Shandong Airlines Co., Ltd. Independent Auditors' Report
FOR THE YEAR ENDED DECEMBER 31st, 2012
ZhongruiYuehua Shen Zi [2013] No 1151
I. Audit report
To The Board of Directors of Shandong Airlines Co., Ltd.：
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereafter, the
Shandong Airlines) and its subsidiaries (together with Shandong Airlines, hereafter, the Group), which
comprise the statement of financial position and the consolidated statement of financial position as at
31 December 2012, the statement of comprehensive income and the consolidated statement of
comprehensive income, the statement of cash flows and the consolidated statement of cash flows and
the statement of changes in shareholders' equity and the consolidated statement of changes in
shareholders' equity for the year then ended and a summary of significant accounting policies and other
explanatory notes.
ⅠManagement’s responsibility for the financial statements
Management of Shandong Airlines is responsible for the preparation and fair presentation of financial
statements. This responsibility includes: (1) preparation of financial statements in accordance with
Enterprise Accounting Standards of China and for the purpose of fair presentation; (2) designing,
implementing and maintaining internal control necessary to the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
ⅡAuditors’ responsibility
Our responsibility is to express an opinion on those financial statements based on our audit. We
conducted our audit in accordance with the Chinese Certified Public Accountants' Auditing Standards
(hereafter, the Standards). The Standards require that we comply with Chinese Certified Public
Accountants Ethical Requirements and plan and perform the audit to obtain reasonable assurance as to
whether the financial statements are free from material misstatement.
An audit involves the performance of audit procedures to obtain audit evidence relevant to the amounts
and disclosures in the financial statements. The procedures selected depend on judgment of the
Certified Public Accountants (hereafter, the CPAs), including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the CPAs consider internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
ⅢAudit opinion
In our opinion, the financial statements of Shandong Airlines have been prepared in accordance with
the Enterprise Accounting Standards of China and present fairly, in all material respects, the
consolidated and separate financial position of Shandong Airlines as at 31 December 2012 and its
consolidated and separate financial performance and cash flows for the year then ended.
RSM China CPA LLP Chinese CPA: Tao Liang
Beijing China Tan Daiming
15 March 2013
1
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated Balance Sheet
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Item Amount at period-end Amount at period-begin
Current assets:
Monetary funds 155,417,742.97 248,185,747.48
Settlement provisions
Capital lent
Transaction finance asset
Notes receivable
Accounts receivable 186,090,177.17 185,700,185.84
Accounts paid in advance 56,927,205.61 41,348,446.65
Insurance receivable
Reinsurance receivables
Contract reserve of
reinsurance receivable
Interest receivable
Dividend receivable
Other receivables 252,147,802.11 189,156,268.92
Purchase restituted finance
asset
Inventories 116,944,913.89 116,270,780.19
Non-current asset due within
one year
Other current assets
Total current assets 767,527,841.75 780,661,429.08
Non-current assets:
Granted loans and advances
Finance asset available for
sales
Held-to-maturity investment
Long-term account
receivable
Long-term equity investment 88,352,100.00 88,352,100.00
Investment property
Fixed assets 8,132,786,866.22 6,683,456,551.61
Construction in progress 1,430,885,814.11 1,644,924,919.38
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 78,814,771.55 79,187,122.04
Expense on Research and
Development
Goodwill 10,220,816.22 10,220,816.22
Long-term expenses to be
301,867,908.75 255,780,389.23
apportioned
Deferred income tax asset 450,885,311.43 230,402,218.41
2
Other non-current asset
Total non-current asset 10,493,813,588.28 8,992,324,116.89
Total assets 11,261,341,430.03 9,772,985,545.97
Current liabilities:
Short-term loans 321,378,829.28 767,636,239.20
Loan from central bank
Absorbing deposit and
interbank deposit
Capital borrowed
Transaction financial
7,198,783.59 2,145,521.10
liabilities
Notes payable 100,000.00 129,547,193.34
Accounts payable 950,968,778.60 900,515,365.55
Accounts received in
215,107,573.13 292,846,652.42
advance
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 343,703,794.71 263,739,110.65
Taxes payable 229,684,478.03 168,132,279.57
Interest payable 16,466,095.25 8,048,176.38
Dividend payable 11,940.00 11,940.00
Other accounts payable 210,075,013.94 161,746,628.41
Reinsurance payables
Insurance contract reserve
Security trading of agency
Security sales of agency
Non-current liabilities due
392,573,521.87 384,557,360.39
within 1 year
Other current liabilities
Total current liabilities 2,687,268,808.40 3,078,926,467.01
Non-current liabilities:
Long-term loans 3,854,676,638.03 3,007,009,638.54
Bonds payable 500,000,000.00
Long-term account payable 1,554,204,331.04 1,477,542,859.02
Special accounts payable
Projected liabilities
Deferred income tax liabilities
Other non-current liabilities 186,135,800.28 160,261,661.59
Total non-current liabilities 6,095,016,769.35 4,644,814,159.15
Total liabilities 8,782,285,577.75 7,723,740,626.16
Owner’s equity (or shareholders’
equity):
Paid-in capital (or share
400,000,000.00 400,000,000.00
capital)
Capital public reserve 75,410,363.70 75,410,363.70
Less: Inventory shares
Reasonable reserve
Surplus public reserve 257,642,799.31 199,414,021.75
Provision of general risk
Retained profit 1,746,002,689.27 1,374,420,534.36
Balance difference of foreign
currency translation
Total owner’s equity attributable 2,479,055,852.28 2,049,244,919.81
3
to parent company
Minority interests
Total owner’s equity ( or
2,479,055,852.28 2,049,244,919.81
shareholders’ equity)
Total liabilities and owner’s
11,261,341,430.03 9,772,985,545.97
equity( or shareholders’ equity)
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
2. Balance Sheet of Parent Company
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Item Amount at period-end Amount at period-begin
Current assets:
Monetary funds 143,242,750.59 243,921,301.34
Transaction finance asset
Notes receivable
Accounts receivable 178,623,467.86 179,188,885.98
Accounts paid in advance 56,697,404.55 40,940,314.17
Interest receivable
Dividend receivable
Other receivables 287,010,996.18 203,763,094.81
Inventories 116,944,913.89 116,270,780.19
Non-current asset due within
one year
Other current assets
Total current assets 782,519,533.07 784,084,376.49
Non-current assets:
Finance asset available for
sales
Held-to-maturity investment
Long-term account
receivable
Long-term equity investment 194,352,785.43 194,352,785.43
Investment property
Fixed assets 8,016,147,993.09 6,623,652,373.64
Construction in progress 1,430,885,814.11 1,621,968,762.03
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 64,037,228.25 64,374,922.89
Expense on Research and
Development
Goodwill
Long-term expenses to be
301,798,566.81 255,600,868.72
apportioned
Deferred income tax asset 450,970,591.69 230,083,720.58
Other non-current asset
Total non-current asset 10,458,192,979.38 8,990,033,433.29
Total assets 11,240,712,512.45 9,774,117,809.78
Current liabilities:
4
Short-term loans 321,378,829.28 767,636,239.20
Transaction financial
7,198,783.59 2,145,521.10
liabilities
Notes payable 100,000.00 129,547,193.34
Accounts payable 947,683,544.83 898,725,089.85
Accounts received in
211,382,526.62 291,086,272.00
advance
Wage payable 343,449,526.33 263,558,230.63
Taxes payable 229,290,824.09 166,980,287.94
Interest payable 16,466,095.25 8,048,176.38
Dividend payable 11,940.00 11,940.00
Other accounts payable 204,933,548.07 168,068,512.20
Non-current liabilities due
392,573,521.87 384,557,360.39
within 1 year
Other current liabilities
Total current liabilities 2,674,469,139.93 3,080,364,823.03
Non-current liabilities:
Long-term loans 3,854,676,638.03 3,007,009,638.54
Bonds payable 500,000,000.00
Long-term account payable 1,554,204,331.04 1,477,542,859.02
Special accounts payable
Projected liabilities
Deferred income tax liabilities
Other non-current liabilities 186,135,800.28 160,261,661.59
Total non-current liabilities 6,095,016,769.35 4,644,814,159.15
Total liabilities 8,769,485,909.28 7,725,178,982.18
Owner’s equity (or shareholders’
equity):
Paid-in capital (or share
400,000,000.00 400,000,000.00
capital)
Capital public reserve 86,911,168.71 86,911,168.71
Less: Inventory shares
Reasonable reserve
Surplus public reserve 256,982,094.78 198,753,317.22
Provision of general risk
Retained profit 1,727,333,339.68 1,363,274,341.67
Balance difference of foreign
currency translation
Total owner’s equity ( or
2,471,226,603.17 2,048,938,827.60
shareholders’ equity)
Total liabilities and owner’s
11,240,712,512.45 9,774,117,809.78
equity( or shareholders’ equity)
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
3. Consolidated Profit Statement
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Item Amount in this period Amount in last period
I. Total operating income 10,993,024,914.41 9,666,969,745.20
Including: Operating income 10,993,024,914.41 9,666,969,745.20
Interest income
5
Insurance gained
Commission charge and
commission income
II. Total operating cost 10,361,111,969.46 8,673,994,733.22
Including: Operating cost 8,576,272,368.85 7,263,251,881.75
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 363,292,935.61 319,511,430.44
Sales expenses 745,690,102.02 621,566,178.55
Administration expenses 238,415,387.65 188,365,620.87
Financial expenses 243,510,475.66 86,035,967.94
Losses of devaluation of asset 193,930,699.67 195,263,653.67
Add: Changing income of fair
-5,053,262.49 -7,570,558.20
value(Loss is listed with “-”)
Investment income (Loss is listed
14,394,514.79 8,549,475.93
with “-”)
Including: Investment income on
affiliated company and joint
venture
Exchange income (Loss is listed
with “-”)
III. Operating profit (Loss is
641,254,197.25 993,953,929.71
listed with “-”)
Add: Non-operating income 147,187,472.57 55,609,548.52
Less: Non-operating expense 7,392,852.70 18,547,260.62
Including: Disposal loss of
6,908,093.55 17,320,987.51
non-current asset
IV. Total Profit (Loss is listed
781,048,817.12 1,031,016,217.61
with “-”)
Less: Income tax expense 191,237,884.65 260,243,745.35
V. Net profit (Net loss is listed
589,810,932.47 770,772,472.26
with “-”)
Including: Net profit of
combined party realized before
combination
Net profit attributable to owner’s
589,810,932.47 771,225,549.05
of parent company
Minority shareholders’ gains
-453,076.79
and losses
VI. Earnings per share -- --
i. Basic earnings per share 1.47 1.93
ii. Diluted earnings per share 1.47 1.93
VII. Other consolidated income
VIII. Total consolidated income 589,810,932.47 770,772,472.26
Total consolidated income
attributable to owners of parent 589,810,932.47 771,225,549.05
company
6
Total consolidated income
attributable to minority -453,076.79
shareholders
For enterprise combination under same control in reporting period, net profit of combined party realized before
combination amounting as: RMB
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
4. Profit Statement of Parent Company
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Item Amount in this period Amount in last period
I. Operating income 10,975,580,616.97 9,646,749,445.02
Less: Operating cost 8,570,545,554.82 7,258,022,848.04
Operating tax and extras 362,295,788.73 318,499,180.24
Sales expenses 748,222,436.40 621,566,178.55
Administration expenses 233,679,178.89 182,797,444.37
Financial expenses 243,533,200.81 85,320,836.52
Losses of devaluation of asset 194,946,539.59 196,012,449.21
Add: Changing income of fair
-5,053,262.49 -7,570,558.20
value(Loss is listed with “-”)
Investment income (Loss is listed
14,394,514.79 8,549,475.93
with “-”)
Including: Investment income on
affiliated company and joint
venture
II. Operating profit (Loss is
631,699,170.03 985,509,425.82
listed with “-”)
Add: Non-operating income 147,181,559.72 55,609,548.52
Less: Non-operating expense 7,382,942.99 18,076,510.82
Including: Disposal loss of
6,905,518.55 17,320,987.51
non-current asset
III. Total Profit (Loss is listed
771,497,786.76 1,023,042,463.52
with “-”)
Less: Income tax expense 189,210,011.19 258,349,794.94
IV. Net profit (Net loss is listed
582,287,775.57 764,692,668.58
with “-”)
V. Earnings per share -- --
i. Basic earnings per share 1.46 1.91
ii. Diluted earnings per share 1.46 1.91
VI. Other consolidated income
VII. Total consolidated income 582,287,775.57 764,692,668.58
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
5. Consolidated Cash Flow Statement
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Item Amount in this period Amount in last period
7
I. Cash flows arising from
operating activities:
Cash received from selling
commodities and providing labor 10,958,543,064.30 9,862,481,548.80
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
Net increase of capital borrowed
Net increase of returned
business capital
Write-back of tax received
Other cash received
138,366,954.40 100,218,711.14
concerning operating activities
Subtotal of cash inflow
11,096,910,018.70 9,962,700,259.94
arising from operating activities
Cash paid for purchasing
commodities and receiving labor 7,134,742,062.38 5,788,881,664.53
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 and
1,280,713,318.55 1,090,515,615.99
workers
Taxes paid 706,663,961.17 655,361,409.83
Other cash paid concerning
248,473,175.85 182,890,904.69
operating activities
Subtotal of cash outflow
9,370,592,517.95 7,717,649,595.04
arising from operating activities
Net cash flows arising from
1,726,317,500.75 2,245,050,664.90
operating activities
II. Cash flows arising from
investing activities:
Cash received from recovering
8
investment
Cash received from investment
16,247,366.84 11,841,382.42
income
Net cash received from disposal
of fixed, intangible and other 82,725.86 26,638,335.14
long-term assets
Net cash received from
disposal of subsidiaries and other
units
Other cash received
concerning investing activities
Subtotal of cash inflow from
16,330,092.70 38,479,717.56
investing activities
Cash paid for purchasing
fixed, intangible and other 2,233,827,146.00 1,495,212,313.66
long-term assets
Cash paid for investment
Net increase of mortgaged loans
Net cash received from
6,937,426.46
subsidiaries and other units
Other cash paid concerning
1,852,852.05 3,291,906.49
investing activities
Subtotal of cash outflow from
2,235,679,998.05 1,505,441,646.61
investing activities
Net cash flows arising from
-2,219,349,905.35 -1,466,961,929.05
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 1,677,158,004.62 1,092,744,152.40
Cash received from issuing
500,000,000.00
bonds
Other cash received
7,470,000.00 180,327,369.12
concerning financing activities
Subtotal of cash inflow from
2,184,628,004.62 1,273,071,521.52
financing activities
Cash paid for settling debts 1,243,570,158.09 1,482,346,801.17
Cash paid for dividend and
profit distributing or interest 326,407,154.44 269,449,515.31
paying
Including: Dividend and
profit of minority shareholder
paid by subsidiaries
Other cash paid concerning
207,713,467.59 207,567,204.67
financing activities
Subtotal of cash outflow
1,777,690,780.12 1,959,363,521.15
from financing activities
Net cash flows arising from
406,937,224.50 -686,291,999.63
financing activities
IV. Influence on cash and cash
1,297,175.59 -217,273.25
equivalents due to fluctuation in
9
exchange rate
V. Net increase of cash and cash
-84,798,004.51 91,579,462.97
equivalents
Add: Balance of cash and
cash equivalents at the period 240,185,747.48 148,606,284.51
-begin
VI. Balance of cash and cash
155,387,742.97 240,185,747.48
equivalents at the period -end
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
6. Cash Flow Statement of Parent Company
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Item Amount in this period Amount in last period
I. Cash flows arising from
operating activities:
Cash received from selling
commodities and providing labor 10,940,139,794.93 9,841,918,121.78
services
Write-back of tax received
Other cash received
142,167,899.49 105,768,674.93
concerning operating activities
Subtotal of cash inflow
11,082,307,694.42 9,947,686,796.71
arising from operating activities
Cash paid for purchasing
commodities and receiving labor 7,140,620,035.20 5,792,830,488.54
service
Cash paid to/for staff and
1,276,278,315.90 1,086,926,998.30
workers
Taxes paid 702,281,591.79 650,829,922.59
Other cash paid concerning
269,198,909.75 196,797,149.55
operating activities
Subtotal of cash outflow
9,388,378,852.64 7,727,384,558.98
arising from operating activities
Net cash flows arising from
1,693,928,841.78 2,220,302,237.73
operating activities
II. Cash flows arising from
investing activities:
Cash received from recovering
investment
Cash received from investment
16,247,366.84 11,841,382.42
income
Net cash received from disposal
of fixed, intangible and other 64,695.86 26,638,335.14
long-term assets
Net cash received from
disposal of subsidiaries and other
units
Other cash received
concerning investing activities
Subtotal of cash inflow from
16,312,062.70 38,479,717.56
investing activities
10
Cash paid for purchasing
fixed, intangible and other 2,209,331,003.27 1,483,183,573.11
long-term assets
Cash paid for investment 24,510,000.00
Net cash received from
6,937,426.46
subsidiaries and other units
Other cash paid concerning
1,852,852.05 3,291,906.49
investing activities
Subtotal of cash outflow from
2,211,183,855.32 1,517,922,906.06
investing activities
Net cash flows arising from
-2,194,871,792.62 -1,479,443,188.50
investing activities
III. Cash flows arising from
financing activities
Cash received from
absorbing investment
Cash received from loans 1,677,158,004.62 1,092,744,152.40
Cash received from issuing
500,000,000.00
bonds
Other cash received
7,470,000.00 180,327,369.12
concerning financing activities
Subtotal of cash inflow from
2,184,628,004.62 1,273,071,521.52
financing activities
Cash paid for settling debts 1,243,570,158.09 1,470,046,801.17
Cash paid for dividend and
profit distributing or interest 326,407,154.44 268,618,773.32
paying
Other cash paid concerning
207,713,467.59 183,057,204.67
financing activities
Subtotal of cash outflow
1,777,690,780.12 1,921,722,779.16
from financing activities
Net cash flows arising from
406,937,224.50 -648,651,257.64
financing activities
IV. Influence on cash and cash
equivalents due to fluctuation in 1,297,175.59 -217,273.25
exchange rate
V. Net increase of cash and cash
-92,708,550.75 91,990,518.34
equivalents
Add: Balance of cash and
cash equivalents at the period 235,921,301.34 143,930,783.00
-begin
VI. Balance of cash and cash
143,212,750.59 235,921,301.34
equivalents at the period -end
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
7. Statement of Changes in Owners’ Equity (Consolidated)
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Amount in this period
Amount in this period
Item Owners’ equity attributable to parent company Minor Total
Paid-u Capital Less: Reason Surplu Provisi Retain Other sharehol owners’
11
p reserve invento able s on of ed ders’ equity
capital s ry reserve reserve general profit equity
(or shares s risk
share
capital
)
400,00 199,41 1,374,4
I. Balance at the end of last 75,410, 2,049,24
0,000. 4,021. 20,534.
year 363.70 4,919.81
00 75 36
Plus: Change of
accounting policy
Correcting of previous
errors
Others
400,00 199,41 1,374,4
II. Balance at the 75,410, 2,049,24
0,000. 4,021. 20,534.
beginning of current year 363.70 4,919.81
00 75 36
III. Changed in current 58,228 371,58
429,810,
term(Loss is listed with ,777.5 2,154.9
932.47
“-”) 6 1
589,81
589,810,
(I) Net profit 0,932.4
932.47
7
(II) Other consolidated
income
589,81
589,810,
Subtotal of (I) and (II) 0,932.4
932.47
7
(III) Owners’ input and
withdraw of share capital
1. Capital input by
owners
2. Share payment
accounted into owners’
equity
3. Others
58,228 -218,2
-160,000,
(IV) Profit distribution ,777.5 28,777.
000.00
6 56
58,228 -58,22
1. Providing of surplus
,777.5 8,777.5
reserves
6 6
2. Common risk
provision
-160,0
3. Dividend to -160,000,
00,000.
owners’(or shareholders) 000.00
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
12
4. Others
(VI) Reasonable reserve
1. Withdrawal in the report
period
2. Usage in the report
period
(VII) Other
400,00 257,64 1,746,0
IV. Balance at the end of 75,410, 2,479,05
0,000. 2,799. 02,689.
this term 363.70 5,852.28
00 31 27
Amount in last year
Unit: RMB
Amount in last year
Owners’ equity attributable to parent company
Paid-u
p Minor
Less: Surplu Provisi Total
Item capital Capital Reason Retain sharehol
invento s on of owners’
(or reserve able ed Other ders’
ry reserve general equity
share s reserve profit equity
shares s risk
capital
)
400,00 122,94 799,66
I. Balance at the end of last 84,050, 13,462,2 1,420,12
0,000. 4,754. 4,252.1
year 162.84 71.78 1,441.68
00 89 7
Plus: retroactive
adjustment arising from
enterprise combination
under same control
Plus: Change of
accounting policy
Correcting of previous
errors
Others
400,00 122,94 799,66
II. Balance at the 84,050, 13,462,2 1,420,12
0,000. 4,754. 4,252.1
beginning of current year 162.84 71.78 1,441.68
00 89 7
III. Changed in current 76,469 574,75
-8,639, -13,462, 629,123,
term(Loss is listed with ,266.8 6,282.1
799.14 271.78 478.13
“-”) 6 9
771,22
-453,076 770,772,
(I) Net profit 5,549.0
.79 472.26
5
(II) Other consolidated
income
771,22
-453,076 770,772,
Subtotal of (I) and (II) 5,549.0
.79 472.26
5
(III) Owners’ input and -8,639, -13,009, -21,648,9
withdraw of share capital 799.14 194.99 94.13
1. Capital input by
owners
2. Share payment
accounted into owners’
equity
-8,639, -13,009, -21,648,9
3. Others
799.14 194.99 94.13
13
76,469 -196,4
-120,000,
(IV) Profit distribution ,266.8 69,266.
000.00
6 86
76,469 -76,46
1. Providing of surplus
,266.8 9,266.8
reserves
6 6
2. Common risk
provision
-120,0
3. Dividend to -120,000,
00,000.
owners’(or shareholders) 000.00
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
400,00 199,41 1,374,4
IV. Balance at the end of 75,410, 2,049,24
0,000. 4,021. 20,534. 0.00
this term 363.70 4,919.81
00 75 36
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
8. Statement of Changes in Owners’ Equity (Parent Company)
Prepared by Shandong Airlines Co., Ltd
Unit: RMB
Amount in this period
Amount in this period
Paid-up Provision
Less: Total
Item capital(or Capital Reasonab Surplus of Retained
inventory owners’
share reserves le reserve reserves general profit
shares equity
capital) risk
I. Balance at the end of last 400,000, 86,911,1 198,753, 1,363,27 2,048,93
year 000.00 68.71 317.22 4,341.67 8,827.60
Plus: Change of accounting
policy
Correcting of previous
errors
Others
II. Balance at the beginning 400,000, 86,911,1 198,753, 1,363,27 2,048,93
of current year 000.00 68.71 317.22 4,341.67 8,827.60
III. Changed in current 58,228,7 364,058, 422,287,
term(Loss is listed with “-”) 77.56 998.01 775.57
14
582,287, 582,287,
(I) Net profit
775.57 775.57
(II) Other consolidated
income
582,287, 582,287,
Subtotal of (I) and (II)
775.57 775.57
(III) Owners’ input and
withdraw of share capital
1. Capital input by
owners
2. Share payment
accounted into owners’
equity
3. Others
58,228,7 -218,228, -160,000,
(IV) Profit distribution
77.56 777.56 000.00
1. Providing of surplus 58,228,7 -58,228,7
reserves 77.56 77.56
2. Common risk
provision
3. Dividend to -160,000, -160,000,
owners’(or shareholders) 000.00 000.00
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 400,000, 86,911,1 256,982, 1,727,33 2,471,22
this term 000.00 68.71 094.78 3,339.68 6,603.17
Amount in last year
Unit: RMB
Amount in last year
Paid-up Provision
Less: Total
Item capital(or Capital Reasonab Surplus of Retained
inventory owners’
share reserves le reserve reserves general profit
shares equity
capital) risk
I. Balance at the end of last 400,000, 84,050,1 122,284, 795,050, 1,401,38
year 000.00 62.84 050.36 939.95 5,153.15
Plus: Change of accounting
policy
Correcting of previous
errors
Others
II. Balance at the beginning 400,000, 84,050,1 122,284, 795,050, 1,401,38
of current year 000.00 62.84 050.36 939.95 5,153.15
15
III. Changed in current 2,861,00 76,469,2 568,223, 647,553,
term(Loss is listed with “-”) 5.87 66.86 401.72 674.45
764,692, 764,692,
(I) Net profit
668.58 668.58
(II) Other consolidated
income
764,692, 764,692,
Subtotal of (I) and (II)
668.58 668.58
(III) Owners’ input and 2,861,00 2,861,00
withdraw of share capital 5.87 5.87
1. Capital input by owners
2. Share payment
accounted into owners’
equity
2,861,00 2,861,00
3. Others
5.87 5.87
76,469,2 -196,469, -120,000,
(IV) Profit distribution
66.86 266.86 000.00
1. Providing of surplus 76,469,2 -76,469,2
reserves 66.86 66.86
2. Common risk
provision
3. Dividend to -120,000, -120,000,
owners’(or shareholders) 000.00 000.00
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, 86,911,1 198,753, 1,363,27 2,048,93
term 000.00 68.71 317.22 4,341.67 8,827.60
Legal Representative: Zhang Xingfu
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Wang Wuping
16
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
For The Year Ended 31 December 2012
(All amounts are expressed in CNY unless otherwise stated)
Note 1 Corporation profile
1.1 Company’s history
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign-invested limited liability company
incorporated in the People’s Republic of China. The Company was incorporated through the
restructuring project jointly initiated by Shandong Airlines Group Co., Ltd. (hereafter, SDA Group),
Inspur Co., Ltd. (previously known as Inspur Electronic Information Industry Group Company (浪潮电
子信息产业集团公司), Shandong Hualu Group Co., Ltd, Shandong Group Corp. of Fisheries
Enterprises and Luyin Investment Group (鲁银投资集团股份有限公司) following the approval
(LuTiGaiQiZi(1999)No.88 ( 鲁 体 改 企 字 (1999) 第 88 号 )) granted by the Economic Reform
Commission of Shandong Province (山东省经济体制改革委员会) on July 29th, 1999.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares (国有法人
股), with CNY 1.00 at par, of the Company by transferring its air transportation operation and the
related assets and liabilities to the Company on November 25th, 1999. Inspur Co., Ltd., Shandong
Hualu Group Co., Ltd. and Shandong Group Corp. of Fisheries Enterprises each acquired 199,000
state-owned corporate shares, with CNY 1.00 at par, by cash investment of CNY 200,000.00 each on
November 26th, 1999. Luyin Investment Group acquired 199,000 domestic corporate shares (国内法
人股), with CNY 1.00 at par, by cash investment of CNY 200,000.00 on November 26 th, 1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign currency (境内
上市外资股) (hereafter, B share(s)), with par value at CNY 1.00 each and issue price at HKD 1.58
each, on August 28th, 2000 upon the approval (ZhengJianFaXingZi[2000]No.116 (证监发行字
[2000]116 号)) granted by the China Securities Regulatory Commission on August 22 nd, 2000; and, the
Company was listed on the Shenzhen Stock Exchange on September 12th, 2000. Immediately after the
issuance of the B shares, the capital of the Company increased to CNY 400,000,000.00.
The Agreement of Share Transfer (《股份转让协议》) signed by SDA Group and China National
Aviation Holding Company (hereafter, China Aviation Group) on February 28th, 2004 authorised the
transfer of 91,200,000 shares of the Company, equal to 22.8% shareholding, from SDA Group to China
Aviation Group. Immediately after the share transfer, SDA Group’s shareholding in the Company was
42.00%. In November 2004, the Board of Directors of the Company, in accordance with the approval
(GuoZiChanQuan[2004]No.956 (国资产权[2004]956 号：《关于中国航空集团公司将受让山东
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.
17
(hereafter, Air China). As so provided in GuoZiChanQuan[2004]No.956, the rights and obligation
attributable to China Aviation Group as specified in the Agreement of Share Transfer shall be afforded
by Air China. The change of share ownership was registered at the China Securities Depository and
Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on December 3rd, 2004;
And, 91,200,000 shares of the Company then became held by Air China.
Legal representative of the Company: ZHANG, Xingfu
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746 – East 2nd Ring Road, Jinan, Shandong
1.2 Industry of operation
The Company operates in the industry of transportation.
1.3 Operating capacity
The Company is permitted to undertake international and domestic passenger and cargo transportation,
hotel and beverage related operation (limited to operation through branch); provision of aircraft
maintenance, training of civil aviation pilots and air crew, insurance brokerage (limited to air accident
insurance, with period of operation valid until September 3rd, 2015); 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),but involve operation related to commodity that are subject to quotas , licence
requirements, which are restricted to obtain permission before the operation.
1.4 Principal products (and/or services)
The principal service supplied by the Company is domestic air transportation.
1.5 The financial statements of the Group has been approved by the board of directors on 15
Mar 2013
Note 2 Basis of Preparation
The financial statements of the Company have been prepared on the basis of going concern in
conformity with Chinese Accounting Standards for Business Enterprises and the Accounting Systems
for Business Enterprises issued by the Ministry of Finance of People’s Republic of China in February
2006, and Accounting Standards (order No.38 of the Ministry of Finance) and Compilation Rules for
Information Disclosure by Companies Offering Securities to the Public No.15—General Provisions on
Financial Reports (2010 Revision) issued by the China Securities Regulatory Commission (CSRC).
According to the relevant accounting regulations in Chinese Accounting Standards for Business
Enterprises, the Company has adopted the accrual basis of accounting. Except for certain financial
instruments which are measured by at fair value, the Company adopts the historical cost as the
principle of measurement in the financial statements. Where assets are impaired, provisions for asset
18
impairment are made in accordance with relevant requirements.
Note 3 Statement of Compliance with Enterprise Accounting Standards
The financial statements of the company are recognized and measured in accordance with the
regulations in the Chinese Accounting Standards for Business Enterprises and they give a true and fair
view of the financial position, business result and cash flow of the Company as of 31 December
2012 .In addition, the financial statements of the company comply, in all material respects, with the
revised disclosing requirements for financial statements and the notes ‖ Compilation Rules for
Information Disclosure by Companies Offering Securities to the Public No.15—General Provisions on
Financial Reports (2010 Revision) issued by China Securities Regulatory Commission (CSRC) in 2010.
Note 4 Important Accounting Principles and Accounting Estimates
4.1 Accounting period
The accounting period of the Company is classified as interim period and annual period. Interim period
refers to the reporting period shorter than a complete annual period. The accounting period of the
Company is the calendar year from January 1 to December 31.
4.2 Monetary Unit
Yuan (CNY) is the currency of the primary economic environment in which the Company and its
domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose CNY as
their functional currency. The Company adopts CNY to prepare its functional statements.
4.3 Business combination
A business combination is a transaction or event that brings together two or more separate entities into
one reporting entity. Business combinations are classified into business combinations involving
enterprises under common control and business combinations not involving enterprises under common
control.
(1) Business combination involving entities under common control
A business combination involving enterprises under common control is a business combination in
which all of the combining enterprises are ultimately controlled by the same party or parties both before
and after the combination, and that control is not transitory.
For a business combination involving enterprises under common control, the party that, on the
combination date, obtains control of another enterprise participating in the combination is the absorbing
party, while that other enterprise participating in the combination is a party being absorbed.
Combination date is the date on which the absorbing party effectively obtains control of the party being
absorbed.
The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise
being combined at the combination date. The difference between the carrying amount of the net assets
obtained and the carrying amount of consideration paid for the combination (or the total face value of
shares issued) is adjusted to the capital premium (or share premium) in the capital reserve. If the
19
balance of the capital premium (or share premium) is insufficient, any excess is adjusted to retained
earnings.
The cost of a combination incurred by the absorbing party includes any costs directly attributable to the
combination shall be recognized as an expense through profit or loss for the current period when
incurred.
(2) Business combination involving entities not under common control
A business combination involving enterprises not under common control is a business combination in
which all of the combining enterprises are not ultimately controlled by the same party or parties both
before and after the business combination.
For a business combination not involving enterprises under common control, the party that, on the
acquisition date, obtains control of another enterprise participating in the combination is the acquirer,
while that other enterprise participating in the combination is the acquiree. Acquisition date is the date
on which the acquirer effectively obtains control of the acquiree.
For a business combination not involving enterprise under common control, the combination cost
including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or
assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the
acquirer in respect of auditing, legal services, valuation and consultancy services etc and other
associated administrative expenses attributable to the business combination are recognized in profit or
loss when they are incurred.
The transaction cost arose from issuing of equity securities or liability securities shall be initially
recognized as equity securities or liability securities.
The contingent consideration related to the combination shall be booked as combination cost at the fair
value at the acquisition date. If, within the 12 months after acquisition, additional information can prove
the existence of related information at acquisition date and the contingent consideration need to be
adjusted, goodwill can be offset.
For a business combination achieved in stages that involves multiple exchange transactions, the equity
interest in the acquiree previously held before the acquisition date re-assessed at the fair value at
the acquisition date, with any difference between its fair value and its carrying amount is recorded as
investment income. The other comprehensive income of the acquiree before the acquisition date
relating to the previously held interest in the acquiree is transferred to investment income.
Combination cost is the aggregate of the carrying amount of the equity interest held in the acquiree
prior to the acquisition date and the fair value of the cost of the additional investment at the acquisition
date.
Combination cost of the acquirer’s interest and identifiable net assets of the acquirer acquired through
the business combination shall be measured by the fair value at the acquisition date. Where the cost of
combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets,
the difference shall be recognized as goodwill. Where the cost of combination is less than the
acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference shall be
20
accounted for according to the following requirements: (i) the acquirer shall reassess the measurement
of the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities and
measurement of the cost of combination; (ii) if after that reassessment, the cost of combination is still
less than the acquirer’s interest in the fair values of the acquiree’s identifiable net assets, the acquirer
shall recognize the remaining difference immediately in profit or loss for the current period.
Where the temporary difference obtained by the acquirer was not recognized due to inconformity with
the conditions applied for recognition of deferred income tax, if, within the 12 months after acquisition,
additional information can prove the existence of related information at acquisition date and the
expected economic benefits on the acquisition date arose from deductible temporary difference by the
acquiree can be achieved, relevant income tax assets can be recognized, and goodwill offset. If the
goodwill is not sufficient, the difference shall be recognized as profit of the current period.
Apart from above, the differences shall be taken into profit or loss of the current period if the recognition
of deferred income tax assets is related to the combination
4.4 Preparation of the consolidated financial statements
(1) The scope of consolidation
The scope of consolidation for the consolidated financial statements is determined on the basis of
control. Control is the power to govern the financial and operating policies of an enterprise so as to
obtain benefits from its operating activities. The scope of consolidation includes the Company and all of
the subsidiaries. Subsidiary is an enterprise or entity under the control of the Company.
(2) Preparation of the consolidated financial statements
The subsidiary of the Company is included in the consolidated financial statements from the date when
the control over the net assets and business decisions of the subsidiary is effectively obtained, and
excluded from the date when the control ceases.
For a subsidiary disposed of by the Company, the operating results and cash flows before the date of
disposal (the date when control is lost) are included in the consolidated income statement and
consolidated statement of cash flows, as appropriate. For a subsidiary disposed during the period, no
adjustment is made to the opening balance of the consolidated financial statements.
For a subsidiary acquired through a business combination not under common control, the operating
results and cash flows from the acquisition (the date when the control is obtained) are included in the
consolidated income statement and consolidated statement of cash flows, as appropriated; no
adjustment is made to the opening balance and comparative figures in the consolidated financial
statements.
Where a subsidiary was acquired during the reporting period, through a business combination involving
enterprises under common control, the financial statements of the subsidiary are included in the
consolidated financial statements. The results of operations and cash flow are included in the
consolidated balance sheet and the consolidated income statement, respectively, based on their
carrying amounts, from the date that common control was established, and the opening balances and
the comparative figures of the consolidated financial statements are restated.
21
When the accounting period or accounting policies of a subsidiary are different from those of the
Company, the Company makes necessary adjustments to the financial statements of the subsidiary
based on the Company’s own accounting period or accounting policies. Where a subsidiary was
acquired during the reporting period through a business combination not under common control, the
financial statements was reconciliated on the basis of the fair value of identifiable net assets at the date
of acquisition. Intra-Group balances and transactions, and any unrealized profit or loss arising from
intra-Group transactions, are eliminated in preparing the consolidated financial statements.
Minority interest and the portion in the net profit or loss not attributable to the Company are presented
separately in the consolidated balance sheet within shareholders’/ owners’ equity and net profit. Net
profit or loss attributable to minority shareholders in the subsidiaries is presented separately as minority
interest in the consolidated income statement below the net profit line item.
When the amount of loss for the current period attributable to the minority shareholders of a subsidiary
exceeds the minority shareholders’ portion of the opening balance of [shareholders’] [owners’] equity of
the subsidiary, the excess is allocated against the minority interests.
When the Company loses control of a subsidiary due to the disposal of a portion of an equity
investment or other reasons, the remaining equity investment is re-measured at its fair value at the
date when control is lost. The difference between 1) the total amount of consideration received from the
transaction that resulted in the loss of control and the fair value of the remaining equity investment and
2) the carrying amounts of the interest in the former subsidiary’s net assets immediately before the loss
of the control is recognized as investment income for the current period when control is lost. The
amount recognized in other comprehensive income in relation to the former subsidiary’s equity
investment is reclassified as investment income for the current period when control is lost. The retained
interest is subsequently measured according to the rules stipulated in the ―Chinese Accounting
Standards for Business Enterprises No.2—Long-term equity investment‖ or ―Chinese Accounting
Standards for Business Enterprises No.22—Determination and measurement of financial instruments‖ .
See Note 4.10 Long-term equity investments and Note 4.7 Financial instruments for details.
4.5 Cash equivalent
Cash and cash equivalents of the Company include cash on hand, ready usable deposits and
investments having short holding term (normally will be due within three months from the day of
purchase), with strong liquidity and easy to be exchanged into certain amount of cash that can be
measured reliably and have low risks of change.
4.6 Foreign exchange
(1) Translation in foreign exchange transactions
The foreign currency transactions are recorded, on initial recognition in the functional currency, by
applying [the spot exchange rate on the date of the transaction / an exchange rate that approximates
the actual spot exchange rate on the date of transaction]. The exchange of foreign currency and
transactions related to the foreign exchange are translated at the spot exchange rate.
(2) Translation of monetary foreign currency and non-monetary foreign currency
22
At the balance sheet date, foreign currency monetary items are translated using the spot exchange rate
at the balance sheet date. All the exchange differences thus resulted are taken to profit or loss, except
for those relating to foreign currency borrowings specifically for construction and acquisition of
qualifying assets, which are capitalized in accordance with the principle of capitalization of borrowing
costs; ② hedging accounting, the exchange difference related to hedging instruments for the purpose
of net oversea operating investment is recorded in the comprehensive income till the date of disposal
and recognized in profit or loss of the period; exchange difference from changes of other account
balance of foreign currency monetary items available-for-trade is recorded into profit or loss except for
amortized cost.
Non-monetary foreign currency items measured at historical cost shall still be translated at the spot
exchange rate prevailing on the transaction date, and the amount denominated in the functional
currency is not changed. Non-monetary foreign currency items measured at fair value are translated at
the spot exchange rate prevailing at the date when the fair values are determined. The exchange
difference thus resulted are recognized in profit or loss for the current period or as capital reserve.
(3) The translation of financial statement in foreign currency
When the consolidated financial statements include foreign operation(s), if there is a foreign currency
monetary item constituting a net investment in a foreign operation, exchange difference arising from
changes in exchange rates are recognized as ―exchange differences arising on translation of financial
statements denominated in foreign currencies‖ in owner’s equity, and in profit or loss for the period
upon disposal of the foreign operation.
The Group translates the financial statements of its foreign operations into CNY by following rules.
Assets and liabilities in the balance sheet are translated at the spot exchange rate prevailing at the
balance sheet date; all equity items except for retained earnings are translated at the spot exchange
rates at the dates on which such items occur; income and expenses in income statement are translated
at the spot exchange rates at the date of transaction; the opening retained earnings is the closing
retained earnings of the last period after translation; the closing balance of retained earnings is
calculates and presented in the basis of each translated income statements and profit distribution item;
the difference arising between the assets and liabilities and shareholders’ equity shall be booked as
translation difference of foreign currency statements, and shall be presented as a separate component
of equity in the balance sheet. On a loss of control over Group’s oversea operation due to disposal, the
Company transfers the accumulated or proportionate share of the accumulated exchange difference
arising on translation of financial statements of this oversea operation attributable to the owners’ equity
of the Company and presented under shareholders’ equity, to profit or loss in the period in which the
disposal occurs.
Foreign currency cash flows and cash flow of oversea subsidiaries are translated at the spot exchange
rates on the date of cash flows.The effect of exchange rate changes on cash is separately presented
as an adjustment item in the cash flow statement.
The opening and actual amount of last year are presented in the financial statement after translation
23
4.7 Financial instruments
(1) Determination of financial assets and liabilities’ fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction. For a financial instrument which has an
active market, the Company uses quoted price in the active market to establish its fair value. The
quoted price in the active market refers to the price that can be regularly obtained from exchange
market, agencies, industry associations, pricing authorities; it represents the fair market trading price in
the actual transaction.
For a financial instrument which does not have an active market, the Company establishes fair value by
using a valuation technique. Valuation techniques include using recent arm’s length market
transactions between knowledgeable, willing parties, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow analysis and option pricing models.
The Company measures initially and subsequently the fair value of an interest rate swap at the value of
a competitor’s interest rate swap quoted by a recognised financial institution as at the Company’s
balance sheet date in accordance with the principle of consistency.
(2) Classification, recognition and measurement of financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date
basis. On initial recognition, the Company’s financial assets are classified into one of the four
categories, including financial assets at fair value though profit or loss, held-to maturity investments,
loans and receivables and available-for-trade financial assets. A financial asset is recognized initially at
fair value. In the case of financial assets at fair value through profit or loss, relevant transaction costs
are immediately charged to the profit and loss of the current period; transaction costs relating to
financial assets of other categories are included in the amount initially recognized.
1) Financial assets at fair value through profit or loss:
Including financial assets held-for-trade and financial assets designated at fair value through profit or
loss.
Financial asset held-for-trade is the financial asset that meets one of the following conditions:
A. the financial asset is acquired for the purpose of selling it in a short term;
B. the financial asset is a part of a portfolio of identifiable financial instruments that are collectively
managed, and there is objective evidence indicating that the enterprise recently manages this portfolio
for the purpose of short-term profits;
C. the financial asset is a derivative, except for a derivative that is designated and effective hedging
instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by
delivery of an unquoted equity instrument (without a quoted price from an active market) whose fair
value cannot be reliably measured. For such kind of financial assets, fair values are adopted for
subsequent measurement.
Financial asset is designated on initial recognition as at fair value through profit or loss only when it
meets one of the following conditions:
24
A. the designation eliminates or significantly reduces the inconsistency in the measurement or
recognition of relevant gains or losses that would otherwise arise from measuring the financial
instruments on different bases.
B.a Group of financial instruments is managed and its performance is evaluated on a fair value basis,
and is reported to the enterprise’s key management personnels. Formal documentation regarding risk
management or investment strategy has prepared.
Financial assets at fair value through profit or loss are subsequently measured at the fair value. Any
gains or losses arising from changes in the fair value and any dividends or interest income earned on
the financial assets are recognized in the profit or loss.
2) Investment held-to maturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturity that an entity has the positive intention and ability to hold to maturity. Such kind of
financial assets are subsequently measured at amortized cost using the effective interest method.
Gains or losses arising from derecognition, impairment or amortization are recognized in profit or loss
for the current period.
Effective interest rate is the rate that exactly discounted estimated future cash flows through the
expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net
carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Company shall estimate future cash flow considering all
contractual terms of the financial asset or financial liability without considering future credit losses, and
also consider all fees paid or received between the parties to the contract giving rise to the financial
asset and financial liability that are an integral part of the effective interest rate, transaction costs, and
premiums or discounts, etc.
3) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed determinable payment that are not
quoted in an active market. Financial assets classified as loans and receivables by the Company
include note receivables, account receivables, interest receivable dividends receivable and other
receivables.
Loans and receivables are subsequently measured at amortized cost using the effective interest
method. Gain or loss arising from derecognition, impairment or amortization is recognized in profit or
loss.
4) Financial assets available-for-trade
Financial assets available-for-trade include non-derivative financial assets that are designated on initial
recognition as available for trade, and financial assets that are not classified as financial assets at fair
value through profit or loss, loans and receivables or investment held-to-maturity.
Financial assets available-for-trade are subsequently measured at fair value, and gains or losses
arising from changes in the fair value are recognized as other comprehensive income and included in
the capital reserve, except that impairment losses and exchange differences related to amortized cost
25
of monetary financial assets denominated in foreign currencies are recognized in profit or loss, until the
financial assets are derecognized, at which time the gains or losses are released and recognized in
profit or loss.
Interests obtained and dividends declared by the investee during the period in which the financial
assets available-for-trade are held, are recognized in investment gains.
(3) Impairment of financial assets
The Group assesses at the balance sheet date the carrying amount of every financial asset except for
the financial assets that measured by the fair value. If there is objective evidence indicating a financial
asset may be impaired, a provision is provided for the impairment.
1) Impairment on held-to maturity investment, loans and receivables
The financial assets measured by cost or amortized cost write down their carrying value by the
estimated present value of future cash flow. The difference is recorded as impairment loss. If there is
objective evidence to indicate the recovery of value of financial assets after impairment, and it is related
with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed.
The carrying value of financial assets after impairment loss reversed shall not exceed the amortized
cost of the financial assets without provisions of impairment loss on the reserving date.
2) Impairment loss on available-for-trade financial assets
Where the fair value of the equity instrument investment drops significantly or not contemporarily
according to the integrated relevant factors, an available-for-trade financial asset is impaired.
When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair
value that had been recognized in capital reserve shall be removed and recognized in profit or loss.
The amount of the cumulative loss that is removed shall be difference between the acquisition cost with
deduction of recoverable amount less amortized cost, current fair value and any impairment loss on
that financial asset previously recognized in profit or loss.
If, after an impairment loss has been recognized, there is objective evidence that the value of the
financial asset is recovered, and it is objectively related to an event occurring after the impairment loss
was recognized, the initial impairment loss can be reversed and the reserved impairment loss on
available-for-trade equity instrument is recorded in the profit or loss, the reserved impairment loss on
available-for-trade debt instrument is recorded in the current profit or loss.
The equity instrument where there is no quoted price in an active market, and whose fair value cannot
be reliably measured, or impairment loss on a derivative asset that is linked to and must be settled by
delivery of such an unquoted equity instrument shall not be reversed.
(4) Recognition and measurement of financial assets transfer
The Group derecognizes a financial asset when one of the following conditions is met:
1) the rights to receive cash flows from the asset have expired;
2) the enterprise has transferred its rights to receive cash flows from the asset to a third party under a
―pass-through‖ arrangement; or
3) the enterprise has transferred its rights to receive cash flows from the asset and either (a) has
26
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
If the enterprise has neither retained all the risks and rewards from the financial asset nor control over
the asset, the asset is recognized according to the extent it exists as financial asset, and correspondent
liability is recognized. The extent of existence refers the level of risk by the financial asset changes the
enterprise is facing.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, (a). the carrying
amount of the financial asset transferred; and (b) the sum of the consideration received from the
transfer and any cumulative gain or loss that had been recognized in other comprehensive income, is
recognized in profit or loss.
If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the
transferred financial asset is allocated between the part that continues to be recognized and the part
that is derecognized, based on the relative fair value of those parts. The difference between (a) the
carrying amount allocated to the part derecognized; and (b) the sum of the consideration received for
the part derecognized and any cumulative gain or loss allocated to the part derecognized which has
been previously recognized in other comprehensive income, is recognized in profit or loss.
(5) Classification and measurement of financial liabilities
The Group’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value
through profit or loss and other financial liabilities. For financial liabilities at fair value through profit or
loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and
transaction costs relating to other financial liabilities are included in the initial recognition amounts.
1) Financial liabilities measured by the fair value and the changes recorded in profit or loss
The classification by which financial liabilities held-for-trade and financial liabilities designed at the
initial recognition to be measured by the fair value follows the same criteria as the classification by
which financial assets held-for-trade and financial assets designed at the initial recognition to be
measured by the fair value and their changes are recorded in the current profit or loss.
For the financial liabilities measured by the fair value and changes recorded in the profit or loss, fair
values are adopted for subsequent measurement. All the gains or losses on the change of fair value
and the expenses on dividends or interests related to these financial liabilities are recognized in profit
or loss for the current period.
2) Other financial liabilities
Derivative financial liabilities that linked with equity instruments, which do not have a quoted price in an
active market and their fair value cannot be measured reliably, is subsequently measured by cost Other
financial liabilities are subsequently measured at amortized cost using the effective interest method.
Gains or losses arising from derecognition or amortization are recognized in profit or loss for the
current period.
3) Financial guarantee contracts
For financial guarantee contracts that are not designated as at fair value through profit or loss,they are,
27
after initial recognition, subsequently measured at the higher of: (i) the amount determined according to
the principles of Accounting Standards for Business Enterprises No. 13 - Contingencies, and (ii) the
amount initially recognized less the accumulated amortization determined according to the principles of
Accounting Standards for Business Enterprises No. 14 - Revenue.
(6) Derecognition
The Group derecognizes a financial liability (or part of it) when the underlying present obligation (or part
of it) is discharged or cancelled or has expired. An agreement between the Company (an existing
borrower) and existing lender to replace original financial liability with a new financial liability with
substantially different terms is accounted for as an extinguishment of the original financial liability and
the recognition of a new liability.
When the Company derecognizes a financial liability or a part of it, it recognizes the difference between
the carrying amount of the financial liability (or part of the financial liability) derecognized the
consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in
profit or loss.
(7) Derivatives and embedded derivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when
the derivative contracts are entered into and are substantially re-measured at fair value. The resulting
gain and loss is recognized in profit or loss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not
designated as a financial asset or financial liability at fair value though profit or loss, and the treated as
a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not
closely related to the economic characteristics and risks of the host contract; and (b) a separate
instrument with the same terms as the embedded derivative would meet the definition of a derivative. If
the Company is unable to measure the embedded derivative separately either at acquisition or at a
subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or
financial liability at fair value through profit or loss.
(8) Offsetting financial assets and financial liabilities
When the Company has a legal right that is currently enforceable to set off the recognized financial
assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset
and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset
and the net amount is presented in the balance sheet. Except for the above circumstances, financial
assets and financial liabilities shall be presented separately in the balance sheet and shall not be
offset.
(9) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. The consideration received from issuing equity instruments, net of
transaction costs, are added to [shareholders’ / owners’] equity.
All types of distribution (excluding stock dividends) made by the Company to holders of equity
28
instruments are deducted from [shareholders’ /owners’] equity. The Group does not recognize any
changes in the fair value of equity instruments.
4.8 Accounts receivable
The receivables by the Company includes account receivables, and other receivables.
(1) Criteria for recognition of bad debts:
The Company carries out an inspection on the balance sheet date. Where there is any objective
evidence proving that the receivables have been impaired, an impairment provision shall be made:
1) A serious financial difficulty occurs to the issuer or debtor;
2) The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the
payment of interests or the principal, etc.;
3) The debtor will probably become bankrupt or carry out other financial reorganizations;
4) Other objective evidences showing the impairment of the receivables.
(2) Method for bad debts provision
1) Provisions of bad debts in account receivables that is individually significant.
Individual receivables equal to or higher than 5% of total receivables are classified as receivables of
individual significance.
For an account receivable that is individually significant, the asset is individually assessed for
impairment, the impairment loss is recognized at the difference between the present value of future
cash flow less the carrying amount, and provision is made accordingly.
2) Provisions of bad debts in account receivables that individually insignificant items with similar credit
risk characteristics that have significant risk:
A.Evidence of credit risk characteristics
Whether the financial asset is individually significant or not individually significant, it is included in a
group of financial assets with similar credit risk characteristics and collectively assessed for impairment.
Such credit risk reflects the repayment of all due amount under the contract, and is related to the
estimation of future cash flow expected to be derived from the assets.
Evidence of portfolios：
Item Basis
Receivables not individually assessed for impairment are categorised on
the basis of credit risk. Provision for bad debts for each category of
Categorisation by nature of
receivables is recognised at the actual rate of loss for the previous year of
receivables
the same or similar category bearing similar credit risk characteristics after
adjustment for the current year circumstances.
B.Provision by credit risk characteristics
During the Company impairment test, the amount of bad debts provisions is determined by the
assessed result from the experience of historical loss and current economic status and the existing loss
in the estimated account receivables according to the set of account receivables and credit risk
characteristic.
29
Provisions for difference portfolios:
Item Provision
Categorisation by nature of receivables Percentage of carrying amount
a. Portfolio 1 by Percentage of carrying amount
Percentage of carrying amount for Percentage of carrying amount for
Category recognition of allowance for bad debt recognition of allowance for bad debt
applicable to accounts receivable applicable to other receivables
Categorisation by nature of receivables 5% 5%
3) Provisions of bad debts that is individually insignificant.
For the account receivables not individually significant, the Company assesses the account receivables
individually for impairment when are of following characteristics: if there is objective evidence indicating
the impairment, the impairment loss is recognized at the difference between the present value of future
cash flow less the carrying amount, and provision is made accordingly. For examples: receivables of
individual insignificance bears differing credit risk characteristics to other receivables of individual
insignificance account receivables with related parties; account receivables under litigations or
arbitrations, or account receivables with obvious indication that debtor cannot fulfill the obligation of
repayment.
(3) The reversal of bad debts provision
If there is objective evidence of recovery in value of account receivables, and the recovery can be
related to an event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed and recognized in profit or loss. However, the reversal shall not result in a
carrying amount that exceeds what the amortized cost would have been had the impairment loss not
been recognized at the date the impairment is reversed.
4.9 Inventories
(1) Classification of inventory
The Company’s inventory mainly include air materials and low-value consumables.。
(2) Valuation method of inventories upon delivery
Inventories are initially carried at the actual cost. The actual cost of inventories transferred out is
assigned by using first-in, first out (FIFO) method.
(3) Basis for determining net realizable value of inventories and provision methods for decline in value
of inventories
Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable
value is determined on the basis of clear evidence obtained, and takes into consideration the purpose
of holding inventories and effect of post balance sheet events.
At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If
the net realizable value is below the cost of inventories, a provision for decline in value of inventories is
made. The provision for inventories decline in value is determined normally by the difference of the cost
30
of individual item less its realizable value. For large quantity and low value items of inventories,
provision for decline in value is made based on categories of inventories. For items of inventories
relating to a product line that are produced and marketed in the same geographical area, have the
same or similar end users or purposes, and cannot be practicably evaluated separately from other
items in that product line provision for decline in value is determined on an aggregate basis.
After the provision for decline in value of inventories is made, if the circumstances that previously
caused inventories to be written down below cost no longer exist so that the net realizable value of
inventories is higher than their cost, the original provision for decline in value is reversed and the
reversal is included in profit or loss for the period.
(4) The perpetual inventory system is maintained for stock system.
(5) Amortization method for low cost and short-lived consumable items and packaging materials.
Low cost and short-lived consumable items are amortized using immediate write-off method; packaging
materials are amortized using immediate write-off method.
4.10 Long-term equity investments
(1) Determination of Investment cost
For a business combination involving enterprises under common control, the initial investment cost of
the long-term equity investment shall be carrying value of the absorbing party’s share of the
shareholder’s equity of the party being absorbed at the date of combination.
For a business combination not involving enterprise under common control, the combination cost
including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or
assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the
acquirer in respect of auditing, legal services, valuation and consultancy services etc and other
associated administrative expenses attributable to the business combination are recognized in profit or
loss when they are incurred.
The transaction cost for the equity securities or liability securities issued by the acquirer in the business
combination shall be recognized as initial amount of equity security or liability.
The equity investments other than the long-term equity through combination shall be initially measured
by cost. The cost shall be recognized to the difference in the way of acquisition of long-term equity
investment. Theses ways include the cash purchase price the Companythe Company actually paid, the
fair value of equity security issued by the Companythe Company, value specified in the investment
contract or agreement, the fair value or carrying value of the asset out in the transaction of
non-monetary asset exchanges, and the fair value of the long-term equity investment.
Expenses, taxes and other necessary expenditures directly attributable to the acquisition of long-term
equity investment are taken into investment cost.
(2) Subsequent Measurement
Cost method shall be adopted in a long-term equity investment where the investing enterprise does not
have common control or significant influence over the investee, the investment is not quoted in an
active market and its fair value cannot be measured reliably.
31
Where an investing enterprise can exercise common control or significant influence over the investee,
a long-term investment shall be accounted for using the equity method.
When an investing enterprise can no longer exercise joint control or common control nor significant
influence over the investee, and its fair value cannot be measured reliably, a long-term investment shall
be counted as financial asset ready-for trade.
A long-term equity investment where cost method is adopted in the Company’s financial statements
can exercise controls over the investee.
1) Cost method of accounting for long-term equity investments
Under the cost method, a long-term equity investment is measured at initial investment cost. Except for
cash dividends or profits declared but not yet paid that are included in the price or consideration
actually paid upon acquisition of the long-term equity investment, investment income is recognized in
the period in accordance with the attributable share of cash dividends or profit distributions declared by
the investee.
2) Equity method of accounting for long-term equity investments
Where the initial investment cost of a long-term equity investment exceeds the investing enterprise’s
interest in the fair values of the investee’s identifiable net assets at the time of acquisition, no
adjustment shall be made to the initial investment cost.
Where the initial investment cost of a long-term equity investment is less than the investing enterprise’s
interest in the fair values of investee’s identifiable net assets at the time of acquisition, the difference
shall be charged to profit or loss for the current period, and the cost of the long-term equity investment
shall adjusted accordingly.
Under the equity method, the Company recognizes its share of the net profit or loss of the investee for
the period as investment income or loss for the period. The Group recognizes it share of the investee’s
net profit or loss based on the fair value of the investee’s individual separately indentible assets, etc at
the acquisition date after making appropriate adjustments to confirm with the Company’s accounting
policies and accounting period. Unrealized profits or losses resulting from the Company’s transactions
with its associates and joint ventures are recognized as investment income or loss to the extent that
those attributable to the Company’s equity interest are eliminated. However, unrealized losses resulting
from the Company’s transactions with its investees on the transferred assets, in accordance with
"Accounting Standards for Enterprises No. 8 - Impairment of Assets", are not eliminated. Changes in
owners’ equity of the investee other than net profit or loss are correspondingly adjusted to the carrying
amount of the long-term equity investment, and recognized as other compressive income which is
included in the capital reserve.
When the investee is recognized net losses, reduce the carrying value of long-term equity investments
and long-term equity of net investment (in substance) in investee to zero. In addition, the Company has
the obligations on additional losses, then the expected obligation as estimated liabilities and included in
the current investment losses. Where the net profit from investee units, restoration confirm the amount
of revenue sharing after offset the amount of unrecognized loss sharing.
32
For long-term equity investments in associates and joint ventures which had been held by the
Company before its first time adoption of Accounting Standards for Business Enterprises, where the
initial investment cost of a long-term equity investment exceeds the Company’s interest in the
investee’s net assets at the time of acquisition, the excess is amortized and is recognized in profit or
loss on a straight line basis over the original remaining life.
3) Acquisition of minority interest
The difference between newly increased equity investment due to acquisition of minority interests and
portion of net asset cumulatively calculated from the acquisition date is adjusted as capital reserve. If
the capital reserve is not sufficient to absorb the difference, the excess are adjusted against returned
earnings.
4) Disposal of long-term equity investment
Where the parent company disposes long-term investment in a subsidiary without a change in control,
the difference in the net asset between the amount of disposed long-term investment and the amount
of the consideration paid or received is adjusted to the owner’s equity. If the disposal of long-term
investment in a subsidiary involves loss of control over the subsidiary, the related accounting policies in
Note 4.2(2) applies.
On disposal of a long-term equity investment, the difference between the proceeds actually received
and receivable and the carrying amount is recognized in profit or loss for the period. For along-term
equity investment accounted for using the equity method, the amount included in the owners’ equity
attributable to the percentage interest disposed is transferred to profit or loss for the period.
For any retained interest, it shall be subsequently measured according to the related accounting
policies in regard of long-term equity investments or financial assets as described above if its carrying
amount is recognized as long-term equity investments or other related financial assets. Retroactive
adjustment is made on the basis of relevant policies if the retained interests are settled from cost
method to equity method.
(3) Recognition of investee under common control or significant influence
Control is the power to govern the financial and operating policies of an enterprise so as to obtain
benefits from its operating activities.
Common control is the contractually agreed sharing of control over an economic activity, and exists
only when the strategic financial and operating decisions relating to the activity require the unanimous
consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence
over an investee, the effect of potential voting rights of the investee held be the investing enterprise or
other parties that are currently exercisable or convertible shall be considered.
(4) Impairment testing methods and recognition of impairment provision
The company assesses the long-term equity investment at the balance sheet date whether there is any
33
indication of impairment. If any indication exists that an asset may be impaired, the enterprise shall
estimate its recoverable value of the asset. If the recoverable value of the asset is less than its carrying
amount, a provision for impairment loss of the asset is recognized accordingly.
Once an impairment loss is recognized, it shall not be reversed in a subsequent period.
4.11 Fixed assets
(1) The conditions of recognition
Fixed assets refers to the tangible assets that are held for the sake of producing commodities,
rendering labor service, renting or business management and their useful life is in excess of one fiscal
year.
(2) The method for depreciation
Fixed assets are stated at cost and consider the impact of expected costs of abandoning the initial
measurement. From the following month of state of intended use, depreciation method of the
straight-line method is used for different categories of fixed assets to take depreciation. The recognition
of the classification, useful life and estimated residual rate are as follows:
Estimated residual
Category Expected useful life Depreciation(%)
value(%)
Houses and building 27-33 5.00 2.88-3.52
Key components and power supports of
15-20 5.00 4.75-6.33
aircraft engine
Replacement parts of aircraft body 6-8 0.00 12.5-16.67
Replacement parts of engine 3-5 0.00 20-33.33
Equipments, electronic devices and
4-10 0-5.00 9.5-23.75
furniture
High value rotables 15-18 0.00 5.56-6.67
Transportation vehicles 5-10 5.00 9.5-19.00
Expected net residual value of fixed assets is the balance of the Company currently obtained from the
disposal of the asset less the estimated costs of disposal amount, assuming the asset is out of useful
life and state the expected service life in the end.
(3) Measurement and recognition of fixed assets
Impairment and provisions of fixed assets are disclosed on Note 4.16.
(4) Fixed Assets under finance leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of
an asset. Title may or may not eventually be transferred.
Fixed assets that are held under finance leases shall be depreciated by applying the same policy as
that for the fixed assets owned by the Company. If it can be reasonably determined that the ownership
of the leased assets can be obtained at the end of the lease period, the leased assets are depreciated
over their useful lives; otherwise, the leased assets are depreciated over the shorter of the lease terms
and the useful lives of the leased assets.
34
(5) Others
A fixed asset is recognized only when the economic benefits associated with the asset will probably
flow to the Company and the cost of the asset can be measured reliably. Subsequent expenditure
incurred for a fixed asset that meet the recognition criteria shall be included in the cost of the fixed
asset, and the carrying amount of the component of the fixed asset that is replaced shall be
derecognized. Otherwise, such expenditure shall be recognized in profit or loss in the period in which
they are incurred.
The revenue from selling or transferring, or disposing a fixed asset is booked into profit and loss after
deduction of carrying value and related tax.
The Company conducts a review of useful life, expected net realizable value and depreciation methods
of the fixed asset at least on an annual base. Any change is regarded as change in accounting
estimates.
4.12 Construction in progress
Construction in progress is measured at its actual cost. The actual costs include various construction
expenditures during the construction period, borrowing costs capitalized before it is ready for intended
use and other relevant costs. Construction in progress is transferred to a fixed asset when it is ready
for intended use.
Testing method for provision impairment of construction in progress and accrued method for provision
impairment please refer to Note 4.16.
4.13 Borrowing costs
Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary
costs incurred in connection with the arrangement of borrowings, and exchange differences arising
from foreign currency borrowings.
The borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalized. The amounts of other borrowing costs incurred are recognized as an
expense in the period in which they are incurred. Qualifying assets are asset (fixed assets, investment
property and inventories, etc.) that necessarily take a substantial period of time for acquisition,
construction or production to get ready for their intended use or sale.
Where funds are borrowed for a specific-purpose, the amount of interest to be capitalized is the actual
interest expense incurred on that borrowing for the period less any bank interest earned from
depositing the borrowed funds before being used on the asset or any investment income on the
temporary investment of those funds.
Where funds are borrowed for a general-purpose, the amount of interest to be capitalized on such
borrowings is determined by applying a weighted average interest rate to the weighted average of the
excess amounts of accumulated expenditure on the asset over and above the amounts of
specific-purpose borrowings
During the capitalization period, exchange differences related to a specific-purpose borrowing
denominating in foreign currency are all capitalized. Exchange differences in connection with
35
general-purpose borrowings are recognized in profit or loss in the period in which they are incurred.
Assets qualified for capitalization are the fixed assets, investment properties or inventories which need
a long time of construction or production activities before ready for intended used or sale.
Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or
production of a qualifying asset is interrupted by activities other than those necessary to prepare the
asset for its intended use or sale, when the interruption is for a continuous period of more than 3
months. Borrowing costs incurred during these periods recognized as an expense for the current period
until the acquisition, construction or production is resumed.
4.14 Intangible assets
(1) Intangible asset
The term ―intangible asset‖ refers to the identifiable non-monetary assets without physical shape,
possessed or controlled by enterprises.
The intangible assets are initially measured by its cost. Expenses related to intangible assets, if the
economic benefits related to intangible assets are likely to flow into the enterprise and the cost of
intangible assets can be measured reliably, shall be recorded as cost of intangible assets. The
expenses other than this shall be booked in the profit or loss when they occur.
Land use rights that are purchased by the Company are accounted for as intangible assets. Buildings,
such as plants that are developed and constructed by the Company, and relevant land use rights and
buildings, are accounted for as intangible assets and fixed assets, respectively. Payments for the land
and buildings purchased are allocated between the land use rights and the buildings; if they cannot be
reasonably allocated, all of the land use rights and buildings are accounted for as fixed assets.
When an intangible asset with a definite useful life is available for use, its original cost less net residual
value and any accumulate impairment losses is amortized over its estimated useful life using the
straight-line method . An intangible asset with an indefinite useful life is not amortized.
For an intangible asset with a definite useful life, the Company reviews the useful life and amortization
method at the end of the period, and makes adjustment when necessary.. An additional review is also
carried out for useful life of the intangible assets with indefinite useful life. If there is evidence showing
the foreseeable limit period of economic benefits generated to the enterprise by the intangible assets,
then estimate its useful life and amortize according to the policy of intangible assets with definite useful
life.
Impairment and provisions of intangible assets are disclosed on Note 4.16.
4.15 Deferred charges
Deferred charges represent expenses incurred that should be borne and amortized over the current
and subsequent period (together of more than one year). Deferred charges are amortized by using
straight line method. 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.
36
4.16 Impairment of non-current non-financial assets
Non-financial assets with non-current nature include fixed assets, construction in progress, intangible
assets with definite useful lives, investment properties measured by cost methods and long-term equity
investment on subsidiaries, jointly operations. The Company assesses whether there are any indicators
of impairment for all non-financial assets at the balance sheet date, and impairment test is carried out
and recoverable value is estimated if such an indicator exits. Goodwill and intangible assets with
indefinite useful lives, as well as intangible assets not ready for use, are tested for impairment annually
regardless of indicators of impairment.
Impairment of loss is calculated and provisions taken by the difference if the recoverable value of the
assets is lower than the book value. The recoverable value is the higher of estimated present value of
the future expected cash flows from the asset and net fair value of the asset less disposed cost. The
fair value of asset is determined by the sales agreement price within an arm’s length transaction. In
case there is no sales agreement, but there is active market of assets, the fair value can be determined
by the selling price. If there is neither sales agreement nor active market, the fair value of the asset can
be estimated based on the best information obtained.
Disposal expenses include expenses related to the legislation, taxes, transportations and the direct
expense for the asset to be ready for sale. When calculating the present value of expected future cash
flows from an asset or asset Group, the management shall estimate the expected future cash flows
from the asset or asset Group and choose a suitable discount rate in order to calculate the present
value of those cash flows.
Provision for asset impairment is calculated and determined on the individual basis. If the recoverable
of individual asset is hard to estimate, the recoverable amount can be determined by the asset Group
where subject asset belongs. Asset Group is the smallest set of assets that can have cash flow in
independently.
The Company determines whether goodwill is impaired at least on an annual basis. This requires an
estimation of the present value of the future expected cash flows from the asset Groups or sets of
asset Groups to which the goodwill is allocated. Estimating the present value requires the Company
to make an estimate of the expected future cash flows from the asset Groups or sets of asset Groups
and also choose a suitable discount rate in order to calculate the present value of those cash flows.
Once the loss from above asset impairment is recognized, the recoverable part cannot be reserved in
the subsequent periods.
4.17 Revenue
(1) Revenue from rendering of service
① The Company 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
37
parties to the code sharing agreement. The revenue arising from code sharing is also recognised when
the service is rendered.
② The Company company recognise air cargo revenue from rendering of air service for carriage of
cargo when the service is rendered
③ 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.
④ Revenue arising from other air service rendering is recognised when the service rendering is
completed.
(2) Royalty Revenue
According to the contract or agreement, the revenue is recognized on an accrual basis.
(3) Interest Income
The amount of interest revenue should be measured and confirmed in accordance with the length of
time for which the enterprise's cash is used by others and the actual interest rate.
4.18 Government Grants
Government grants are transfer of monetary assets and non-monetary assets from the government to
the Company at no consideration, excluding the capital invested by the government as equity owner.
Government grant can be classified as grant related to the assets and grants related to the income.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount
received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at
fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. A
government grant measured at a nominal amount is recognized immediately in profit or loss for the
period.
A government grant related to an asset is recognized as deferred income, and evenly amortized to
profit or loss over the useful life of the related asset. For a government grant related to income, if the
grant is a compensation for related expenses or losses to be incurred in subsequent period, the grant is
recognized as deferred income, and recognized in profit or loss over the periods in which the related
costs are recognized. If the grant is a compensation for related expenses or losses already incurred,
the grant is recognized immediately in profit or loss for the period.
For repayment of a government grant already recognized, if there is a related deferred income, the
repayment is offset against the carrying amount of the deferred income, and any excess is recognized
in profit or loss for the period. If there is no related deferred income, the repayment is recognized
immediately in profit or loss for the period.
4.19 Deferred tax assets and deferred tax liabilities
(1) Income tax for the current period
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability is settled, according to the
38
requirements of tax laws. The measurement of deferred tax assets and deferred tax liabilities reflects
the tax consequences that would follow from the manner in which the Company expects at the balance
sheet date, to recover the assets or settle the liabilities.
At the balance sheet date, current income tax liabilities or assets for the current and prior periods, are
measured at the amount expected to be paid (or recovered) according to the requirements of tax laws.
The calculation for income tax expenses in the current period is based on the taxable income according
to the related tax laws after adjustment to the accounting profit of the reporting period.
(2) Deferred income tax assets and liabilities
For temporary differences between the carrying amount of certain assets or liabilities and their tax base,
or between the nil carrying amount of those items that are not recognized as assets or liabilities and
their tax base that can be determined according to tax laws, deferred tax assets and liabilities are
recognized using the balance sheet liability method.
For temporary differences associated with the initial recognition of goodwill and the initial recognition of
an asset or liability arising from a transaction (not a business combination) that affects neither the
accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax
asset or liability is recognized.
For taxable temporary differences associated with investments in subsidiaries and associates, and
interests in joint ventures, no deferred income tax liability related is recognized except where the
Company is able to control the timing of reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
All deferred income tax liabilities arising from taxable temporary differences except the ones mentioned
above are recognized.
For temporary deductible differences associated with the initial recognition of an asset or liability arising
from a transaction (not a business combination) that affects neither the accounting profit nor taxable
profits (or deductible losses) at the time of transaction, no deferred tax asset is recognized.
For taxable temporary deductible differences associated with investments in subsidiaries and
associates, and interests in joint ventures, no deferred income tax asset related is recognized if it is
impossible to reversal the temporary difference in the foreseeable future, or it is not probable to obtain
taxable income which can be used for the deduction of the temporary difference in the future.
Except mentioned above, the Company recognizes other deferred income tax assets that can deduct
temporary differences to the extent that it is probable that taxable profits will be available against which
the deductible temporary differences can be utilized.
For the deductible losses and tax credit that can be carried forward, deferred tax assets for deductible
temporary differences are recognized to the extent that it is probable that taxable profits will be
available against which the deductible temporary differences can be utilized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates according to
tax laws, that are expected to apply in the period in which the asset is realized or the liability is settled.
At the balance sheet date, the Company reviews the carrying amount of deferred tax assets. If it is no
39
longer probable that sufficient taxable profit will be available in future periods to allow the benefits of the
deferred tax assets to be used, the Company reduces the carrying amount of deferred tax assets. The
amount of such reduction is reversed when it becomes probable that sufficient taxable profit will be
available
(3) Income tax expenses
Income tax expenses consist of current income tax and deferred income tax.
The expenses from income tax and deferred income tax, as well as the revenue, shall be recorded into
profit or loss in current accounting period, except expense for income tax of the current period and
deferred income tax that booked into other income or equity and adjusted carrying value of deferred
income tax goodwill arose from business combination.
(4) Income tax offset
When we have the legal right, and have intended to, to make settlement with net amount, or through
the asset acquisition and liability fulfillment simultaneously, the Company shall present the net value
from the offset between current income tax asset and current income tax liability in the financial
statement.
When the Company has the legal right to make a settlement with the current income tax asset and
current income tax liability, and the deferred income tax asset and deferred income tax liability are
related to the same taxable subject under the same tax payer, or related to different taxable subject,
but the intension of net value settlement in regard of the current income tax asset and current income
tax liability, the Company shall present net value after the offset of deferred income tax asset and
deferred income tax liability.
4.20 Leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of
an asset. Title may or may not eventually be transferred. An operating lease is a lease other than a
finance lease.
(1) The Company as Lessee under operating Lease
Lease payments under an operating lease are recognized by a lessee on a straight-line basis over the
lease term, and either included in the cost of the related asset or charged to profit or loss for the current
period. The contingent rents shall be recorded in the profit or loss of the period in which they actually
arise.
(2) The Company as Leaser under operating Lease
Lease income from operating leases shall be recognized by the leaser in profit or loss on a straight-line
basis over the lease term. Initial direct cost of significance in amount shall be capitalized when incurred.
If another basis is more systematic and rational, that basis may be used. Contingent rents are credited
to profit or loss in the period in which they actually arise.
(3) The Company as Lessee under financing Lease
For an asset that is held under a finance lease, at the lease commencement, the leased asset is
recorded at the lower of its fair value at the lease commencement and the present value of the
40
minimum lease payments, and the minimum lease payment is recorded as the carrying amount of the
long-term payables; the difference between the recorded amount of the leased asset and the recorded
amount of the payable is accounted for as unrecognized finance charge, Initial direct costs incurred by
the lessee during the process of negotiating and securing the lease agreement shall be added to the
amount recognized for the leased asset.
The net amount of minimum lease payment deducted by the unrecognized finance shall be separated
into long-term liabilities and long-term liability within one year for presentation.
Unrecognized finance charge shall be computed by the effective interest method during the lease term.
Contingent rent shall be booked into profit or loss when actually incurred.
(4) In the case of the lesser of a financing lease
For an asset that is leased out under a finance lease, the aggregate of the minimum lease receipts at
the inception of the lease and the initial direct costs is recorded as a finance lease receivable, and
unguaranteed residual value is recorded at the same time; the difference between the aggregate of the
minimum lease receipt, initial direct costs, and unguaranteed residual value, and the aggregate of their
present values, is recognized as unearned finance income, which is amortized using the effective
interest rate method over each period during the lease term.
Finance lease receivable less unearned finance income shall be separated into long-term liabilities and
long-term liability within one year for presentation.
Unearned finance income shall be computed by the effective interest method during the lease term.
Contingent rent shall be credited into profit or loss in which actually incurred.
4.21 Assets held-for-sale
The Company has made decision on disposal of some non-current assets, and signed irrecoverable
transferring agreements with buyers. The transaction is probably to be completed with one year. If so,
the non-current asset shall be counted as an asset ready-for-sale, not depreciated or amortized, and
shall be measured by the lower of carrying amount and faire value less net value of disposal expenses.
Non-current assets ready-for-sale includes individual asset and disposal Group. If disposal Group is an
asset Group, and has allocated goodwill acquired during the combination according to the Accounting
Standard for Business Enterprises No. 8 - Impairment, or. the disposal Group is an operation in the
asset Group, the disposal Group includes goodwill in the business combination.
Where an asset or a disposal Group is classified as held-for-trade, but cannot satisfy the condition of
non-current asset ready-for-trade, the Company shall derecognize it as held-for-trade, and measure it
by the lower of the followings:
(1) the carrying amount of the asset or disposal Group before it is classified as held-for-trade, the value
after the adjustment of depreciation, amortization or impairment recognized under the assumption that
it is not classified as held-for-trade;
(2) the recoverable value on the date when decided not to trade any more.
4.22 Employee Benefits
During the accounting period of an employee’ providing services to the Company, the Company
41
recognizes the compensation payable as liabilities.
The Company participates in the employees social security system set up by government agencies,
including pensions, medical insurance, housing fund and other social security system, and the
corresponding expenditures are included in the cost of related assets or the profit or loss.
When an enterprise terminates the employment relationship with employees before the end of the
employment contracts or provides compensation as an offer to encourage employees to accept
voluntary redundancy, a provision shall be recognized for the compensation arising from termination of
employment relationship with employees, with a corresponding charge to the profit or loss for the
current period. The enterprise cannot unilaterally withdraw from the termination plan or the redundancy
offer.
The early retirement plan adopts the same principles of termination benefits. Salaries and social
insurance (from the date of ceasing services to the date of normal retirement) are paid by the Company,
subject to the conditions to be recognized in profit or loss (termination benefits).
4.23 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 on the basis of air hours over the
lease period.
4.24 PhoenixMiles Program
The Company currently implements PhoenixMiles Program, which provides flight or product awards to
members based on accumulated mileage. 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.
4.25 Changes in major accounting policies and accounting estimates
(1) change of accounting policies
There is no significant change of accounting policies for the Company during the reporting period.
(2) change of accounting estimates
There is no significant change of accounting estimates for the Company during the reporting period.
4.26 Correction of prior period errors
There is no significant change of previous accounting errors for the Company during the reporting
period.
4.27 Significant account judgment and estimates
The Company is required to make judgments, estimates and assumptions about the carrying amounts
of items in the financial statements that cannot be measured accurately, due to the internal
42
uncertainties of operation activities. These judgments, estimates and assumptions are based on
historical experiences of the Company’s management as well as other factors that are considered to be
relevant. These judgments, estimates and assumptions may affect value of the financial statements in
revenue, expenses, assets and liabilities and the disclosure of contingency at the balance sheet date.
However, the result derived from those uncertainties in estimates may lead significant adjustments to
the carrying amounts of the assets or liabilities affected in the future.
The Company has reviews the judgments, estimates and assumptions regularly on the basis of going
concern. Where the changes in accounting estimates only affect the period when changes occurred,
and they are recognized within the same period. Where the changes in accounting estimates affect
both current period and future period, the changes are recognized within the period of change and
future period.
At balance sheet date, the followings are the significant areas where the Company needs to make
judgment, estimates and assumptions over the value of items in the financial statements:
(1) Classification of lease
The Company classifies leases as operating lease and financing lease according to the rule stipulated
in the Accounting Standard for Business Enterprises No. 21--Leasing-. The management shall make
analysis and judgment on whether the risks and rewards related to the title of leased assets has been
transferred to the leaser, or whether the Company has substantially held the risks and rewards related
to the ownership of leased assets.
(2) Allowance for bad debt
According to the relevant accounting policies of the Company in receivables, allowance method is used
for bad debt’s calculation. The impairment of receivables is calculated based on the assessment of
recoverable of receivables. Assurance of receivable impairment needs judgments and estimations from
the management. The difference between actual results and original estimates shall have impact on the
carrying amount of receivables and receivable bad debt provisions or the reverse during the change of
estimation.
(3) Impairment of inventories
The Company measures inventories by the lower of cost and realizable net value according to the
accounting policies in regard of inventories and provisions for decline in value of inventories is made if
the cost is higher than their net realizable value, and obsolete and slow-movement inventories.
Inventories decline in value to net realizable value is the estimated selling price in the ordinary course
of business. Net realizable value is determined on the basis of clear evidence obtained, and takes into
consideration the purposes of holding inventories and effect of post balance sheet events. The
difference between the actual result and the original estimates shall have impact on reverse of the
carrying amount of the inventories and their decline in value or provisions during the period of change.
(4) The fair value of financial instruments
For a financial instrument which has no active market, the Company establishes fair value by using
various valuation methods, including of discounted cash flow analysis model. The Company needs to
43
estimate future cash flow, credit risk, volatility and relationship during the valuation and choose
appropriate discount rate. Such assumptions have uncertainties and their changes shall have impact
on the fair value of financial instruments.
(5) Impairment of non-financial, non-current assets
The Company assesses whether there are any indicators of impairment for all non-current assets other
than financial assets at the balance sheet date. For an intangible asset that has indefinite useful life,
impairment test is made in addition to the annual impairment test if there is any indication of impairment.
For non-current assets other than financial assets, impairment test is made when there is any
indication that its account balance cannot be recovered.
Impairment exists when the recoverable amount of an asset is the higher of its fair value less cost of
disposal and present value of the future cash flows expected to be derived from the asset.
Net value between the difference of fair value and disposal cost is determined by reference of the price
of similar product in a sale agreement in an arm’s length transaction or an observable market price less
the additional cost directly attributable to the disposal of the asset.
When estimating the present value of future cash flow, significant judgments are made over the asset’s
production, selling price and relevant operating expenses, and discount rate used to calculate present
value. All available materials that are considered to be relevant shall be used in the estimation of
recoverable value. These materials include estimations of production, selling price and operating
expenses based on reasonable and supportable assumptions.
The Company makes an impairment test for goodwill at least at each year end. This requires an
estimation of present value of future cash flow of the assets or assets group where goodwill has been
allocated. The Company shall makes estimation on the future cash flow derived from assets or assets
group and determine an appropriate discount rate for the present value of future cash flow when the
estimation of present value of future cash flow is made.
(6) Depreciation and amortization
Investment property, fixed assets and intangible assets are depreciated and amortized using the
straight-line method over their useful lives after taking into account residual value. The useful lives are
regularly reviewed to determine the depreciation and amortization costs charged in each reporting
period. The useful lives are determined based on historical experience of similar assets and the
estimated technical changes. If there is an indication that there has been a change in the factor used to
determine the depreciation or amortization, the rate of depreciation or amortization is revised.
(7) Deferred tax assets
The group shall recognize all unused tax losses as deferred tax assets to the extent that it is probable
that future taxable profit will be available against which the unused tax losses and unused tax credits
can be utilized. This requires the management of the Company make a lot of judgments over the
estimation of time period, value and tax planning strategies when future taxable profit incurs so that the
value of deferred tax assets can be determined.
(8) Aircraft operating lease and engine overhaul expenses
44
Aircraft operating lease and engine overhaul expenses are accrued and charged to profit or loss in
accordance with the expected maintenance cycle, based on flight hours, flight cycles overhaul period
and the amount of the cost of repairs which may occur. These estimates are largely based on past
historical data about the same or similar types of aircraft and engines repairance. The withholding
amount and overhaul costs may be affected by different judgments and estimates and affect current
profit or loss.
(9) PhoenixMiles Program
The PhoenixMiles Program is a program which provides flight or product awards to members based on
accumulated mileage. 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.
Therefore it is needed to estimate the fair value of the united mileage reward points and flight mileage
rates. The fair value of the air miles is measured with reference to the market price. The mileage rates
are based on historical data and the convertibility of the coming years. The amount of deferred revenue
and profit or loss may be affected by different judgments and estimates
(10) Income tax
There are some transactions where ultimate tax treatments and calculations have uncertainties in the
Company’s everyday operation. Whether it is possible for some items to make expenditure before tax
needs approval from competent tax authorities. If there is any difference between finalized
determination value and their initial estimations value, the difference shall have the impact on the
income tax and deferred income tax of the current period during the final determination.
Note 5 Taxation
5.1 Major taxes and tax rate
Tax Tax rate (%)
Business Tax Business tax rate is the 3%-5% of taxable income
Enterprise income tax Income tax is calculated with the ratio of 25%.
Other taxes applicable to the Company are calculated in accordance with the relevant law and
regulation.
5.2 Civil Aviation Development Fund
Civil Aviation Development Fund for civil aviation is calculated in accordance with the guidance set out
in CaiZong[2012] No.17 (财政部 关于印发民航发展基金征收使用管理暂行办法) issued by
the Ministry of Finance. CaiZong[2012] No.17 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.
5.3 Tax incentives
5.3.1. Revenue earned by domestic individuals and incorporation domiciled in the PRC for the
45
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)
5.3.2. 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 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.
5.3.3. Notice of the General Administration of Customs. CAAC on issuing the policies[2004]No.43(财
关税[2004]43 号《财政部国家税务总局关于调整国内航空公司进口飞机有关增值税政策
的通知》), upon the approval of the State Council on October 01, 2004, import VAT of only 4% will be
levied on passenger and freight planes with an unladen weight of 25 tons or more (hereinafter
referred to as ―planes‖) imported by domestic airline companies.
Note 6 Business combination and consolidated financial statements
6.1 Subsidiaries
6.1.1 Subsidiaries acquired through establishment or investment
Monetary unit: CNY
Registered Scope of
Subsidiary Type of subsidiary Place of registration Nature of operation
capital operation
Qingdao
Strorage and
International Air
ground logistics
Logistics Centre Wholly-owned
Qingdao, Shandong Logistics and storage 30 Million for aero cargo,
Co., Ltd Subsidiary
electionic
(hereafter, Qingdao
commerce, etc.
Logistics)
46
(Continued)
Balance of
Acutal investment
Type of Legal other de facto
Subsidiary Institution code as at the reporting
incorporation representative investment in
date
subsidiary
Qingdao
International Air
Logistics Centre Limited liability
SU, Zhongmin 73349654-1 48,323,205.97 0.00
Co., Ltd company
(hereafter, Qingdao
Logistics)
(Continued)
Shareholding Voting right Equity attributable to minority interst
Minority
Subsidiary Consolidation for set-off of profit or loss attributable Note
(%) (%) interests
to minority intterest
Qingdao
100.00 100.00 Yes 0.00 0.00
Logistics
6.1.2 Subsidiaries acquired through business combination not under common control
Monetary unit: CNY
Nature of
Subsidiary Type of subsidiary Place of registration Registered capital Scope of operation
operation
Qingdao Feisheng
International Ddevelopment and
Aviation Training application of civil
Technology Wholly-owned aviation new
Qingdao, Shandong Pilot training 51,545,500.00
Development Co., Subsidiary technology, pilot
Ltd training and related
(hereafter, Qingdao consultancy
Feisheng)
(Continued)
Balance of
Acutal investment
Type of Legal other de facto
Subsidiary Institution code as at the reporting
incorporation representative investment in
date
subsidiary
Qingdao Feisheng
International
Aviation Training
Limited liability
Technology SONG, Yuxia 72557262-0 57,677,479.46 0.00
company
Development Co.,
Ltd (hereafter,
Qingdao Feisheng)
47
(Continued)
Shareholdi Equity attributable to minority
Voting right Consolidati Minority interst for set-off of profit or
Subsidiary ng Note
(%) on interests loss attributable to minority
(%) intterest
Qingdao
100.00 100.00 Yes 0.00 0.00
Feisheng
6.3 Change of scope of consolidation
No change of scope of consolidation from last year.
Note 7 Notes to significant elements of the financial statements
Unless otherwise stated, the meaning of "B/f", "C/f", "Current year", "Prior year" in the following notes
(incl. notes to significant elements of the financial statements is "1st January 2012", "31st December
2012", "the year ended 31st December 2012", "the year ended 31st December 2011" respectively.
7.1 Monetary funds
C/f B/f
Item Currency Exchange CNY Currency Exchange CNY
amount rate amount amount rate amount
Cash at hand: 349,489.05 464,985.14
- CNY — — 277,891.69 — — 444,053.27
USD 4,881.63 6.2855 30,683.48 1,534.07 6.3009 9,666.02
GBP 1,658.55 10.1611 16,852.69 58.55 9.7116 568.61
Others — — 24,061.19 — — 10,697.24
Bank deposit: 155,038,253.92 239,720,762.34
- CNY — — 144,719,592.51 — — 236,879,354.17
USD 1,424,159.60 6.2855 8,951,555.18 315,249.24 6.3009 1,986,353.94
Others — — 1,367,106.23 — — 855,054.23
Other monetary funds: 30,000.00 8,000,000.00
- CNY — — 30,000.00 — — 8,000,000.00
Total 155,417,742.97 248,185,747.48
Other monetary funds as at the reporting date include margin deposit amounting to 30,000.00 (2011
comparative: 8,000,000.00).
48
7.2 Accounts receivables
7.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual
significance and subject to individual 137,210,577.33 72.52 0.00 0.00
impairment assessment
Accounts receivable subject to
impairment assessment by portfolio
Portfolio by nature 43,875,679.81 23.19 2,193,763.64 5.00
Subtotal 43,875,679.81 23.19 2,193,763.64 5.00
Accounts receivable of individual
insignificance but subject to individual 8,114,191.72 4.29 916,508.05 11.30
impairment assessment
Total 189,200,448.86 100.00 3,110,271.69 1.64
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual
significance and subject to individual 133,831,501.87 70.68 0.00 0.00
impairment assessment
Accounts receivable subject to
impairment assessment by portfolio
Portfolio by nature 54,598,614.70 28.84 2,729,930.73 5.00
Subtotal 54,598,614.70 28.84 2,729,930.73 5.00
Accounts receivable of individual
insignificance but subject to individual 916,508.05 0.48 916,508.05 100.00
impairment assessment
Total 189,346,624.62 100.00 3,646,438.78 1.93
7.2.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 181,367,393.86 95.86 180,026,605.11 95.08
1 to 2 years 3,699,462.88 1.96 6,240,814.99 3.30
2 to 3 years 1,121,571.85 0.59 2,127,920.65 1.12
Over 3 years 3,012,020.27 1.59 951,283.87 0.50
Total 189,200,448.86 100.00 189,346,624.62 100.00
49
7.2.3 Allowance for bad debt
① Accounts receivable of individual significance and subject to individual impairment assessment
Allowance Rate of
Debtor Carrying amount Reason for allowance
for bad debt allowance (%)
No indication of impairment
Air China 54,927,044.11 0.00 0.00 upon individual
assessment
No indication of impairment
BSP-CHINA 43,324,169.71 0.00 0.00 upon individual
assessment
No indication of impairment
Accounting Center of China Aviation
38,959,363.51 0.00 0.00 upon individual
Limited Company
assessment
Total 137,210,577.33 0.00 0.00
② Accounts receivable subject to impairment assessment by portfolio
Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance (%) Allowance for bad debt
Portfolio by nature 43,875,679.81 5.00 2,193,763.64
Total
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
Rate of
Allowance for
Debtor Carrying amount allowance Reason for allowance
bad debt
(%)
No indication of impairment
BSP-TWD 3,610,675.99 0.00 0.00 upon individual
assessment
No indication of impairment
UATP 3,160,389.34 0.00 0.00 upon individual
assessment
Impaired collectibility
CR Airways 916,508.05 100.00 916,508.05 identified upon individual
assessment
No indication of impairment
BSP-JAPAN 426,618.34 0.00 0.00 upon individual
assessment
Total 8,114,191.72 11.30 916,508.05
7.2.4 Accounts receivable owed by investors holding 5% or more of the shares of the Company
C/f B/f
Investor
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt
Air China 54,927,044.11 0.00 54,247,936.00 0.00
Total 54,927,044.11 0.00 54,247,936.00 0.00
50
7.2.5 Top five accounts receivable
Relationship to % of total accounts
Debtor Amount Age
the Company receivable
Air China Related party 54,927,044.11 Within 1 year 29.03
BSP-CHINA Third party 43,324,169.71 Within 1 year 22.90
Accounting Center of China Aviation
Third party 38,959,363.51 Within 1 year 20.59
Limited Company
China Post, Jinan Third party 5,290,213.09 Within 1 year 2.80
Luoyang Municipal Government Third party 4,444,563.98 Within 1 year 2.35
Total 146,945,354.40 77.67
7.2.6 Related party balances
See Note 8.6 Related party balances for details.
7.3 Advances to suppliers
7.3.1 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 56,117,454.43 98.58 40,518,175.85 97.99
1 to 2 years 163,289.18 0.29 343,276.80 0.83
2 to 3 years 159,468.60 0.28 476,994.00 1.15
Over 3 years 486,993.40 0.85 10,000.00 0.03
Total 56,927,205.61 100.00 41,348,446.65 100.00
7.3.2 Top five prepaid suppliers
Relationship to Reason for pending
Supplier Amount Age
the Company settlement
Prepayment for
Supplier #1 Third party 8,035,474.73 Within 1 year
aircraft lease rental
Prepayment for
Supplier #2 Third party 5,706,916.14 Within 1 year
aircraft lease rental
Prepayment for
Supplier #3 Third party 4,950,000.00 Within 1 year
machinery
Prepayment for
Supplier #4 Third party 4,890,340.78 Within 1 year
aircraft lease rental
Prepayment for
Supplier #5 Third party 4,362,540.00 Within 1 year
aircraft lease rental
Total 27,945,271.65
7.3.3 No advance to supplier was owed by investors holding 5% or more of the shares of the Company.
51
7.4 Other receivables
7.4.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual
significance and subject to individual 170,529,977.31 46.45 109,051,717.65 63.95
impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 117,991,367.19 32.14 5,899,568.36 5.00
Subtotal 117,991,367.19 32.14 5,899,568.36 5.00
Other receivables of individual
insignificance but subject to individual 78,577,743.62 21.41 0.00 0.00
impairment assessment
Total 367,099,088.12 100.00 114,951,286.01 31.31
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual
significance and subject to individual 168,048,800.93 55.87 109,051,717.65 64.89
impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 51,848,032.27 17.23 2,592,401.60 5.00
Subtotal 51,848,032.27 17.23 2,592,401.60 5.00
Other receivables of individual
insignificance but subject to individual 80,903,554.97 26.90 0.00 0.00
impairment assessment
Total 300,800,388.17 100.00 111,644,119.25 37.12
7.4.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 156,252,301.80 42.56 66,961,652.52 22.26
1 to 2 years 9,668,933.94 2.64 28,287,616.45 9.40
2 to 3 years 15,390,105.67 4.19 7,813,620.80 2.60
Over 3 years 185,787,746.71 50.61 197,737,498.40 65.74
Total 367,099,088.12 100.00 300,800,388.17 100.00
52
7.4.3 Allowance for bad debt
① Other receivables of individual significance and subject to individual impairment assessment
Rate of
Carrying Allowance for
Debtor allowance Reason for allowance
amount bad debt
(%)
Impaired collectibility
Shandong Rainbow Commercial Jet
109,051,717.65 109,051,717.65 100.00 identified upon
Co., Ltd.
individual assessment
No indication of
CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00 impairment upon
individual assessment
No indication of
Beijing FuLaiTe Technology
20,123,696.38 0.00 0.00 impairment upon
Development Co., Ltd.
individual assessment
Total 170,529,977.31 109,051,717.65 63.95
② Other receivables subject to impairment assessment by portfolio
Allowance by percentage of remaining balance
Rate of allowance
Portfolio Carrying amount Allowance for bad debt
(%)
Portfolio by nature 117,991,367.19 5.00 5,899,568.36
Total 117,991,367.19 5.00 5,899,568.36
③ Other receivables of individual insignificance but subject to individual impairment assessment
Rate of
Allowance for
Debtor Carrying amount allowance Reason for allowance
bad debt
(%)
No indication of
Debtor #1 17,599,400.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #2 13,185,878.09 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #3 9,679,670.00 0.00 0.00 impairment upon
individual assessment
No indication of
Air China 9,336,264.20 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #4 7,073,772.00 0.00 0.00 impairment upon
individual assessment
No indication of
KuaiQian Telephone Payment 7,008,161.00 0.00 0.00 impairment upon
individual assessment
53
Rate of
Allowance for
Debtor Carrying amount allowance Reason for allowance
bad debt
(%)
No indication of
Debtor #5 4,311,853.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #6 3,318,744.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #7 1,743,974.83 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #8 1,389,095.50 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #9 1,301,098.50 0.00 0.00 impairment upon
individual assessment
No indication of
HuiFuTianXia Phone Payment 914,177.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #10 628,550.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #11 628,550.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #12 188,565.00 0.00 0.00 impairment upon
individual assessment
No indication of
Debtor #13 169,708.50 0.00 0.00 impairment upon
individual assessment
No indication of
China Merchants Bank Phone Payment 100,282.00 0.00 0.00 impairment upon
individual assessment
Total 78,577,743.62 0.00 0.00
7.4.4 Other receivables owed by investors holding 5% or more of the shares of the Company
C/f B/f
Investor Allowance for Allowance for bad
Carrying amount Carrying amount
bad debt debt
Air China 9,336,264.20 0.00 13,859,769.26 0.00
Total 9,336,264.20 0.00 13,859,769.26 0.00
54
7.4.5 Top five other receivables
Relationship to % of total other
Debtor Amount Age
the Company receivables
Shandong Rainbow Commercial Jet
Related party 109,051,717.65 Over 3 years 29.71
Co., Ltd.
CBD-leasing Co., Ltd. Third party 41,354,563.28 Over 3 years 11.27
Beijing FuLaiTe Technology
Third party 20,123,696.38 Within 1 year 5.48
Development Co., Ltd.
Debtor #1 Third party 17,599,400.00 Over 3 years 4.79
Western Airport Group Qinghai Airport
Third party 14,840,000.00 Within 1 year 4.04
Co., Ltd.
Total 202,969,377.31 55.29
7.4.6 Related party balances
See Note 8.6 Related party balances for details.
7.4.7 Other receivables denominated in foreign currencies and the relevant rate for translation
C/f B/f
Currency Currency Exchange CNY Currency Exchange CNY
amount rate amount amount rate amount
USD 13,821,767.06 6.2855 86,876,716.86 9,003,974.08 6.3009 56,733,140.28
7.5 Inventories
Disclosure by type
C/f
Type Impairment
Gross carrying amount Net carrying amount
allowance
Consumable air quipements 110,802,491.47 0.00 110,802,491.47
Low-value consumables 5,405,045.57 0.00 5,405,045.57
Materials 737,376.85 0.00 737,376.85
Total 116,944,913.89 0.00 116,944,913.89
(Continued)
Type C/f
Impairment
Gross carrying amount Net carrying amount
allowance
Consumable air quipements 111,200,001.62 0.00 111,200,001.62
Low-value consumables 4,283,702.66 0.00 4,283,702.66
Materials 787,075.91 0.00 787,075.91
Total 116,270,780.19 0.00 116,270,780.19
55
7.6 Long-term equity investments
7.6.1 Disclosure by category
Current year Current year
Category B/f C/f
increase decrease
Investment in associates 22,500,000.00 0.00 0.00 22,500,000.00
Other equity investments 88,352,100.00 0.00 0.00 88,352,100.00
Less: Impairment allowance 22,500,000.00 0.00 0.00 22,500,000.00
Total 88,352,100.00 0.00 0.00 88,352,100.00
7.6.2 Details of long-term equity investments
Investee Measurement method Cost of investment
China Travelsky Technology Co., Ltd. Cost method 6,690,000.00
Sichuan Airlines Co., Ltd. Cost method 35,000,000.00
Jinan International Airport Co., Ltd. Cost method 46,662,100.00
Shandong Rainbow Commercial Jet Co., Ltd. Equity method 22,500,000.00
Total 110,852,100.00
(Continued)
Current year
Investee B/f C/f
movement
China Travelsky Technology Co., Ltd. 6,690,000.00 0.00 6,690,000.00
Sichuan Airlines Co., Ltd. 35,000,000.00 0.00 35,000,000.00
Jinan International Airport Co., Ltd. 46,662,100.00 0.00 46,662,100.00
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 22,500,000.00
Total 110,852,100.00 0.00 110,852,100.00
(Continued)
Shareholding Voting right Reason for disagreement between
Investee
(%) (%) shareholding and voting right
China Travelsky Technology Co., Ltd. 0.45 0.45 In agreement
Sichuan Airlines Co., Ltd. 10.00 10.00 In agreement
Jinan International Airport Co., Ltd. 2.53 2.53 In agreement
Shandong Rainbow Commercial Jet Co., Ltd. 45.00 45.00 In agreement
Total
56
(Continued)
Impairment Impairment allowance Cash dividend in
Investee
allowance recognised in current year current year
China Travelsky Technology Co., Ltd. 0.00 0.00 1,565,460.00
Sichuan Airlines Co., Ltd. 0.00 0.00 13,730,000.00
Jinan International Airport Co., Ltd. 0.00 0.00 951,906.84
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 0.00
Total 22,500,000.00 16,247,366.84
7.6.3 Details of long-term equity investments measured by equity method
Type of Place of Legal Nature of
Investee
incorporation registration representative operation
Limited liability Aero
Shandong Rainbow Commercial Jet Co., Ltd. Jinan, Shandong ZHAO, Hong
company transportation
(Continued)
Investee Registered capital Shareholding (%) Voting right(%)
Shandong Rainbow Commercial Jet Co., Ltd. 50.00 million 45.00 45.00
(Continued)
Investee Total assets c/f Total liabilities c/f Net assets c/f
Shandong Rainbow Commercial Jet Co., Ltd. 11,774,150.76 175,265,154.52 -163,491,003.76
(Continued)
Revenue for Net profit for Relationship to
Investee Institution code
current year current year the company
Shandong Rainbow Commercial Jet Co., Ltd. -58,947.62 -1,576,444.32 Associate 72497146
7.6.4 Details of impairment allowance for long-term equity investments
Current year Current year
Investee B/f C/f
increase decrease
Investment in associates
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 0.00 22,500,000.00
Total 22,500,000.00 0.00 0.00 22,500,000.00
57
7.7 Fixed assets
7.7.1 General information
Current year Current year
Category B/f C/f
increase decrease
1. Historical cost 10,274,102,193.05 2,383,599,945.46 155,388,022.81 12,502,314,115.70
Houses and buildings 216,534,784.90 67,520,406.45 560,820.81 283,494,370.54
Aircrafts and engines 9,389,885,334.62 2,162,825,781.43 127,290,829.10 11,425,420,286.95
High-value rotables 514,120,231.79 128,401,222.08 21,869,195.10 620,652,258.77
Transportation vehicles 48,813,412.30 10,602,603.19 2,001,789.00 57,414,226.49
Machinery , electronics&
104,748,429.44 14,249,932.31 3,665,388.80 115,332,972.95
furniture
2. Cumulative depreciation Addition Recognition
Total cumulative
3,396,835,560.77 726,168,020.56 137,248,155.07 3,985,755,426.26
depreciation
Houses and buildings 39,393,560.99 5,655,081.68 167,726.95 44,880,915.72
Aircrafts and engines 3,097,768,452.52 664,835,417.04 127,290,829.10 3,635,313,040.46
High-value rotables 183,183,084.17 39,661,547.96 4,588,095.48 218,256,536.65
Transportation vehicles 21,814,042.77 4,362,377.46 1,828,176.22 24,348,244.01
Machinery , electronics&
54,676,420.32 11,653,596.42 3,373,327.32 62,956,689.42
furniture
3. NBV before impairment
6,877,266,632.28 8,516,558,689.44
allowance
Houses and buildings 177,141,223.91 238,613,454.82
Aircrafts and engines 6,292,116,882.10 7,790,107,246.49
High-value rotables 330,937,147.62 402,395,722.12
Transportation vehicles 26,999,369.53 33,065,982.48
Machinery , electronics&
50,072,009.12 52,376,283.53
furniture
4. Impairment allowance 193,810,080.67 191,159,700.00 1,197,957.45 383,771,823.22
Houses and buildings 0.00 0.00 0.00 0.00
Aircrafts and engines 178,336,555.38 173,551,300.00 0.00 351,887,855.38
High-value rotables 15,473,525.29 17,608,400.00 1,197,957.45 31,883,967.84
Transportation vehicles 0.00 0.00 0.00 0.00
Machinery , electronics&
0.00 0.00 0.00 0.00
furniture
5. NBV 6,683,456,551.61 8,132,786,866.22
Houses and buildings 177,141,223.91 238,613,454.82
58
Current year Current year
Category B/f C/f
increase decrease
Aircrafts and engines 6,113,780,326.72 7,438,219,391.11
High-value rotables 315,463,622.33 370,511,754.28
Transportation vehicles 26,999,369.53 33,065,982.48
Machinery , electronics&
50,072,009.12 52,376,283.53
furniture
Note: Depreciation recognised during the current year amounted to 726,168,020.56; historical cost of
fixed assets transferred from construction in progress during the current year amounted to
1,669,953,198.41.
7.7.2 Fixed assets with imposed restriction on ownership
As at reporting date, aircrafts and engines with NBV amounting to 5,290,960,014.07 (historical cost
amounting to 6,784,301,763.02; 2011 comparative: NBV and historical cost amounting to
3,959,256,219.56 and 5,109,105,473.71 respectively) were pledged as security for long-term
borrowings amounting to 3,854,676,638.03 (2011 comparative: 3,007,009,638.54 元, see Note 7.25)
and long-term borrowings due within one year amounting to 283,051,698.10 (2011 comparative:
258,278,648.16, see Note 7.24); ownership of aircrafts and engines with NBV amountig to
1,191,901,011.49 (historical cost amounting to 1,737,224,257.96; 2011 comparative: NBV and historical
cost amounting to 1,230,067,170.79 and 1,685,994,438.14 respectively) was restricted as the fact that
they were acquired under financial leases.
7.7.3 Fixed assets acquired under financial leases
Category C/f B/f
1. Historical cost
Aircrafts and engines 1,737,224,257.96 1,685,994,438.14
Total 1,737,224,257.96 1,685,994,438.14
2. Cumulative depreciation
Aircrafts and engines 545,323,246.47 455,927,267.35
Total 545,323,246.47 455,927,267.35
3. NBV before impairment allowance
Aircrafts and engines 1,191,901,011.49 1,230,067,170.79
Total 1,191,901,011.49 1,230,067,170.79
4. Impairment allowance
Aircrafts and engines 0.00 0.00
Total 0.00 0.00
5. NBV
Aircrafts and engines 1,191,901,011.49 1,230,067,170.79
Total 1,191,901,011.49 1,230,067,170.79
59
7.7.4 Fixed assets pending ownership registration
Estimated
Item Reason for pending NBV
registration
Jinan cargo arrival and departure Land rented from Jinan Air Control, no
11,468,671.35
warehouses eligible for ownership registration
Qingdao aircraft maintenance
Ownership registration in process 2013 38,677,325.66
workshops
Yantai terminal building Ownership registration in process 2013 18,655,086.17
Qingdao logistic operation
Ownership registration in process 2013 62,324,271.61
building
Total 131,125,354.79
7.7.5 Impairment allowance for fixed assets
Impairment allowance for the asset group consisting of 5 CRJ200 aircrafts and their related high-value
rotables amounting to 191,159,700.00 was recognised during the current year with reference to the
disposal plan for CRJ200 aircrafts. The impairment was evaluated by the Asset Appraisal Report
LongYuan ZhiBo Ping Bao Zi (2013) No. B-102 issued by Beijing Longbro Asset Valuation Co., Ltd.
7.8. Construction in progress
7.8.1 General information
C/f
Project
Gross carrying amount Impairment allowance Net carrying amount
Prepayment for aircrafts 1,414,569,228.22 0.00 1,414,569,228.22
Simulator 0.00 0.00 0.00
Qingdao logistic operation building 0.00 0.00 0.00
Others 16,316,585.89 0.00 16,316,585.89
Total 1,430,885,814.11 0.00 1,430,885,814.11
(Continued)
B/f
Project
Gross carrying amount Impairment allowance Net carrying amount
Prepayment for aircrafts 1,620,234,746.63 0.00 1,620,234,746.63
Simulator 100,000.00 0.00 100,000.00
Qingdao logistic operation building 22,956,157.35 0.00 22,956,157.35
Others 1,634,015.40 0.00 1,634,015.40
Total 1,644,924,919.38 0.00 1,644,924,919.38
60
7.8.2 Significant projects
Project Budget B/f Current year increase
Prepayment for aircrafts 5,939,797,500.00 1,620,234,746.63 1,333,239,335.43
Simulator 65,012,686.55 100,000.00 64,912,686.55
Qingdao logistic operation building 62,492,654.60 22,956,157.35 39,536,497.25
Others 191,380,000.00 1,634,015.40 18,225,573.91
Total 6,258,682,841.15 1,644,924,919.38 1,455,914,093.14
(Continued)
Transferred to fixed
Project Other decrease C/f
assets in current year
Prepayment for aircrafts 1,538,904,853.84 0.00 1,414,569,228.22
Simulator 65,012,686.55 0.00 0.00
Qingdao logistic operation building 62,492,654.60 0.00 0.00
Others 3,543,003.42 0.00 16,316,585.89
Total 1,669,953,198.41 0.00 1,430,885,814.11
(Continued)
Borrowing costs Rate of interest
Cumulative borrowing
Project capitalised in the current capitalisation for the
costs capitalised
year current year
Prepayment for aircrafts -3,710,039.34 7,353,039.90 1.43-4.97
Simulator 0.00 0.00 n/a
Qingdao logistic operation building 0.00 0.00 n/a
Others 0.00 0.00 n/a
Total -3,710,039.34 7,353,039.90
(Continued)
Project % of investment : budget Percentage of completion Source of finance
Borrowings from financial
Prepayment for aircrafts 23.82 23.82
institutions
Simulator 100.00 100.00 Self-financing
Qingdao logistic operation building 100.00 100.00 Self-financing
Others 8.53 8.53 Self-financing
Total
7.8.3 No indication of impairment on construction in progress was present as at the reporting date,
therefore no impairment allowance was recognised.
61
7.9 Intangible assets
General information
Current year Current year
Category B/f C/f
increase decrease
1. Historical cost 83,601,933.13 1,062,000.00 0.00 84,663,933.13
Land rights 83,601,933.13 1,062,000.00 0.00 84,663,933.13
2. Cumulative depreciation 4,414,811.09 1,434,350.49 0.00 5,849,161.58
Land rights 4,414,811.09 1,434,350.49 0.00 5,849,161.58
3. Impairment allowance 0.00 0.00 0.00 0.00
Land rights 0.00 0.00 0.00 0.00
4. NBV 79,187,122.04 78,814,771.55
Land rights 79,187,122.04 78,814,771.55
Note: ① Amortisation recognised during the current year amounted to 1,434,350.49.
② No indication of impairment on intangible assets was present as at the reporting date, therefore no
impairment allowance was recognised.
7.10 Goodwill
7.10.1 General information
Impairment
Current year Current year
Investee B/f C/f alowance
increase decrease
c/f
Qingdao Feisheng 10,220,816.22 0.00 0.00 10,220,816.22 0.00
Total 10,220,816.22 0.00 0.00 10,220,816.22 0.00
Management concluded that no impairment on goodwil arising from Qingdao Feisheng was present as
at the reporting date after assessment made on the basis of the current operation assets of Qingdao
Feisheng and with reference to the audited operating results of Qingdao Feisheng for the current year
and the valuation report as at the reporting date.
7.11 Deferred charges
Current year Current year Other Reason for
Item B/f C/f
increase amortisation decrease other decrease
Pilot training 249,104,101.12 78,438,685.60 43,709,507.04 0.00 283,833,279.68
Decoration
6,676,288.11 13,352,520.51 1,994,179.55 0.00 18,034,629.07
expenditure
Total 255,780,389.23 91,791,206.11 45,703,686.59 0.00 301,867,908.75
62
7.12 Deferred tax assets
C/f B/f
Category Deductible temporary Deductible temporary
Deferred tax
Deferred tax assets difference and tax loss difference and tax loss
assets
carried forwards carried forwards
Allowance for bad debt 29,515,389.43 118,061,557.70 28,822,639.51 115,290,558.03
Impairment allowance for
95,942,955.81 383,771,823.22 48,452,520.17 193,810,080.67
fixed assets
Fair value movement of
financial liabilities held for 1,799,695.90 7,198,783.59 536,380.28 2,145,521.10
trading
Provisions 198,150,745.16 792,602,980.62 135,006,662.91 540,026,651.65
Employment benefits
85,129,768.80 340,519,075.19 17,388,124.64 69,552,498.55
payable
Deferred income 40,300,683.54 161,202,734.16 0.00 0.00
Tax loss carried forwards 46,072.79 184,291.18 195,890.90 783,563.60
Total 450,885,311.43 1,803,541,245.66 230,402,218.41 921,608,873.60
7.13 Allowance for asset impairment
Current year Current decrease
Category B/f C/f
recognition Reversal Expanded
1. Allowance for bad debt 115,290,558.03 3,529,381.35 758,381.68 0.00 118,061,557.70
2. Impairment allowance for
22,500,000.00 0.00 0.00 0.00 22,500,000.00
long-term equity investments
3. Impairment allowance for fixed
193,810,080.67 191,159,700.00 0.00 1,197,957.45 383,771,823.22
assets
Total 331,600,638.70 194,689,081.35 758,381.68 1,197,957.45 524,333,380.92
7.14 Assets with imposed restriction on ownership
Category C/f Reason of restriction
Assets pledged as security
Pledge as security for long-term
Aircrafts and engines 5,290,960,014.07
borrowings
Other form of restriction:
Aircrafts and engines 1,191,901,011.49 Assets acquired under financial lease
Total 6,482,861,025.56
63
7.15 Short-term borrowings
7.15.1 Disclosure by type
Type C/f B/f
Credit loans 321,378,829.28 450,000,000.00
Guarantee loans 0.00 317,636,239.20
Total 321,378,829.28 767,636,239.20
7.16 Financial liabilities held for trading
Item Fair value c/f Fair value b/f
Interest rate swaps 7,198,783.59 2,145,521.10
Total 7,198,783.59 2,145,521.10
The immature interest rate swaps held by the Company had a principal amount of USD 136,113,217.20
as at the reporting date; bankers confirmed that the reporting date fair value of these interest rate
swaps is -7,198,783.59 (USD -1,145,300.07).
7.17 Notes payable
Type C/f B/f
Bankers' acceptance 100,000.00 24,959,340.48
Commercial acceptance 0.00 104,587,852.86
Total 100,000.00 129,547,193.34
Note: Notes payable due in the next reporting period amounts to 100,000.00.
7.18 Accounts payable
7.18.1 General information
Item C/f B/f
Fuel cost 296,059,868.05 226,327,463.66
Aircraft maintenance costs 253,358,086.69 228,090,474.18
Landing fee 194,407,548.18 194,653,002.79
Computer booking fee 58,105,416.36 80,221,998.70
Flight catering 53,351,961.08 37,481,411.68
Aero equipments 45,048,851.36 80,856,056.97
Lease rental 20,551,734.38 16,682,222.31
Others 30,085,312.50 36,202,735.26
Total 950,968,778.60 900,515,365.55
7.18.2 Accounts payable owed to investors investors holding 5% or more of the shares of the Company
See Note 8.6 Related party balances for details.
7.18.3 No material accounts payable due for more than 1 year as at the reporting date.
64
7.19 Advances from customers
7.19.1 General information
Item C/f B/f
Ticket clearing 191,551,691.08 262,611,956.03
Advanced payment for tickets 15,459,309.56 24,015,753.74
Others 8,096,572.49 6,218,942.65
Total 215,107,573.13 292,846,652.42
7.19.2 Advances from customers owed to investors investors holding 5% or more of the shares of the
Company
See Note 8.6 Related party balances for details.
7.19.3 No material advances from customers due for more than 1 year as at the reporting date.
7.20 Employment benefits payable
Current year Current year
Category B/f C/f
increase decrease
(1) Wages and salaries, bonuses,
227,244,844.29 1,119,727,571.13 1,040,361,631.43 306,610,783.99
subsidies and allowances
(2) Employee benefits 0.00 48,679,783.34 48,679,783.34 0.00
(3) Social insurance 2,612,106.72 137,433,680.17 137,115,335.75 2,930,451.14
Within: ①Medical insurance 0.00 29,641,875.60 29,641,875.60 0.00
②Basic retirement insurance 0.00 61,273,237.02 61,273,237.02 0.00
③Annuity fee 2,612,106.72 33,854,407.25 33,536,062.83 2,930,451.14
④Unemployment fee 0.00 6,401,994.38 6,401,994.38 0.00
⑤Work injury insurance 0.00 1,648,064.46 1,648,064.46 0.00
⑥Pregnancy insurance 0.00 2,590,585.78 2,590,585.78 0.00
⑦Reserved funds for disable
0.00 2,023,515.68 2,023,515.68 0.00
jobseekers
(4) Housing provident fund 15,290.40 39,676,932.13 39,673,414.13 18,808.40
(5) Labor union fee and employee
33,866,869.24 15,743,663.22 15,466,781.28 34,143,751.18
education fee
(6) Non-monetary benefits 0.00 0.00 0.00 0.00
(7) Redemption of termination of
0.00 41,165.39 41,165.39 0.00
labor contract
(8) Others 0.00 0.00 0.00 0.00
Within: Share-based payments
0.00 0.00 0.00 0.00
settled by cash
Total 263,739,110.65 1,361,302,795.38 1,281,338,111.32 343,703,794.71
65
7.21 Taxes and fees payable
Tax (Fee) C/f B/f
VAT and custom 2,889.52 2,889.52
Business tax 21,097,209.73 19,366,568.31
Urban construction and maintenance
1,422,656.41 1,116,189.38
tax
Education surcharge 1,031,247.63 1,456,370.22
Enterprise income tax 139,026,409.94 66,816,641.91
Property tax 1,225,434.50 1,191,811.73
Land tax 150,775.11 135,237.68
Personal income tax 4,736,473.47 4,111,680.70
Stamp duty 3,651,170.17 3,679,689.12
Civil aviation development fund 59,423,302.82 52,289,975.60
Provision for income tax deducted at
-3,000,686.74 17,237,385.96
source
Sales tax deducted at source 703,487.16 715,315.42
Others 214,108.31 12,524.02
Total 229,684,478.03 168,132,279.57
7.22 Interests payable
Item C/f B/f
Interest on long-term borrowings by
3,939,751.55 2,787,494.91
installment
Interest on corporate bond 12,035,833.33 0.00
Interest on short-term borrowings 490,510.37 5,260,681.47
Total 16,466,095.25 8,048,176.38
7.23 Other payables
7.23.1 General information
Item C/f B/f
Payable for construction projects 24,002,111.06 1,280,272.62
Payable for down payments 57,843,473.65 60,312,728.59
Payables associated with aircraft
19,098,882.67 4,111,748.30
purchase
Civil aviation development fund
25,039,913.23 28,225,731.21
deducted at source
Others 84,090,633.33 67,816,147.69
Total 210,075,013.94 161,746,628.41
66
7.23.2 Other payables owed to investors investors holding 5% or more of the shares of the Company
See Note 8.6 Related party balances for details.
7.23.3 Material other payables due for more than 1 year
Reason for pending Post reporting date
Creditor Amount
settlement repayment
Margin deposit to be
Air China 20,000,000.00 settlement upon expiry of No
immature wet lease
Total 20,000,000.00
7.23.4 Material other payables
Creditor C/f Description
Air China 20,000,000.00 Margin deposit for wet lease
Total 20,000,000.00
7.24 Non-current liabilities due within one year
7.24.1 General information
Category C/f B/f
Long-term borrowings due within one year (Note 7.25) 283,051,698.10 258,278,648.16
Financial lease rental payables due within one year (Note 7.27) 109,521,823.77 126,278,712.23
Total 392,573,521.87 384,557,360.39
7.24.2 Long-term borrowings due within one year
① General information
Category C/f B/f
Secured loans 283,051,698.10 258,278,648.16
Total 283,051,698.10 258,278,648.16
② Top five long-term borrowings due within one year
Creditor Start date Expiry date Interest rate (%) Currency
Bank of China, Jinan 2005/10/19 Step repayment 6M LIBOR+120BP USD
Minsheng Bank, Jinan 2005/4/7 Step repayment 6.55 CNY
ICBC, Jinan Dongjiao Branch 2009/6/30 Step repayment 3M LIBOR+150BP USD
China Development Bank, Shandong 2008/7/11 Step repayment 6M LIBOR+70BP USD
China Development Bank, Shandong 2008/9/2 Step repayment 6M LIBOR+70BP USD
Total
67
(Continued)
C/f B/f
Creditor Currency CNY Currency CNY
amount amount amount amount
Bank of China, Jinan 11,200,000.00 70,397,600.00 0.00 0.00
Minsheng Bank, Jinan 0.00 50,000,000.00 0.00 50,000,000.00
ICBC, Jinan Dongjiao Branch 4,000,000.00 25,142,000.00 4,000,000.00 25,203,600.00
China Development Bank, Shandong 3,528,000.00 22,175,244.00 0.00 0.00
China Development Bank, Shandong 3,072,000.00 19,309,056.00 0.00 0.00
Total 187,023,900.00 75,203,600.00
7.24.3 Financial lease rental payables due within one year (top five)
Creditor Term Principal amount Interest rate(%)
CBD-leasing Co., Ltd. 2005.6-2020.6 1,440,000,000.00 6.943
CALC Jian Zhao Limited 2011.8-2026.8 284,290,146.39 7.05
Total 1,724,290,146.39
(Continued)
Creditor Accrued interest C/f Condition
CBD-leasing Co., Ltd. 49,920,559.03 94,446,531.79 Financial lease for aircraft
CALC Jian Zhao Limited 17,606,039.56 15,075,291.98 Financial lease for aircraft
Total 67,526,598.59 109,521,823.77
7.25 Long-term borrowings
Disclosure by category
Category C/f B/f
Secured loans (by tangible assets) 4,137,728,336.13 2,559,385,749.07
Secured loans (by intangible assets) 0.00 161,774,914.40
Credit loans 0.00 544,127,623.23
Less: Long-term borrowings due within one year (Note 7.24) 283,051,698.10 258,278,648.16
Total 3,854,676,638.03 3,007,009,638.54
See Note 7.7.2 for details of collaterals for secured loans.
68
② Top five long-term borrowings
Creditor Start date Expiry date Interest rate (%) Currency
China Development Bank, Shandong 2012/5/7 Repayment on expiry 6M LIBOR+340BP USD
China Development Bank, Shandong 2012/11/30 Repayment on expiry 6M LIBOR+340BP USD
China Development Bank, Shandong 2012/12/27 Repayment on expiry 6M LIBOR+340BP USD
ICBC, Jinan Dongjiao Branch 2009/6/30 Step repayment 3M LIBOR+150BP USD
Bank of China, Jinan 2005/12/21 Step repayment 6M LIBOR+120BP USD
Total
(Continued)
C/f B/f
Creditor Currency CNY Currency CNY
amount amount amount amount
China Development Bank, Shandong 50,000,000.00 314,275,000.00 0.00 0.00
China Development Bank, Shandong 31,000,000.00 194,850,500.00 0.00 0.00
China Development Bank, Shandong 28,500,000.00 179,136,750.00 0.00 0.00
ICBC, Jinan Dongjiao Branch 22,491,654.64 141,371,295.24 26,491,654.64 166,921,266.72
Bank of China, Jinan 26,213,260.00 164,763,445.73 26,213,260.00 165,167,129.93
Total 158,204,914.64 994,396,990.97 52,704,914.64 332,088,396.65
7.26 Bonds payable
Bond Face value Issue date Term Amount issued
Medium-term bond 500,000,000.00 2012/6/12 Three years 500,000,000.00
Total 500,000,000.00 500,000,000.00
(Continued)
Interest payable Interest accrued in Interest paid in Interest payable
Bond C/f
b/f current year current year c/f
Medium-term bond 0.00 12,035,833.33 0.00 12,035,833.33 500,000,000.00
Total 0.00 12,035,833.33 0.00 12,035,833.33 500,000,000.00
7.27. Long-term payables
Disclosure by category
Category C/f B/f
Financial lease rental payables 1,003,581,510.68 1,130,479,061.57
Maintenance payables for aircrafts and engines held under 783,480,828.66 593,221,506.30
operating lease
69
Category C/f B/f
Less: Financial lease rental payables due within one year
109,521,823.77 126,278,712.23
(Note 7.24)
Less: Maintenance payables for aircrafts and engines held 123,336,184.53 119,878,996.62
under operating lease due within one year (Note 1)
Total 1,554,204,331.04 1,477,542,859.02
Note : Maintenance payables for aircrafts and engines held under operating lease due within one year
had been included in accounts payable.
7.27.2 Top five financial lease rental payables
Creditor Term Principal amount Interest rate (%)
CBD-leasing Co., Ltd. 2005.6-2020.6 1,440,000,000.00 6.943
CALC Jian Zhao Limited 2011.8-2026.8 284,290,146.39 7.05
Total 1,724,290,146.39
(Continue)
Creditor Accrued interest C/f Condition
CBD-leasing Co., Ltd. 181,923,308.14 656,556,432.70 Financial lease for aircraft
CALC Jian Zhao Limited 116,643,538.48 237,503,254.21 Financial lease for aircraft
Total 298,566,846.62 894,059,686.91
7.28 Other non-current liabilities
Item C/f B/f
Designated subsidy for snow disaster 3,488,458.34 3,987,958.34
SMS fund 0.00 1,000,000.00
PhoenixMiles Program 161,202,734.17 127,562,137.01
Desigated subsidy for IT construction 4,709,541.65 10,000,000.00
Designated subsidy for civil aviation energy-saving
16,735,066.12 17,711,566.24
program
Total 186,135,800.28 160,261,661.59
7.29 Share capital
B/f
Category
Amount %
1. Shares with restriction on disposal
1.1 State-held shares 0.00 0.00
1.2 Shares held by state-owned entities 259,801,000.00 64.95
1.3 Shares held by other domestic investors 199,000.00 0.05
Within: Held by institutional investors 199,000.00 0.05
70
B/f
Category
Amount %
Held by non-institutional investors 0.00 0.00
1.4 Shares held by foreign investors 0.00 0.00
Within: Held by institutional investors 0.00 0.00
Held by non-institutional investors 0.00 0.00
Subtotal of shares with restriction on disposal 260,000,000.00 65.00
2. Floating shares
2.1 Ordianry shares issued in CNY 0.00 0.00
2.2 Shares issued in domestic stock market in foreign currency 140,000,000.00 35.00
2.3 Shares issued in foreign market in foreign currency 0.00 0.00
2.4 Others 0.00 0.00
Subtotal of floating shares 140,000,000.00 35.00
Total 400,000,000.00 100.00
(Continued)
Currency year movement (+, -)
Category Coversion
Share issue Bonus issue from Others Subtotal
reserves
1. Shares with restriction on disposal
1.1 State-held shares 0.00 0.00 0.00 0.00 0.00
1.2 Shares held by state-owned entities 0.00 0.00 0.00 0.00 0.00
1.3 Shares held by other domestic investors 0.00 0.00 0.00 0.00 0.00
Within: Held by institutional investors 0.00 0.00 0.00 0.00 0.00
Held by non-institutional investors 0.00 0.00 0.00 0.00 0.00
1.4 Shares held by foreign investors 0.00 0.00 0.00 0.00 0.00
Within: Held by institutional investors 0.00 0.00 0.00 0.00 0.00
Held by non-institutional investors 0.00 0.00 0.00 0.00 0.00
Subtotal of shares with restriction on disposal 0.00 0.00 0.00 0.00 0.00
2. Floating shares
2.1 Ordianry shares issued in CNY 0.00 0.00 0.00 0.00 0.00
2.2 Shares issued in domestic stock market in
0.00 0.00 0.00 0.00 0.00
foreign currency
2.3 Shares issued in foreign market in foreign
0.00 0.00 0.00 0.00 0.00
currency
2.4 Others 0.00 0.00 0.00 0.00 0.00
Subtotal of floating shares 0.00 0.00 0.00 0.00 0.00
Total 0.00 0.00 0.00 0.00 0.00
71
(Continue)
C/f
Category
Amount %
1. Shares with restriction on disposal
1.1 State-held shares 0.00 0.00
1.2 Shares held by state-owned entities 259,801,000.00 64.95
1.3 Shares held by other domestic investors 199,000.00 0.05
Within: Held by institutional investors 199,000.00 0.05
Held by non-institutional investors 0.00 0.00
1.4 Shares held by foreign investors 0.00 0.00
Within: Held by institutional investors 0.00 0.00
Held by non-institutional investors 0.00 0.00
Subtotal of shares with restriction on disposal 260,000,000.00 65.00
2. Floating shares
2.1 Ordianry shares issued in CNY 0.00 0.00
2.2 Shares issued in domestic stock market in foreign currency 140,000,000.00 35.00
2.3 Shares issued in foreign market in foreign currency 0.00 0.00
2.4 Others 0.00 0.00
Subtotal of floating shares 140,000,000.00 35.00
Total 400,000,000.00 100.00
Note: ① Shares were issued at CNY 1.00 each at par.
② The above shares have been verified by the Report on the Verification of Capital
(YanQianZi[2000]No.27) issued by Shandong Yantai QianJu Certified Public Accountants Co., Ltd.
7.30 Capital reserves
Current year Current year
Category B/f C/f
increase decrease
Share premium 67,618,282.54 0.00 0.00 67,618,282.54
Other capital reserves 7,792,081.16 0.00 0.00 7,792,081.16
Total 75,410,363.70 0.00 0.00 75,410,363.70
7.31 Surplus reserves
Current year Current year
Category B/f C/f
increase decrease
Statutory surplus reserve 199,414,021.75 58,228,777.56 0.00 257,642,799.31
Total 199,414,021.75 58,228,777.56 0.00 257,642,799.31
72
7.32. Retained earnings
Movement of retained earnings
Rate of
Item Current year Prior year
appropriation
B/f 1,374,420,534.36 799,664,252.17
Total adjustment to retained earnings b/f (+, -) 0.00 0.00
Retained earnings b/f after adjustment 1,374,420,534.36 799,664,252.17
Add: Net profit attributable to shareholders of the
589,810,932.47 771,225,549.05
parent
Loss set off by surplus reserves 0.00 0.00
Others 0.00 0.00
Less: Appropriation to statutory surplus reserve 58,228,777.56 76,469,266.86 10% of net profit
Appropriation to discretionary surplus reserve 0.00 0.00
Ordinary dividends declared 160,000,000.00 120,000,000.00
Bonus issue 0.00 0.00
C/f 1,746,002,689.27 1,374,420,534.36
7.33 Revenue and operating costs
7.33.1 General information
Category Current year Prior year
Principal operating income 10,892,489,041.34 9,562,851,733.23
Other operating income 100,535,873.07 104,118,011.97
Total 10,993,024,914.41 9,666,969,745.20
Principal operating cost 8,571,793,581.33 7,256,886,850.82
Other operating cost 4,478,787.52 6,365,030.93
Total 8,576,272,368.85 7,263,251,881.75
7.33.2 Disclosure by service line
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost
Aero transportation 10,845,887,973.75 8,539,879,426.57 9,516,803,167.77 7,228,626,954.17
Hospitality and catering 22,119,064.02 19,496,643.53 20,712,093.43 18,454,321.51
Training 17,978,025.13 9,187,896.05 17,333,253.52 7,032,351.04
Freight logistics 6,503,978.44 3,229,615.18 8,003,218.51 2,773,224.10
Total 10,892,489,041.34 8,571,793,581.33 9,562,851,733.23 7,256,886,850.82
7.33.3 Operating income from top five customers
Year Operating income % of total operating income
2012 701,094,111.08 6.38
2011 739,549,243.01 7.65
73
7.34 Business tax and surcharges
Item Current year Prior year
Business tax 322,040,241.43 285,290,624.53
Urban maintenance and construction tax 22,407,051.10 19,969,488.56
Education surcharge and others 18,845,643.08 14,251,317.35
Total 363,292,935.61 319,511,430.44
7.35 Sales expenses
Category Current year Prior year
Employment benefits 178,559,093.77 124,727,615.68
Depreiciation 2,117,377.88 1,921,967.96
Travel 4,094,804.02 3,409,904.23
Advertisement 12,104,590.05 14,123,544.57
Brokerage 397,328,163.87 337,884,885.04
Computer booking 67,118,157.82 61,405,065.12
Online payment 21,600,770.07 16,886,185.15
Lease rental 14,356,560.06 10,792,458.84
System and network 4,087,876.50 3,040,272.70
BSP data processing 2,165,963.39 1,669,314.66
Office 5,302,142.43 4,404,781.53
Sales of annual ticket 18,302,127.40 21,224,600.00
Others 18,552,474.76 20,075,583.07
Total 745,690,102.02 621,566,178.55
7.36 General and administrative expenses
Category Current year Prior year
Employment benefits 143,402,835.27 98,767,664.24
Depreiciation 7,228,965.52 6,191,904.84
Office 4,846,659.27 4,861,667.01
Amortisation of intangibles 1,434,350.49 804,633.81
Taxes and fees 6,060,356.49 8,179,272.10
Entertainment 16,891,805.85 13,820,381.31
Lease rental 14,105,149.76 9,961,104.37
Technology development 6,064,208.25 7,183,485.10
Subscription for clearing system 3,961,952.36 3,973,561.94
Others 34,419,104.39 34,621,946.15
Total 238,415,387.65 188,365,620.87
74
7.37 Financial costs
Category Current year Prior year
Interest expenses 247,729,159.28 190,069,387.42
Less: Interest income 2,728,247.92 10,138,950.37
Exchange difference -8,090,980.43 -97,589,600.65
Bank charges and others 6,600,544.73 3,695,131.54
Total 243,510,475.66 86,035,967.94
7.38 Loss on asset impairment
Category Current year Prior year
Allowance for bad debt 2,770,999.67 1,453,573.00
Impairment allowance for fixed assets 191,159,700.00 193,810,080.67
Total 193,930,699.67 195,263,653.67
7.39 Gain (loss) on asset impairment
Source Current year Prior year
Interest rate swaps -5,053,262.49 -11,436,367.72
HuiLiDa Contracts 0.00 3,865,809.52
Total -5,053,262.49 -7,570,558.20
7.40 Investment income
7.40.1 Disclosure by category
Category Current year Prior year
Income from long-term equity investments measured at cost 16,247,366.84 11,841,382.42
Income from holding of financial assets held for trading -1,852,852.05 -3,291,906.49
Total 14,394,514.79 8,549,475.93
7.40.2 Income from long-term equity investments measured at cost
Investee Current year Prior year
China Travelsky Technology Co., Ltd. 1,565,460.00 1,365,429.42
Sichuan Airlines Co., Ltd. 13,730,000.00 10,000,000.00
Jinan International Airport Co., Ltd. 951,906.84 475,953.00
Total 16,247,366.84 11,841,382.42
7.41 Non-operating income
Included in
current year
Category Current year Prior year non-recurring
profit and loss
Gain on non-current asset disposals 59,901.02 7,721,097.44 59,901.02
Within: Gain on fixed asset disposals 59,901.02 7,721,097.44 59,901.02
Government assistance (See details of government assistance 52,137,058.47 21,698,008.50 52,137,058.47
75
Included in
current year
Category Current year Prior year non-recurring
profit and loss
Subsidy for air routes 64,962,684.00 17,933,800.00 64,962,684.00
Others 30,027,829.08 8,256,642.58 30,027,829.08
Total 147,187,472.57 55,609,548.52 147,187,472.57
Details of government assistance:
Government assitance Current year Prior year Description
Granted by the CAAC regional
Subsidy for side air routes 7,330,000.00 7,690,000.00
office
Designated subsidy for snow disaster 499,500.00 387,000.00 Amortisation of utilised subsidy
Designated subsidy for civil aviation
976,500.12 844,083.50 Amortisation of utilised subsidy
energy-saving program
Subsidy for 12-5 construction of IT Subsidy for expenditure on 12-5
5,290,458.35 0.00
system construction of IT system
Subsidy for SMS 1,000,000.00 0.00 Subsidy for expenditure on SMS
Others 37,040,600.00 12,776,925.00 Granted by regional government
Tota 52,137,058.47 21,698,008.50
7.42 Non-operating expenses
Included in current year
Category Current year Prior year non-recurring profit and
loss
Loss on non-current asset disposals 6,908,093.55 17,320,987.51 6,908,093.55
Within: Loss on fixed asset disposals 6,908,093.55 17,320,987.51 6,908,093.55
Charitable donation 15,000.00 17,000.00 15,000.00
Fines 8,334.71 805,456.51 8,334.71
Others 461,424.44 403,816.60 461,424.44
Total 7,392,852.70 18,547,260.62 7,392,852.70
7.43 Income tax expenses
Category Current year Prior year
Current tax calculated in accordance with relevant tax law 411,720,977.67 366,233,479.64
Deferred tax -220,483,093.02 -105,989,734.29
Total 191,237,884.65 260,243,745.35
7.44 Computation of basic earnings per share and diluted earnings per share
Basic earngings per share is calculated by dividing net profit attributable to shareholders of the parent
by the weighted average number of issued shares. The start date of ordinary shares issued in the
period for the purpose of calculation of basic earnings per share is the date on which subscription
becomes receivable per contract of issuance.
Diluted earnings per share is calculated by dividing the results of adjustment of net profit attributable to
76
shareholders of the parent for the interest expense for the dilutive convertible instruments, the
expected gain or expense at the time of conversion and their related income tax implication by the sum
of the weighted average number of issued shares for calculation of baisc earnings per shares and the
weighted average number of potential shares from convertible instruments.
For the purpose of calculation of the weighted average number of potential shares from convertible
instruments, the conversion date for dilutive conventible instruments issued in prior period and dilutive
convertible instruments issued in the period is the the 1st date of the period and the issue date
respectively.
7.44.1 General disclosure
Current year Prior year
Category of earning
Basic EPS Diluted EPS Basic EPS Diluted EPS
Net profit attributable to ordinary
1.47 1.47 1.93 1.93
shareholders
Recurring profit or loss attributable to
1.23 1.23 1.88 1.88
ordinary shareholders
7.44.2 Calculation
During the reporting period, the Company does not have dilutive potential ordinary shares, diluted
earnings per share therefore is equal to the earnings per share.
① Net profit attributable for ordinary shareholders for the calculation of basic EPS
Category Current year Prior year
Net profit attributable for ordinary shareholders 589,810,932.47 771,225,549.05
Within: From continuing operation 589,810,932.47 771,225,549.05
From curtailed operation 0.00 0.00
Recurring profit or loss attributable to ordinary shareholders 490,146,637.15 751,635,820.83
Within: From continuing operation 490,146,637.15 751,635,820.83
From curtailed operation 0.00 0.00
②When calculating the basic earnings per share, the denominator is the weighted average number of
outstanding ordinary shares, calculated as follows
Category Current year Prior year
Number of ordinary shares issued b/f 400,000,000.00 400,000,000.00
Add: the number of ordinary shares issued this year 0.00 0.00
Less: the number of ordinary shares bought back this year 0.00 0.00
Number of ordinary shares c/f 400,000,000.00 400,000,000.00
77
7.45 Notes to the statement of cash flows
7.45.1 Cash received relating to other operating activities
Category Current year Prior year
Government assistance 52,060,600.00 27,316,925.00
Interest income on bank deposit 2,728,247.92 11,548,478.50
Cash receiptes from non-operating income 73,065,513.08 26,190,442.58
Cash receiptes from operating balance 10,012,593.40 35,162,865.06
Margin deposit repaid 500,000.00 0.00
Total 138,366,954.40 100,218,711.14
7.45.2 Other cash payments relating to operating activities
Category Current year Prior year
Bank charges 26,701,314.80 20,581,316.69
Cash payments for non-operating expenses 484,759.15 1,226,273.11
Cash payments for operating balance 62,031,683.41 7,611,441.52
Cash payments for sales and general and administrative expenses 159,255,418.49 152,971,873.37
Margin deposit paid 0.00 500,000.00
Total 248,473,175.85 182,890,904.69
7.45.3 Other cash payments relating to investing activities
Category Current year Prior year
Cash payments of settlement of interest rate swaps 1,852,852.05 3,291,906.49
Total 1,852,852.05 3,291,906.49
7.45.4 Other cash receipts relating to financing activities
Category Current year Prior year
Margin deposit for bankers' acceptance repaid 7,470,000.00 27,300,000.00
Margin deposit for loans repaid 0.00 150,166,363.25
Performance compensation received 0.00 2,861,005.87
Total 7,470,000.00 180,327,369.12
7.45.5 Other cash payments relating to financing activities
Category Current year Prior year
Cash payments for aircraft lease rental 206,213,467.59 183,057,204.67
Cash payments for acquisition of minority interest 0.00 24,510,000.00
Cash payments for issuance of medium-term bonds 1,500,000.00 0.00
Total 207,713,467.59 207,567,204.67
78
7.46 Supplementary information to the statement of cash flows
7.46.1 Reconciliation of cash flows from operating activities to net profit
Category Current year Prior year
① Reconciliation of cash flows from operating activities to net profit:
Net profit 589,810,932.47 770,772,472.26
Add: Loss on asset impairment 193,930,699.67 195,263,653.67
Depreciation of fixed assets, oil and gas assets, bioogical assets held for
726,168,020.56 669,156,553.70
production
Amortisation of intangible assets 1,434,350.49 934,030.49
Amortisation of deferred charges 45,703,686.59 45,733,261.80
Loss on non-current assets disposal (gain presented by "-" prefix) -59,901.02 -7,721,097.44
Loss on scrap of fixed assets (gain presented by "-" prefix) 6,908,093.55 17,320,987.51
Loss on fair value changes (gain presented by "-" prefix) 5,053,262.49 7,570,558.20
Fianncial costs (gain presented by "-" prefix) 238,341,003.26 92,697,060.02
Investment loss (gain presented by "-" prefix) -14,394,514.79 -8,549,475.93
Decrease of deferred tax assets (increase presented by "-" prefix) -220,483,093.02 -103,667,022.63
Increase of deferred tax liabilities (increase presented by "-" prefix) 0.00 -2,322,711.66
Decrease of inventories (increase presented by "-" prefix) 9,195,192.86 -38,483,530.73
Decrease of operating receivables (increase presented by "-" prefix) -67,334,514.13 9,169,602.80
Increase of operating payables (decrease presented by "-" prefix) 212,044,281.77 597,176,322.84
Others 0.00 0.00
Net cash flows generated from operating activities 1,726,317,500.75 2,245,050,664.90
② Significant investing and financing acitivities involve no cash:
Debt-to-capital conversion 0.00 0.00
Convertable loan due within one year 0.00 0.00
Fixed assets acquired under financial lease 0.00 267,289,540.06
③ Movement of cash and cash equivalents:
Cash C/f 155,387,742.97 240,185,747.48
Less: Cash B/f 240,185,747.48 148,606,284.51
Add: Cash equivalents C/f 0.00 0.00
Less: Cash equivalents B/f 0.00 0.00
Net increase of cash and cash equivalents -84,798,004.51 91,579,462.97
79
7.46.2 Compostion of cash and cash equivalents
Category Current year Prior year
① Cash 155,387,742.97 240,185,747.48
Including: Cash at hand 349,489.05 464,985.14
Demand bank deposit 155,038,253.92 239,720,762.34
Demand other monetary funds 0.00 0.00
Demand deposit in the Central Bank 0.00 0.00
Deposit in peer firms 0.00 0.00
Loan to peer firms 0.00 0.00
② Cash equivalents 0.00 0.00
Including: Debt instrument matured within three months 0.00 0.00
③ Cash and cash equivalents C/f 155,387,742.97 240,185,747.48
Note 8 Related parties and related party transaction
8.1 Major investors
Relationship to the Type of Legal
Investor Place of registration Nature of operation
Company incorporation representative
Investment and
Limited liability
SDA Group Largest shareholder Jinan MA, Chongxian management of aero
company
transportation
2nd largest Joint stock WANG,
Air China Beijing Aero transportation
shareholder company Changshun
(Continued)
Shareholding in the Voting right in the Ultimate
Investor Registered capital Company Company controller of Institution code
(%) (%) the Company
SDA Group 580,000,000.00 42.00 42.00 Note 61407164-7
Air China 12,891,954,673.00 22.80 22.80 Note 71787100-6
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 China’s shareholding and voting right in SDA
Group is 49.406％ and 49.406％ respectively.
8.2 Subsidiaries
See Note 6.1 Subsidiaries.
8.3 Associates and joint ventures
See Note 7.6.3.
80
8.4 Other related parties
Other related party Relationship to the Company Institution code
Taikoo (Shandong) Aircraft Engineering Company
Controlled by major investors 70588297-1
Limited
Shandong XiangYu Air Technology Co., Ltd. Controlled by major investors 720736454
Shenzhen Airlines Co., Ltd. Controlled by major investors 19221129-0
Air China Cargo Co., Ltd. Controlled by major investors 71093205-6
China National Aviation Finance Co., Ltd. Controlled by major investors 10113699
Sichuan International Aero Engine Maintenance
Controlled by major investors 71188088-4
Co., Ltd.
Aircraft Maintenance and Engineering Corporation
Controlled by major investors 62591162-1
(Ameco Beijing)
Chengfu FuKai Aircraft Engineering Co., Ltd. Controlled by major investors 72808856-X
8.5 Related party transactions
① Goods and services purchase
Related party Transaction Pricing principle
Taikoo (Shandong) Aircraft Engineering Company
Aircraft maintenance Market price
Limited
SDA Group Office lease rental and catering Market price
Shandong XiangYu Air Technology Co., Ltd. Repairment Market price
Aircraft Maintenance and Engineering Corporation
Repairment Market price
(Ameco Beijing)
Aircraft Maintenance and Engineering Corporation
Ground service Market price
(Ameco Beijing)
Shenzhen Airlines Co., Ltd. Training Market price
Air China Ground service Market price
Air China Repairment Market price
Air China Brokerage Market price
Shenzhen Airlines Co., Ltd. Brokerage Market price
Air China Cargo Co., Ltd. Ground service Market price
Sichuan International Aero Engine Maintenance
Repairment Market price
Co., Ltd.
Chengfu FuKai Aircraft Engineering Co., Ltd. Repairment Market price
Total
81
(Continue)
Current year Prior year
% in total % in total
Related party transaction of transaction of
Amount Amount
the same the same
category category
Taikoo (Shandong) Aircraft Engineering
79,492,346.10 14.86 95,242,721.31 17.94
Company Limited
SDA Group 22,369,102.37 36.74 18,831,262.82 38.77
Shandong XiangYu Air Technology Co., Ltd. 32,057,124.35 5.99 33,646,853.93 6.34
Aircraft Maintenance and Engineering
5,572,650.35 1.04 14,016,265.65 2.64
Corporation (Ameco Beijing)
Aircraft Maintenance and Engineering
9,244,562.66 0.93 0.00 0.00
Corporation (Ameco Beijing)
Shenzhen Airlines Co., Ltd. 0.00 0.00 1,332,744.00 7.77
Air China 21,580,926.14 2.16 11,365,926.74 1.37
Air China 767,471.77 0.14 534,348.24 0.10
Air China 6,448,583.78 73.61 0.00 0.00
Shenzhen Airlines Co., Ltd. 774,279.40 8.84 0.00 0.00
Air China Cargo Co., Ltd. 2,468,814.84 0.25 2,502,943.35 0.30
Sichuan International Aero Engine
146,045,495.96 27.29 49,122,192.42 9.25
Maintenance Co., Ltd.
Chengfu FuKai Aircraft Engineering Co., Ltd. 3,292,316.90 0.62 0.00 0.00
Total 330,113,674.62 226,595,258.46
② Sales of goods and vendering of services
Related party Transaction Pricing principle
Air China Flight support By agreement
Air China Ground service Market price
Air China Brokerage Market price
Shenzhen Airlines Co., Ltd. Brokerage Market price
Shenzhen Airlines Co., Ltd. Ground service Market price
Taikoo (Shandong) Aircraft Engineering
Training By agreement
Company Limited
Total
82
(Continued)
Current year Prior year
% in total % in total
Related party transaction of transaction of
Amount Amount
the same the same
category category
Air China 10,323,343.20 97.06 12,565,524.20 88.26
Air China 820,994.80 8.27 0.00 0.00
Air China 1,954,422.08 41.65 0.00 0.00
Shenzhen Airlines Co., Ltd. 827,854.78 17.64 0.00 0.00
Shenzhen Airlines Co., Ltd. 308,220.00 3.10 0.00 0.00
Taikoo (Shandong) Aircraft Engineering
280,775.00 3.99 0.00 0.00
Company Limited
Total 14,515,609.86 12,565,524.20
8.5.3 Lease between related parties
The Company as leasee
Lease rental
Leasor Leasee Leased asset Start date Expiry date Pricing principle
recognised
Air China The Company Engines 2012.1.1 2012.12.31 By agreement 8,129,240.94
Air China The Company Simulators 2012.1.1 2012.12.31 By agreement 1,019,500.00
8.5.4 Lending between related parties
Related party Amount Start date Expiry date Description
Lended from:
China National Aviation Finance Co., Ltd. 50,000,000.00 2011/7/25 2012/7/20 Repaid
China National Aviation Finance Co., Ltd. 50,000,000.00 2011/7/27 2012/7/27 Repaid
China National Aviation Finance Co., Ltd. 50,000,000.00 2011/8/16 2012/8/16 Repaid
China National Aviation Finance Co., Ltd. 50,000,000.00 2011/8/23 2012/8/23 Repaid
China National Aviation Finance Co., Ltd. 50,000,000.00 2011/8/30 2012/8/30 Repaid
China National Aviation Finance Co., Ltd. 50,000,000.00 2012/3/21 2013/3/21 Active
8.5.5 Asset transfer between related parties
Related party Type of transaction Transaction Pricing principle
Shandong XiangYu Air Technology Co., Ltd. Sales Aero materials By agreement
83
(Continued)
Current year Prior year
% in total % in total
Related party transaction of transaction of
Amount Amount
the same the same
category category
Shandong XiangYu Air Technology Co., Ltd. 0.00 0.00 4,598,783.00 100.00
8.5.6 Remuneration to key management personel
Range of annual remuneration Current year Prior year
Total 11.18 Million 10.1951 Million
Within: (Number of management peronnel in each range)
Over 500 thousands 11 11
100 thousand to 500 thousands 3 2
Up to 100 thousands 5 3
8.5.7 Other related party transaction
Related party Transaction Pricing principle
Air China Wet lease By agreement
SDA Group Fee for guarantee By agreement
SDA Group Asset purchase By agreement
Brokerage for aero material
Shandong XiangYu Air Technology Co., Ltd. By agreement
repairment
Air China Code sharing By agreement
Air China Cargo Co., Ltd. Code sharing for cargo By agreement
(Continued)
Current year Prior year
% in total % in total
Related party transaction of transaction of
Amount Amount
the same the same
category category
Air China 643,189,241.11 100.00 659,331,863.00 100.00
SDA Group 0.00 0.00 240,000.00 100.00
SDA Group 0.00 0.00 1,482,899.66 0.15
Shandong XiangYu Air Technology Co., Ltd. 0.00 0.00 2,369,193.93 100.00
Air China -907,911.39 100.00 11,172,745.81 100.00
Air China Cargo Co., Ltd. 3,576,765.21 100.00 3,006,710.77 100.00
645,858,094.93 677,603,413.17
84
8.6 Related party balance
8.6.1 Receivables owed by and advances paid to related parties
C/f B/f
Related party Carrying Allowance for Carrying Allowance for
amount bad debt amount bad debt
Accounts receivable
Air China 54,927,044.11 0.00 54,247,936.00 0.00
Shenzhen Airlines Co., Ltd. 1,849,400.00 92,470.00 1,849,400.00 92,470.00
Air China Cargo Co., Ltd. 0.00 0.00 3,762,274.92 188,113.75
Taikoo (Shandong) Aircraft Engineering Company
11,100.00 555.00 0.00 0.00
Limited
Total 56,787,544.11 93,025.00 59,859,610.92 280,583.75
Advances to suppliers
Shandong XiangYu Air Technology Co., Ltd. 0.00 0.00 4,511,590.60 0.00
Chengfu FuKai Aircraft Engineering Co., Ltd. 252,000.00 0.00 0.00 0.00
Total 252,000.00 0.00 4,511,590.60 0.00
Other receivables
Air China 9,336,264.20 0.00 13,859,769.26 0.00
Shandong Rainbow Commercial Jet Co., Ltd. 109,051,717.65 109,051,717.65 109,051,717.65 109,051,717.65
Shenzhen Airlines Co., Ltd. 55,400.00 2,770.00 0.00 0.00
Total 118,443,381.85 109,054,487.65 122,911,486.91 109,051,717.65
8.6.2 Payables owed to and advances received from related parties
Related party C/f B/f
Accounts payable
Aircraft Maintenance and Engineering Corporation (Ameco Beijing) 1,358,745.52 3,825,794.45
Sichuan International Aero Engine Maintenance Co., Ltd. 9,189,096.07 8,835,970.40
Air China 7,735,879.32
4,363,260.34
Taikoo (Shandong) Aircraft Engineering Company Limited 15,434,555.99 23,072,537.89
Air China Cargo Co., Ltd. 211,086.76 417,427.64
Chengfu FuKai Aircraft Engineering Co., Ltd. 631,044.32 0.00
Shenzhen Airlines Co., Ltd. 3,360.00 0.00
Total 31,191,149.00 43,887,609.70
Notes payable
Shandong XiangYu Air Technology Co., Ltd. 100,000.00 0.00
Total 100,000.00 0.00
85
Related party C/f B/f
Other payables
Air China 20,000,000.00 20,000,000.00
SDA Group 1,008,583.74
1,967,892.49
Taikoo (Shandong) Aircraft Engineering Company Limited 245,400.00 245,400.00
Shenzhen Airlines Co., Ltd. 1,850,144.00 1,850,144.00
Total 24,063,436.49 23,104,127.74
Note 9 Contingencies
No contingency is subject to disclosure as at the reporting date.
Note 10 Commitments
10.1 Signifcant commitments
10.1.1 Capital commitment
CNY
Item C/f B/f
Firm contracts not recognised in the financial
statements
- Commitment to acquire non-current assets 6,381,289,558.12 7,904,420,010.89
Total 6,381,289,558.12 7,904,420,010.89
10.1.2 Operating lease
Information of irrevocable operating lease contracts as at the reporting date:
CNY
Item C/f B/f
Minimum lease rental for irrevocable operating
lease contracts
Within one year from the reporting date 766,080,155.32 597,506,810.00
Within two years from the reporting date 764,243,425.08 552,070,630.00
Within three years from the reporting date 763,137,177.08 535,458,930.00
Subsequent years 3,734,609,417.85 2,474,462,010.00
Total 6,028,070,175.33 4,159,498,380.00
86
Note 11 Post reporting date events
Post reporting date profit appropriation
The Proposal for Profit Appropriation for the Year ended 31 December 2012 proposing cash dividend
amounting to CNY 4.00 (gross) per 10 shares for the 400 million shares outstanding as at the reporting
date which in total amounts to CNY 160 million was approved by the 3rd Meeting of the 5th Term of
Board of Directors of the Company held on 15 March 2013; the Proposal was pending the approval of
the General Meeting of the Company.
Note 12 Other significant events
13.1 Assets and liabilities measured by fair value
Current year Cumulative fair Current
Item B/f fair value value movement year C/f
movement recognised in equity impairment
Financial liabilities
Derivative financial liabilities 2,145,521.10 5,053,262.49 0.00 0.00 7,198,783.59
Total 2,145,521.10 5,053,262.49 0.00 0.00 7,198,783.59
12.2 Financial assets and liabilities denominated in foreign currency
Cumulative fair
Current year Current
value movement
Item B/f fair value year C/f
recognised in
movement impairment
equity
Financial liabilities
Derivative financial liabilities 2,145,521.10 5,053,262.49 0.00 0.00 7,198,783.59
Total 2,145,521.10 5,053,262.49 0.00 0.00 7,198,783.59
Note 13 Comparatives
Certain comparatives have been editted for the pupose of the presentation layout adopted for the
current year.
87
Note 14 Notes to the separate financial statements
14.1 Accounts receivable
14.1.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual
significance and subject to individual 137,210,577.33 76.05 0.00 0.00
impairment assessment
Accounts receivable subject to
impairment assessment by portfolio
Portfolio by nature 36,015,985.80 19.96 1,800,778.94 5.00
Subtotal 36,015,985.80 19.96 1,800,778.94 5.00
Accounts receivable of individual
insignificance but subject to individual 7,197,683.67 3.99 0.00 0.00
impairment assessment
Total 180,424,246.80 100.00 1,800,778.94 1.00
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual
significance and subject to individual 133,831,501.87 73.71 0.00 0.00
impairment assessment
Accounts receivable subject to
impairment assessment by portfolio
Portfolio by nature 47,744,614.85 26.29 2,387,230.74 5.00
Subtotal 47,744,614.85 26.29 2,387,230.74 5.00
Accounts receivable of individual
insignificance but subject to individual 0.00 0.00 0.00 0.00
impairment assessment
Total 181,576,116.72 100.00 2,387,230.74 1.31
14.1.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 180,029,268.67 99.78 179,525,464.28 98.87
1 to 2 years 252,427.26 0.14 2,010,369.62 1.11
2 to 3 years 107,775.05 0.06 5,507.00 0.00
88
C/f B/f
Age
Amount % Amount %
Over 3 years 34,775.82 0.02 34,775.82 0.02
Total 180,424,246.80 100.00 181,576,116.72 100.00
14.1.3 Allowance for bad debt
① Accounts receivable of individual significance and subject to individual impairment assessment
Rate of
Allowance for
Debtor Carrying amount allowance Reason for allowance
bad debt
(%)
No indication of
Air China 54,927,044.11 0.00 0.00 impairment upon
individual assessment
No indication of
BSP-CHINA 43,324,169.71 0.00 0.00 impairment upon
individual assessment
No indication of
Accounting Center of China Aviation
38,959,363.51 0.00 0.00 impairment upon
Limited Company
individual assessment
Total 137,210,577.33 0.00 0.00
② Accounts receivable subject to impairment assessment by portfolio
Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance (%) Allowance for bad debt
Portfolio by nature 36,015,985.80 5.00 1,800,778.94
Total 36,015,985.80 5.00 1,800,778.94
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
Rate of
Allowance for
Debtor Carrying amount allowance Reason for allowance
bad debt
(%)
No indication of
BSP-TWD 3,610,675.99 0.00 0.00 impairment upon
individual assessment
No indication of
UATP 3,160,389.34 0.00 0.00 impairment upon
individual assessment
No indication of
BSP-JAPAN 426,618.34 0.00 0.00 impairment upon
individual assessment
Total 7,197,683.67 0.00 0.00
89
14.1.4 Accounts receivable owed by investors holding 5% or more of the shares of the Company
Investor C/f B/f
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt
Air China 54,927,044.11 0.00 54,247,936.00 0.00
Total 54,927,044.11 0.00 54,247,936.00 0.00
14.1.5 Top five accounts receivable
Relationship to % of total accounts
Debtor Amount Age
the Company receivable
Air China Related party 54,927,044.11 Within 1 year 30.44
BSP-CHINA Third party 43,324,169.71 Within 1 year 24.01
Accounting Center of China Aviation
Third party 38,959,363.51 Within 1 year 21.59
Limited Company
China Post, Jinan Third party 5,290,213.09 Within 1 year 2.93
Luoyang Municipal Government Third party 4,444,563.98 Within 1 year 2.46
Total 146,945,354.40 81.43
14.1.6 Related party balances
Debtor Relationship to the Company Amount % of total accounts receivable
Air China Major investor 54,927,044.11 30.44
Total 54,927,044.11 30.44
14.2 Other receivables
14.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual
significance and subject to individual 150,406,280.93 37.25 109,051,717.65 72.50
impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 154,689,466.21 38.31 7,734,473.31 5.00
Subtotal 154,689,466.21 38.31 7,734,473.31 5.00
90
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual
insignificance but subject to individual 98,701,440.00 24.44 0.00 0.00
impairment assessment
Total 403,797,187.14 100.00 116,786,190.96 28.92
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual
significance and subject to individual 168,048,800.93 53.15 109,051,717.65 64.89
impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 67,223,638.48 21.26 3,361,181.92 5.00
Subtotal 67,223,638.48 21.26 3,361,181.92 5.00
Other receivables of individual
insignificance but subject to individual 80,903,554.97 25.59 0.00 0.00
impairment assessment
Total 316,175,994.38 100.00 112,412,899.57 35.55
14.2.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 181,310,421.00 44.90 82,537,201.30 26.10
1 to 2 years 21,442,689.76 5.31 28,090,673.88 8.89
2 to 3 years 15,259,329.67 3.78 7,813,620.80 2.47
Over 3 years 185,784,746.71 46.01 197,734,498.40 62.54
Total 403,797,187.14 100.00 316,175,994.38 100.00
91
14.2.3 Allowance for bad debt
① Other receivables of individual significance and subject to individual impairment assessment
Allowance for Rate of
Debtor Carrying amount Reason for allowance
bad debt allowance (%)
Impaired collectibility
Shandong Rainbow
109,051,717.65 109,051,717.65 100.00 identified upon individual
Commercial Jet Co., Ltd.
assessment
No indication of
CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00 impairment upon
individual assessment
Total 150,406,280.93 109,051,717.65 72.50
② Other receivables subject to impairment assessment by portfolio
A. Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance (%) Allowance for bad debt
Portfolio by nature 154,689,466.21 5.00 7,734,473.31
Total 154,689,466.21 5.00 7,734,473.31
③ Other receivables of individual insignificance but subject to individual impairment assessment
Allowance for Rate of
Debtor Carrying amount Reason for allowance
bad debt allowance (%)
No indication of impairment
Beijing FuLaiTe Technology
20,123,696.38 0.00 0.00 upon individual
Development Co., Ltd.
assessment
No indication of impairment
Debtor #1 17,599,400.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #2 13,185,878.09 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #3 9,679,670.00 0.00 0.00 upon individual
assessment
No indication of impairment
Air China 9,336,264.20 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #4 7,073,772.00 0.00 0.00 upon individual
assessment
No indication of impairment
KuaiQian Telephone Payment 7,008,161.00 0.00 0.00 upon individual
assessment
92
Allowance for Rate of
Debtor Carrying amount Reason for allowance
bad debt allowance (%)
No indication of impairment
Debtor #5 4,311,853.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #6 3,318,744.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #7 1,743,974.83 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #8 1,389,095.50 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #9 1,301,098.50 0.00 0.00 upon individual
assessment
No indication of impairment
HuiFuTianXia Phone Payment 914,177.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #10 628,550.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #11 628,550.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #12 188,565.00 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #13 169,708.50 0.00 0.00 upon individual
assessment
No indication of impairment
China Merchants Bank Phone
100,282.00 0.00 0.00 upon individual
Payment
assessment
Total 98,701,440.00 0.00 0.00
14.2.4 Other receivables owed by investors holding 5% or more of the shares of the Company
C/f B/f
Investor Allowance for bad Allowance for bad
Carrying amount Carrying amount
debt debt
Air China 9,336,264.20 0.00 13,859,769.26 0.00
Total 9,336,264.20 0.00 13,859,769.26 0.00
93
14.2.5 Top five other receivables
Relationship to % of total other
Debtor Amount Age
the Company receivables
Shandong Rainbow Commercial Jet
Related party 109,051,717.65 Over 3 years 27.01
Co., Ltd.
CBD-leasing Co., Ltd. Third party 41,354,563.28 Over 3 years 10.24
Beijing FuLaiTe Technology
Third party 20,123,696.38 Within 1 year 4.98
Development Co., Ltd.
Debtor #1 Third party 17,599,400.00 Over 3 years 4.36
Western Airport Group Qinghai Airport
Third party 14,840,000.00 Within 1 year 3.68
Co., Ltd.
Total 202,969,377.31 50.27
14.2.6 Related party balances
% of total other
Debtor Relationship to the Company Amount
receivables
Shandong Rainbow Commercial Jet
Associate 109,051,717.65 27.01
Co., Ltd.
Qingdao Logistics Wholly owned subsidiary 36,575,091.78 9.06
Air China Major investor 9,336,264.20 2.31
Qingdao Feisheng Wholly owned subsidiary 391,519.60 0.10
Shenzhen Airlines Co., Ltd. Controlled by major investor 55,400.00 0.01
Total 155,409,993.23 38.49
15.2.7 Other receivables denominated in foreign currencies and the relevant rate for translation
C/f B/f
Currency Currency Exchange CNY Currency Exchange CNY
amount rate amount amount rate amount
USD 13,821,767.06 6.2855 86,876,716.85 9,003,974.08 6.3009 56,733,140.28
14.3 Long-term equity investments
14.3.1 Disclosure by category
Current year Current year
Category B/f C/f
increase decrease
Investment in subsidiaries 106,000,685.43 0.00 0.00 106,000,685.43
Investment in associates 22,500,000.00 0.00 0.00 22,500,000.00
Other equity investments 88,352,100.00 0.00 0.00 88,352,100.00
Less: Impairment allowance 22,500,000.00 0.00 0.00 22,500,000.00
Total 194,352,785.43 0.00 0.00 194,352,785.43
94
14.3.2 Details of long-term equity investments
Current
Measurement Cost of
Investee B/f year C/f
method investment
movement
China Travelsky Technology Co., Ltd. Cost method 6,690,000.00 6,690,000.00 0.00 6,690,000.00
Sichuan Airlines Co., Ltd. Cost method 35,000,000.00 35,000,000.00 0.00 35,000,000.00
Jinan International Airport Co., Ltd. Cost method 46,662,100.00 46,662,100.00 0.00 46,662,100.00
Qingdao Losgistics Cost method 48,323,205.97 48,323,205.97 0.00 48,323,205.97
Qingdao Feisheng Cost method 57,677,479.46 57,677,479.46 0.00 57,677,479.46
Shandong Rainbow Commercial Jet
Equity method 22,500,000.00 22,500,000.00 0.00 22,500,000.00
Co., Ltd.
Total 216,852,785.43 216,852,785.43 0.00 216,852,785.43
(Continued)
Reason for Impairment
Shareholdin
Voting right disagreement Impairment
allowance
Cash dividend
Investee g between recognised
(%) allowance in current year
(%) shareholding and in current
voting right year
China Travelsky Technology
0.45 0.45 In agreement 0.00 0.00 1,565,460.00
Co., Ltd.
Sichuan Airlines Co., Ltd. 10.00 10.00 In agreement 0.00 0.00 13,730,000.00
Jinan International Airport
2.53 2.53 In agreement 0.00 0.00 951,906.84
Co., Ltd.
Qingdao Losgistics 100.00 100.00 In agreement 0.00 0.00 0.00
Qingdao Feisheng 100.00 100.00 In agreement 0.00 0.00 0.00
Shandong Rainbow
45.00 45.00 In agreement 22,500,000.00 0.00 0.00
Commercial Jet Co., Ltd.
Total 22,500,000.00 0.00 16,247,366.84
14.3.3 Details of impairment allowance for long-term equity investments
Current year Current year
Investee B/f C/f
increase decrease
Investment in associates
Shandong Rainbow Commercial
22,500,000.00 0.00 0.00 22,500,000.00
Jet Co., Ltd.
Total 22,500,000.00 0.00 0.00 22,500,000.00
14.4 Revenue and operating costs
14.4.1 General information
Category Current year Prior year
Principal operating income 10,875,044,743.90 9,542,640,118.55
Other operating income 100,535,873.07 104,109,326.47
95
Category Current year Prior year
Total 10,975,580,616.97 9,646,749,445.02
Principal operating cost 8,566,066,767.30 7,251,657,817.11
Other operating cost 4,478,787.52 6,365,030.93
Total 8,570,545,554.82 7,258,022,848.04
14.4.2 Disclosure by service line
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost
Aero transportation 10,845,887,973.75 8,543,555,576.57 9,516,803,167.77 7,228,626,954.17
Hospitality and catering 22,119,064.02 19,496,643.53 20,712,093.43 18,454,321.51
Training 7,037,706.13 3,014,547.20 5,124,857.35 4,576,541.43
Total 10,875,044,743.90 8,566,066,767.30 9,542,640,118.55 7,251,657,817.11
14.4.3 Operating income from top five customers
Year Operating income % of total operating income
2012 701,094,111.08 6.39
2011 739,549,243.01 7.67
14.5 Investment income
15.5.1 Disclosure by category
Category Current year Prior year
Income from long-term equity investments measured at cost 16,247,366.84 11,841,382.42
Income from holding of financial assets held for trading -1,852,852.05 -3,291,906.49
Total 14,394,514.79 8,549,475.93
14.5.2 Income from long-term equity investments measured at cost
Investee Current year Prior year
China Travelsky Technology Co., Ltd. 1,565,460.00 1,365,429.42
Sichuan Airlines Co., Ltd. 13,730,000.00 10,000,000.00
Jinan International Airport Co., Ltd. 951,906.84 475,953.00
Total 16,247,366.84 11,841,382.42
14.6 Supplementary information to the statement of cash flows
Category Current year Prior year
① Reconciliation of cash flows from operating activities to net profit:
Net profit 582,287,775.57 764,692,668.58
Add: Loss on asset impairment 194,946,539.59 196,012,449.21
Depreciation of fixed assets, oil and gas assets, bioogical assets held for
720,279,551.90 663,583,520.35
production
96
Category Current year Prior year
Amortisation of intangible assets 1,399,694.64 899,374.64
Amortisation of deferred charges 45,593,508.02 45,575,668.37
Loss on non-current assets disposal (gain presented by "-" prefix) -53,988.17 -7,721,097.44
Loss on scrap of fixed assets (gain presented by "-" prefix) 6,905,518.55 17,320,987.51
Loss on fair value changes (gain presented by "-" prefix) 5,053,262.49 7,570,558.20
Fianncial costs (gain presented by "-" prefix) 238,341,003.26 91,953,090.03
Investment loss (gain presented by "-" prefix) -14,394,514.79 -8,549,475.93
Decrease of deferred tax assets (increase presented by "-" prefix) -220,886,871.11 -103,658,330.62
Increase of deferred tax liabilities (increase presented by "-" prefix) 0.00 -2,322,711.66
Decrease of inventories (increase presented by "-" prefix) 9,195,192.86 -38,483,530.73
Decrease of operating receivables (increase presented by "-" prefix) -86,813,804.28 -5,550,239.08
Increase of operating payables (decrease presented by "-" prefix) 212,075,973.25 598,979,306.30
Others 0.00 0.00
Net cash flows generated from operating activities 1,693,928,841.78 2,220,302,237.73
② Significant investing and financing acitivities involve no cash:
Debt-to-capital conversion 0.00 0.00
Convertable loan due within one year 0.00 0.00
Fixed assets acquired under financial lease 0.00 267,289,540.06
③ Movement of cash and cash equivalents:
Cash C/f 143,212,750.59 235,921,301.34
Less: Cash B/f 235,921,301.34 143,930,783.00
Add: Cash equivalents C/f 0.00 0.00
Less: Cash equivalents B/f 0.00 0.00
Net increase of cash and cash equivalents -92,708,550.75 91,990,518.34
Note 15 Supplementary information
15.1 Non-recurring profit and loss
Category Current year Prior year
Gains from disposals of non-current assets after expending impairment
-6,848,192.53 -9,599,890.07
provisions
Exceeded-authority approved, non-official approved or accidental tax
0.00 0.00
repayment and relief
97
Category Current year Prior year
Government grants recognised through profit or loss for the current
reporting period, excluding grants which are closely related to the Company’s
52,137,058.47 21,698,008.50
operating activities and of which the quota or approval is eligible for automatic
renewal in accordance with relevant regulations
Financial resource usage fees charged on non-financial institution
0.00 0.00
recognised through profit or loss for the current reporting period
Gains arising from bargain purchase in business combination and
0.00 0.00
investments in associates and joint ventures
Non-monetary asset exchange 0.00 0.00
Consigned investment and asset management 0.00 0.00
Impairment provision resulting from force majeure, eg. natural desasters 0.00 0.00
Reorganisation 0.00 0.00
Reorganisation expenditure 0.00 0.00
Unfair transactions 0.00 0.00
Net profits or losses achieved by an acquired under-common-control
0.00 0.00
entity during the period from the start of the period to the acquisition date
Gains or losses arising from contingent events unconnected with the
0.00 0.00
Company’s daily operating activities
Fair value changes of tradable financial assets and tradable financial
liabilities held and gains or losses arising from disposals of tradable financial
assets, tradable financial liabilities and available-for-sale financial assets, -6,906,114.54 -10,862,464.69
excluding hedging contracts relevant to the Company’s daily operating
activities
Reversal of impairment provision for accounts receivables eligible for
0.00 0.00
individual impairment assessment
Gains or losses arising from consigned borrowings 0.00 0.00
Fair value changes of property investments subsequently measured at
0.00 0.00
fair value
One-off adjustment of profit or loss for the current reporting period in
0.00 0.00
accordance with tax and accounting laws and regulations
Consignment income arising from consigned operations 0.00 0.00
Income and expenses other than items listed above 94,505,753.93 24,964,169.47
Other gains or losses satisfying the definition of extraordinary gains or
0.00 0.00
losses
Subtotal 132,888,505.33 26,199,823.21
Less: Impact of income tax 33,224,210.01 6,751,319.93
Less: Impact on non-controlling interest 0.00 -141,224.94
Total 99,664,295.32 19,589,728.22
98
Note: Positive amounts and negative amounts in non-recurring categories mean income and expense
or loss respectively.
The Company recognised non-recurring categories of activities in accodance with the Explanatory
Announcement regarding Information Disclosure by Publicly Listed Company No. 1 - Non-recurring
Profit and Loss (Zhengjianhui Gonggao [2008] No.43).
15.2 Rate of return on net assets and earnings per share
Weighted Earnings per share (CNY/share)
Profit catetory average rate of
RONA Basic EPS Diluted EPS
Net profit attributable to ordinary shareholders 26.36% 1.47 1.47
Recurring profit or loss attributable to ordinary shareholders 21.91% 1.23 1.23
15.3 Significant change of major element of the consolidated financial statements
15.3.1 Elements of the consolidated statement of financial position
① Monetary funds amounting to 155,417,742.97 as at the reporting date: 37.38% decrease from last
year mainly resulted from cash outflows for investing activities.
② Advances to suppliers amounting to 56,927,205.61 as at the reporting date: 37.68% increase from
last year mainly resulted from increase of prepaid aircraft lease rental due to increased number of
leased aircrafts.
③ Other receivables amounting to 252,147,802.11 as at the reporting date: 33.30% increase from last
year mainly resulted from incrase of air route subsidy receivables and discount on purchase of
buyer-furnished equipments receivables.
④ Deferred tax assets amounting to 450,885,311.43 as at the reporting date: 95.69% increase from
last year mainly resulted from increase of temporary difference in relation to provision and impairment
allowance recognised during the current year.
⑤ Short-term borrowings amounting to 321,378,829.28 as at the reporting date: 58.13% decrease
from last year mainly resulted from repayment upon expiry.
⑥ Financial liabilities held for trading amounting to 7,198,783.59 as at the reporting date: 235.53%
increase from last year mainly resulted from changes of fair value of interest rate swaps held.
⑦ Notes payable amounting 100,000.00 as at the reporting date: 99.92% decrease from last year
mainly resulted from settlement upon expiry.
⑧ Employment benefits payable amounting to 343,703,794.71 as at the reporting date: 30.32%
increase from last year mainly resulted from increase in annual bonus.
⑨ Taxes and fees payable amounting to 229,684,478.03 as at the reporting date: 36.61% increase
from last year mainly resulted from increase in enterprise income tax due to increase of taxable profit.
⑩ Interests payable amounting to 16,466,095.25 as at the reporting date: 104.59% increase from last
99
year mainly resulted from interest on medium-term bonds issued in the period.
15.3.2 Elements of the consolidated statement comprehensive income
① Financial costs amounting to 243,510,475.66 for the period: 183.03% increase from last year mainly
resulted from increase in interest and expense and decrease in gain on exchange difference.
② Gains from changes in fair value amounting to -5,053,262.49 for the period: 33.25% decrease from
last year mainly resulted from changes of fair value of interest rate swaps held.
③ Investment income amounting to 14,394,514.79 for the period: 68.37% increase from last year
mainly resulted from cash dividend declared by investees.
④ Non-operating income amounting to 147,187,472.57 for the period: 164.68% increase from last year
mainly resulted from increase in receipts of government assistance and air route subsidy.
⑤ Non-operating expenses amounting to 7,392,852.70 for the period: 60.14% decrease from last year
mainly resulted from decrease in loss on non-current asset disposals.
100
