,414,051.87 20,815,817.17
Training 5,124,857.35 4,576,541.43 3,914,000.00 924,032.15
Rental 607,750.00 117,469.97 88,110.26 0.00
Other 94,260,232.05 2,494,132.93 75,837,558.61 3,002,786.38
Total 9,646,749,445.02 7,258,022,848.04 7,284,474,069.23 5,484,462,677.17
11.4.3. Operating revenue from top five customers
Customer Operating revenue % of total operating revenue
Customer 1 683,070,133.01 7.08
Customer 2 31,680,000.00 0.33
Customer 3 9,739,110.00 0.10
Customer 4 7,800,000.00 0.08
Customer 5 7,260,000.00 0.08
Total 739,549,243.01 7.67
11.5. Investment income
11.5.1. Disclosure by classification
Classification Y/e 2011.12.31 Y/e 2010.12.31
Investment arising from long-term equity investments
measure using the historical cost convention 11,841,382.42 1,235,391.15
Investment arsing from holding of financial assets held
for trading -3,291,906.49 -2,955,503.33
Total 8,549,475.93 -1,720,112.18
11.5.2. Investment arising from long-term equity investments measured using the historical cost convention
Reason for change from the previous
Investee Y/e2011.12.31 Y/e2010.12.31 year
China Travelsky Technology Co., Ltd. 1,365,429.00 1,165,398.00 Change of profit distribution
76
Sichuan Airlines Co., Ltd. 10,000,000.00 0.00 Change of profit distribution
Jinan International Airport Co., Ltd. 475,953.42 69,993.15 Change of profit distribution
Total 11,841,382.42 1,235,391.15
11.5.3. No investment income was imposed with limitation on remittance as at December 31st, 2011.
11.6. Supplementary information to the separate statement of cash flows
Y/e 2011.12.31 Y/e 2010.12.31
(1) Cash flows adjusted from net profits
Net profits 764,692,668.58 633,686,858.58
Add: Impairment losses 196,012,449.21 939,702.80
Add: Depreciation of non-current assets and productive biological assets and losses of 663,583,520.35 561,748,970.27
fuel
Add: Amortisation of intangible assets 899,374.64 714,050.73
Add: Amortisation of long-term deferred expenses 45,575,668.37 42,512,979.36
Add: Losses on disposals of non-current assets, intangible assets and long-term assets -7,721,097.44 -4,106.42
(minus sign representing gains)
Add: Losses arising from scrapping non-current assets (minus sign representing gains) 17,320,987.51 7,619,454.74
Add: Losses arising from fair value changes (minus sign representing gains) 7,570,558.20 5,916,809.38
Add: Financial costs (minus sign representing income) 91,953,090.03 148,529,818.13
Add: Investment losses (minus sign representing income) -8,549,475.93 1,720,112.18
Add: Decrease of deferred income tax assets (minus sign representing increase) -103,658,330.62 -34,613,253.12
Add: Increase of deferred income tax liabilities (minus sign representing decrease) -2,322,711.66 -512,749.96
Add: Decrease of inventories (minus sign representing increase) -38,483,530.73 -12,165,928.57
Add: Decrease of operating accounts receivables (minus sign representing increase) -5,550,239.08 -76,890,676.84
Add: Increase of operating accounts payables (minus sign representing decrease) 598,979,306.30 392,661,666.17
Add: Others 0.00 0.00
Net cash flows from operating activities 2,220,302,237.73 1,671,863,707.43
(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 267,289,540.06 0.00
(3) Net change of cash and cash equivalents
Cash carried forward 235,921,301.34 143,930,783.00
77
Y/e 2011.12.31 Y/e 2010.12.31
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 91,990,518.34 108,849,106.05
Note 12: Supplementary information
12.1. Details of non-operating gain or loss for the current reporting period
Amount Note
Gains from disposals of non-current assets after expending impairment provisions -9,599,890.07
Exceeded-authority approved, non-official approved or accidental tax repayment and relief 0.00
Government grants recognised through profit or loss for the current reporting period,
excluding grants which are closely related to the Companys operating activities and of which Flight route subsidy
21,698,008.50
the quota or approval is eligible for automatic renewal in accordance with relevant by government
regulations
Financial resource usage fees charged on non-financial institution recognised through profit
0.00
or loss for the current reporting period
Gains arising from bargain purchase in business combination and investments in associates
0.00
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 during the period
0.00
from the start of the period to the acquisition date
Gains or losses arising from contingent events unconnected with the Companys daily
0.00
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
-10,862,464.69
available-for-sale financial assets, excluding hedging contracts relevant to the Companys
daily operating activities
Reversal of impairment provision for accounts receivables eligible for individual impairment
0.00
assessment
Gains or losses arising from consigned borrowings 0.00
Fair value changes of property investments subsequently measured at fair value 0.00
One-off adjustment of profit or loss for the current reporting period in accordance with tax
0.00
and accounting laws and regulations
Consignment income arising from consigned operations 0.00
78
Amount Note
Other non-operating
Income and expenses other than items listed above 24,964,169.47
income and expenses
Other gains or losses satisfying the definition of extraordinary gains or losses 0.00
Subtotal 26,199,823.21
Less: Impact of income tax 6,751,319.93
Less: Impact on non-controlling interest -141,224.94
Total 19,589,728.22
12.2. Rate of return on net assets and earnings per share
Weighted average rate Earnings per share
Profit for the reporting period
of return on net assets Basic Diluted
Profit attributable to ordinary 45.05% 1.93 1.93
shareholders of the Company
Profit after adjustment for
non-operating gain/loss 43.90% 1.88 1.88
attributable to ordinary
shareholders of the Company
Computation of earnings per share
12.2.1. Basic earnings per share
Y/e 2011.12.31 Y/e 2010.12.31
Amount after Amount after
Computation adjustment for adjustment for
Amount Amount
non-operating non-operating
gain/loss gain/loss
Profit for the reporting period attributable to
(1) 771,225,549.05 751,635,820.83 634,364,547.92 625,449,962.16
ordinary shareholders of the Company
Number of ordinary shares outstanding as at January
(2) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
1st, 2011
Weighted average number of ordinary shares
(3) 0.00 0.00 0.00 0.00
increased in year
Weighted average number of ordinary shares
(4) 0.00 0.00 0.00 0.00
decreased in year
Weighted average number of ordinary shares
(5)=(2)+(3)-(4) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
outstanding
Basic earnings per share (6)=(1)÷(5) 1.93 1.88 1.59 1.56
12.2.2. Diluted earnings per share
Y/e 2011.12.31 Y/e 2010.12.31
Amount after Amount after
Computation adjustment for adjustment for
Amount Amount
non-operating non-operating
gain/loss gain/loss
Profit for the reporting period attributable to
(1) 771,225,549.05 751,635,820.83 634,364,547.92 625,449,962.16
ordinary shareholders of the Company
Dilutive protential dividend on ordinary share
(2) 0.00 0.00 0.00 0.00
recognised as expense
Coversion cost applicable to dilutive protential
(3) 0.00 0.00 0.00 0.00
ordinary shares
Income tax rate (4) 25.00% 25.00% 25.00% 25.00%
79
Y/e 2011.12.31 Y/e 2010.12.31
Amount after Amount after
Computation adjustment for adjustment for
Amount Amount
non-operating non-operating
gain/loss gain/loss
Post-adjustment Profit for the reporting period
(5)=(1)+[(2)
attributable to ordinary shareholders of the 771,225,549.05 751,635,820.83 634,364,547.92 625,449,962.16
-(3)]×[1-(4)]
Company
Number of shares employed in the computation
(6) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
of basic earnings per share
Weighted average number of ordinary shares
(7) 0.00 0.00 0.00 0.00
outstanding increased adjustment for dilutive effect
Weighted average number of ordinary shares
outstanding for the computation of diluted earnings (8)=(6)+(7) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
per share
Diluted earnings per share (9)=(5)÷(8) 1.93 1.88 1.59 1.56
Note 13: Approval of Financial Statement
The financial statement was approved for disclosed by the Board of Directors dated 21 March 2012.
80
