SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
ANNUAL REPORT 2013
March 2014
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Contents
Section I Important Notice and Paraphrase.................................................................................... 1
Section II Company Profile............................................................................................................... 4
Section III Accounting data and summary of finnaical indexes.................................................... 6
Section IV Report of the Board of Directors....................................................................................9
Section V Important Events............................................................................................................ 21
Section VI Changes in shares and particular about shareholders............................................... 27
Section VII Particulars about Directors, Supervisors,Senior Executives and Employees........ 31
Section VIII Corporate Governance...............................................................................................40
Section IX Internal Control.............................................................................................................45
Section X Financial Report..............................................................................................................48
Section XI Documents available for reference.............................................................................168
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section I. Important Notice and Paraphrase
Board of Directors, Supervisory Committee, all directors, supervisors and senior
executives of Shandong Airlines Co., Ltd. (hereinafter referred to as the Company)
hereby confirm that there are no any fictitious statements, misleading statements, or
important omissions carried in this report, and shall take all responsibilities,
individual and/or joint, for the reality, accuracy and completion of the whole contents.
Director Mr. Wang Mingyuan absent the Meeting due to business and authorized
Deputy Chairman Mr. Ma Chongxian for voting;independent director Mr.Wang
kaiyuan submit his resignation,absent the Meeting；other directors attend the Meeting.
The profit distribution plan that deliberated and approved by the Board is: based on
total stock issue of the Company dated 31 December 2013, distributed 2.50 Yuan (tax
included) bonus in cash for every 10-share hold by all shareholders, 00 shares bonus
issued (tax included) and no capitalizing of common reserves carried out.
Zhang Xingfu, Principal of the Company, Xu Guojian, person in charger of
accounting works and Sun Jingping, person in charge of accounting organ
(accounting principal) hereby confirm that the Financial Report of 2013 Annual
Report is authentic, accurate and complete.
Concerning the forward-looking statements of future situation prediction and
business planning involved in the Report, they do not constitute a substantial
commitment for investors. Investors are advised to exercise caution of investment
risks.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Paraphrase
Items Refers to Contents
The Company, Company Refers to Shandong Airlines Co., Ltd.
Shandong Aviation Group; the first largest shareholder and
SDA Refers to
controlling shareholder of the Company
Air China Limited, the second largest shareholder of the
Air China Refers to
Company
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Major Risk Warning
China Securities Journal, Securities Times, Hong Kong Commercial Daily and
Juchao Website (www.cninfo.com.cn) are the media for information disclosure
appointed by the Company, all information under the name of the Company
disclosed on the above said media shall prevail, and Investors are advised to
exercise caution of investment risks.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section II Company profile
I. Company information
Short form of the stock Shanhang-B Stock code 200152
Stock exchange for listing Shenzhen Stock Exchange
Name of the Company (in
山东航空股份有限公司
Chinese)
Short form of the Company
山东航空
(in Chinese)
Foreign name of the
SHANDONG AIRLINES CO.,LTD.
Company(if applicable)
Short form of foreign name of
SDA
the Company(if applicable)
Legal representative Zhang Xingfu
Registrations add. Yaoqiang International Airport, Jinan, Shandong
Code for registrations add 250107
Offices add. SDA Bldg., No. 5746, Er Huan East Road, Jinan, Shandong
Codes for office add. 250014
Company website http://www.shandongair.com.cn
Email zqb@shandongair.com.cn
II. Person/Way to contact
Secretary of the Board Rep. of security affairs
Name Dong Qiantang Fan Peng
19/F, SDA Bldg., No. 5746, Er Huan East 8/F, SDA Bldg., No. 5746, Er Huan East
Contacts add.
Road, Jinan, Shandong Road, Jinan, Shandong
Tel. 0531－85698229 0531－85698678
Fax. 0531－85698767 ext.8679 0531－85698767 ext.8679
Email dongqt@shandongair.com.cn fanp@shandongair.com.cn
III. Information disclosure and preparation place
In China: China Securities Journal, Securities Times
Newspaper appointed for information disclosure
overseas: Hong Kong Commercial Daily
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Website for annual report publish appointed by
http://www.cninfo.com.cn
CSRC
Office of Board (8/F, SDA Bldg., No. 5746, Er Huan East Road, Jinan,
Preparation place for annual report
Shandong)
IV. Registration changes of the Company
Registration NO. for
No. of taxation
Date for registration Place for registration enterprise legal Organization code
registration
license
Shandong
Administration for
Initial registration 1999-12-13 370000400002351 370112720721201 72072120-1
Industry &
Commerce
Shandong
Registration at end Administration for
2013-03-22 370000400002351 370112720721201 72072120-1
of report period Industry &
Commerce
V. Other relevant information
CPA engaged by the Company
Name of CPA Ruihua Certified Public Accountants (LLP)
5-11/F, West Tower, China Oversea Property Plaza, West Binhe Rd., Dongcheng District,
Offices add. for CPA
Beijing
Signing Accountants Yang Ganlin, Yang Yunhui
Sponsor engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable √ Not applicable
Financial consultant engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable √ Not applicable
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section III. Accounting data and summary of financial indexes
I. Main accounting data and financial indexes
Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accounting
error correction or not
□Yes √ No
Changes over last year
2013 2012 2011
(%)
Operating income (RMB) 11,427,157,933.15 10,993,024,914.41 3.95% 9,666,969,745.20
Net profit attributable to
shareholders of the listed 389,081,811.72 589,810,932.47 -34.03% 771,225,549.05
company(RMB)
Net profit attributable to
shareholders of the listed company
137,850,318.37 490,146,637.15 -71.88% 751,635,820.83
after deducting non-recurring gains
and losses(RMB)
Net cash flow arising from
1,411,186,522.15 1,726,317,500.75 -18.25% 2,245,050,664.90
operating activities(RMB)
Basic earnings per share
0.97 1.47 -34.01% 1.93
(RMB/Share)
Diluted earnings per share
0.97 1.47 -34.01% 1.93
(RMB/Share)
Weighted average ROE (%) 15.08% 26.36% 11.28 percentage down 45.05%
Changes over end of
End of 2013 End of 2012 End of 2011
last year (%)
Total assets (RMB) 11,403,124,428.82 11,261,341,430.03 1.26% 9,772,985,545.97
Net assets attributable to
shareholder of listed company 2,708,137,664.00 2,479,055,852.28 9.24% 2,049,244,919.81
(RMB)
II. Difference of the accounting data under accounting rules in and out of China
1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International
Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)
In RMB
Net profit attributable to shareholders of listed Net assets attributable to shareholders of listed
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
company company
Amount at
Amount in this period Amount in last period Amount at period-end
period-begin
Chinese GAAP 389,081,811.72 589,810,932.47 2,708,137,664.00 2,479,055,852.28
Items and amount adjusted by IAS
2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting
rules and Chinese GAAP (Generally Accepted Accounting Principles)
In RMB
Net profit attributable to shareholders of listed Net assets attributable to shareholders of listed
company company
Amount at
Amount in this period Amount in last period Amount at period-end
period-begin
Chinese GAAP 389,081,811.72 589,810,932.47 2,708,137,664.00 2,479,055,852.28
Items and amount adjusted by foreign accounting rules
III. Items and amounts of extraordinary profit (gains)/loss
In RMB
Item 2013 2012 2011 Note
Gains/losses from the disposal of
non-current asset (including the write-off 68,990,941.57 -6,848,192.53 -9,599,890.07
that accrued for impairment of assets)
Governmental subsidy reckoned into current
gains/losses (not including the subsidy
enjoyed in quota or ration according to 22,465,841.77 52,137,058.47 21,698,008.50
national standards, which are closely
relevant to enterprise’s business)
Losses/gains from changes of fair values
occurred in holding transaction financial
assets and transaction financial liabilities,
and investment income obtaining from the
disposal of transaction financial assets and 4,292,356.41 -6,906,114.54 -10,862,464.69
transaction financial liabilities and financial
assets available for sales, excluded effective
hedging business relevant with normal
operations of the Company
Reversal of impairment reserve for account 7,500,000.00
receivable with separate impairment testing
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Other non-operating income and expenditure
165,501,423.87 94,505,753.93 24,964,169.47
except for the aforementioned items
Other gains/losses satisfied definition of
67,342,734.17
extraordinary profit (gains)/loss
Less: Impact on income tax 84,861,804.44 33,224,210.01 6,751,319.93
Impact on minority shareholders’ equity
-141,224.94
(post-tax)
Total 251,231,493.35 99,664,295.32 19,589,728.22 --
Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies
Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to
the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their
Securities to the Public --- Extraordinary Profit/loss, explain reasons
□ Applicable √ Not applicable
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section IV. Report of the Board of Directors
I. Introduction
In 2013, the Company calmly coped with the complex and severe situation of safety and benefits, scientifically deliberated the
decisions, optimized and enhanced the management, united and worked hard, and overcome the challenges so that the safety,
operation, benefits and services have maintained a good momentum, achieved a steady and rapid development, and obtained the
hard-won business performance.
I. Continue to strengthen the safety management, and safety production situation is basically stable
In 2013, the Companies guaranteed the safety flight of 257,600 hours and138,000 sorties, respectively increased by 12.79% and
12.41% year on year, and no transport and aviation accident proneness caused by the company occurred; further clarified the safety
leadership responsibilities, detailed the safety regulatory responsibility, implemented the security posts responsibility, and continued
to strengthen the security infrastructure; fully launched the safety production checking and soundly developed the key special
renovation in accordance with the principle of "full coverage, zero tolerance, strict law enforcement, and pragmatics" and guiding by
"five asks" and "three checks".
II. Optimize and adjust the transport control system, the production runs properly
In 2013, the Company’s average flight punctuality rate was 78.17%, ranked third in the civil aviation; established the new operation
and control center, the construction of the transport and control management system has achieved initial success; established and
improved the policy standards relevant to the normal flight management, the normal flight management advanced steadily;
successfully completed the air transport guarantee mission in "two sessions", "ten Arts Festival", national defense, and Ya’an disaster
relief.
III. Actively and appropriately organize the production, and maintain a preferable income level
In 2013, the company completed the total transport turnover volume of 1,757,467,100 tons km, the passenger transport volume of
14,035,800 person-time, total mail volume 130,800 tons, respectively increased by 10.42%, 12.08%, and 5.72% year on year;
achieved operating income of 11,427,157,933.15 Yuan, increase by 3.95% year on year, net profit of 389,081,811.72 Yuan,
decreased by 34.03% year on year;the passenger load factor was 77.76%, decreased by 1.31% year on year, and the cargo and mail
load factor was 46.69%, decreased by 1.78% year on year; the company continued to optimize the flight schedules and the airline
network, gradually increased the flight numbers among the three bases so that the synergistic effect has gradually revealed; made
progress in product innovation and channel development, and achieved remarkable results in increasing revenue and reducing
expenditure.
IV. Continuously improve the service process, and the service quality has been improved
In 2013, the company's service process and standard optimization have been strongly boosted, the improvement for the service short
slab made progress; overall passenger satisfaction survey score reached 89.72, increased by 0.34 scores year on year, which was 1.72
scores more than the target at the beginning of the year; the valid customer complaint rate was 0.486 per ten thousand person-time,
which completed the target the company made at the beginning of the year; the brand value increased to 15.286 billion Yuan, ranked
121 in the ranking of China's 500 most valuable brands, and ranked 15 ahead compared to the last year.
Operation data summary:
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Index 2013 2012 Changes
Total t-km load rate (10 thousand t-km) 175746.71 159165.58 10.42%
Volume of passenger traffic (10 1403.58 1252.30 12.08%
thousand passengers)
Cargo & mail traffic volume (10 13.08 12.38 5.72%
thousand tons)
Flying km (one million km) 145.29 130.80 11.08%
Flying hours(10 thousand hours) 25.76 22.84 12.79%
Number of flight (10 thousand times) 13.80 12.28 12.41%
PLF(passenger load factor) 77.76% 79.07% 1.31 percentage points down
Cargo&Mail OLF (overall load factor) 46.69% 48.47% 1.78 percentage points down
In the Period, totally fifth teen B737-800aircrafts are introduced by the Company and five B737-300 aircrafts are out of services.
Up to 31 December 2013, the Company operates 72 aircrafts in total and the fleet distribution below
Model Numbers Average service age (Year)
737-300 2
737-700 3
737-800 60 4.66-year
CRJ-200 5
CRJ-700 2
II. Main business analysis
1. Introduction
Reasons for difference of actual operation performance has 20% lower or higher than profit forecast of the Year disclosed
□ Applicable √ Not applicable
2. Revenue
Changes of revenue for year of 2013
Item 2013 2012 +,- (%)
Air transport service 11,246,302,839.28 10,854,936,532.36 3.61%
Logistics freight service 8,642,617.01 6,503,978.44 32.88%
Hotel & catering service 32,879,987.03 25,811,523.03 27.38%
Training service 22,194,939.18 17,978,025.13 23.46%
Major clients of the Company in sales
Total top five clients in sales (RMB) 681,700,941.89
Proportion in total annual sales volume for top five clients
5.97%
(%)
Top five clients of the Company
Serial Name Sales (RMB) Proportion in total annual sales (%)
1 Client 1 608,056,192.19 5.32%
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
2 Client 2 38,080,992.43 0.33%
3 Client 3 23,320,427.72 0.2%
4 Client 4 6,439,020.00 0.06%
5 Client 5 5,804,309.55 0.05%
Total -- 681,700,941.89 5.97%
3. Cost
Industry classification
In RMB
2013 2012
Industry Y-o-y changes
Item Ratio in operation Ratio in operation
classification Amount Amount (%)
cost (%) cost (%)
Aviation fuel
3,854,933,435.85 39.87% 3,687,585,645.45 43.18% 4.54%
consumption
Take-off &
1,155,209,250.95 11.95% 999,261,514.62 11.7% 15.61%
landing fees
Employee’s
1,077,378,712.69 11.15% 898,563,294.36 10.52% 19.9%
salary
Air transport Depreciation of
service aircraft and 723,612,575.70 7.49% 664,835,417.04 7.79% 8.84%
engine
Other 2,855,740,816.76 29.54% 2,289,633,555.10 26.81% 24.72%
Total 9,666,874,791.95 100% 8,539,879,426.57 100% 13.2%
Employee’s
2,072,808.90 31.91% 2,367,694.16 73.31% -12.45%
salary
Logistics freight
Other 4,423,145.29 68.09% 861,921.02 26.69% 413.17%
service
Total 6,495,954.19 100% 3,229,615.18 100% 101.14%
Raw materials 16,936,712.26 58.01% 12,654,174.46 53.61% 33.84%
Employee’s
4,840,025.55 16.58% 4,065,297.58 17.22% 19.06%
salary
Hotel & catering
Depreciation 976,617.70 3.35% 1,946,475.49 8.25% -49.83%
service
Other 6,438,210.38 22.06% 4,937,432.41 20.92% 30.40%
Total 29,191,565.89 100% 23,603,379.94 100% 23.68%
Depreciation 4,849,087.29 69.68% 4,849,008.75 52.78% 0%
Training service Other 2,109,547.19 30.32% 4,338,887.30 47.22% -51.38%
Total 6,958,634.48 100% 9,187,896.05 1% -24.26%
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Main suppliers of the Company
Total purchase amount from top five suppliers (RMB) 2,658,698,047.78
Proportion in total annual purchase amount for top five
39.07%
suppliers (%)
Top five suppliers of the Company
Serial Name Purchases (RMB) Proportion in total annual purchase (%)
East China Branch of China Aviation Fuel
1 1,501,280,256.35 22.06%
Co., Ltd.
Qingdao Branch of China Aviation Fuel
2 597,139,475.37 8.77%
Co., Ltd.
Xi’an Branch of China Aviation Fuel Co.,
3 208,558,583.66 3.06%
Ltd.
China National Aviation Fuel Yantai Co.,
4 207,345,975.70 3.05%
Ltd.
Sichuan International Airlines Engine
5 144,373,756.70 2.12%
maintenance Co., Ltd.
Total -- 2,658,698,047.78 39.07%
4. Expenses
Changes of expenses for year of 2013
Item 2013 2012 +,- (%) Reason for changes
Sales expenses 775,204,419.75 745,690,102.02 3.96%
Administrative
-5.49%
expenses 225,319,947.49 238,415,387.65
Exchange gain increased due to the
Financial expenses 142,819,611.58 243,510,475.66 -41.35% Yuan appreciated against the U.S. Dollar
in the Year
5. Cash flow
In RMB
Item 2013 2012 Y-o-y changes (%)
Subtotal of cash in-flow from
12,120,664,358.85 11,096,910,018.70 9.23%
operation activity
Subtotal of cash out-flow from
10,709,477,836.70 9,370,592,517.95 14.29%
operation activity
Net cash flow from operation 1,411,186,522.15 1,726,317,500.75 -18.25%
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
activity
Subtotal of cash in-flow from
177,128,657.92 16,330,092.70 984.68%
investment activity
Subtotal of cash out-flow from
1,725,696,472.77 2,235,679,998.05 -22.81%
investment activity
Net cash flow from investment
-1,548,567,814.85 -2,219,349,905.35 -30.22%
activity
Subtotal of cash in-flow from
2,611,008,010.20 2,184,628,004.62 19.52%
financing activity
Subtotal of cash out-flow from
2,183,736,323.48 1,777,690,780.12 22.84%
financing activity
Net cash flow from financing
427,271,686.72 406,937,224.50 5%
activity
Net increased amount of cash
289,134,528.24 -84,798,004.51 -440.97%
and cash equivalent
Reasons for y-o-y relevant data with over 30% changes
Item 2013 2012 +,- (%) Reason for changes
Cash received concerned with The route subsidies increased and
298,723,497.82 138,366,954.40 115.89%
other operation activity margin collected in the year
The dividends obtained from foreign
Cash received from investment
2,447,115.15 16,247,366.84 -84.94% investment enterprise decreased
income
y-o-y
Disposal income for two aircraft of
Net cash received from disposal
737-300 were collected and
of fixed assets, intangible assets 174,681,542.77 82,725.86 211057.12%
insurance compensation for aircraft
and other long-term assets
B2995 obtained in the year
Expenditure of actual delivery of
Cash paid concerned with other
2,609,524.71 1,852,852.05 40.84% rate swap contract increased over
investment activity
that of same period of last year
Cash received from bonds issued 500,000,000.00 -100.00% Medium term note issued last year
The original purchasement right cost
Cash received concerned with
903,064,822.94 7,470,000.00 11989.22% of the aircraft that transfer to
other financing activity
operating lease was received
Impact on cash and cash
Exchange rate of RMB against
equivalent from changes of -755,865.78 1,297,175.59 -158.27%
foreign currency changed
exchange rate
Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company
□Applicable √Not applicable
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
III. Composition of main business
In RMB
Increase/decrease
Increase/decrease Increase/decrease
Operating Gross profit ratio of operating
Operating cost of operating cost of gross profit
revenue (%) revenue y-o-y
y-o-y (%) ratio y-o-y (%)
(%)
According to industries
Air transport 11,232,141,639.7
9,666,874,791.95 13.94% 3.56% 13.2% -7.32%
service 3
Hotel & catering
30,362,647.64 27,348,610.96 9.93% 37.27% 40.27% -1.93%
service
Training service 22,194,939.18 6,958,634.48 68.65% 23.46% -24.26% 19.76%
Logistics freight
8,642,617.01 6,495,954.19 24.84% 32.88% 101.14% -25.5%
service
According to region
10,932,329,826.3
In China 9,416,947,236.40 13.86% 3.33% 12.82% -7.25%
4
H.K., Macao and
209,330,865.91 159,304,843.31 23.9% 10.84% 11.58% -0.5%
Taiwan
International 151,681,151.31 131,425,911.87 13.35% 22.35% 59.8% -20.31%
Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on
latest one year’s scope of period-end
□ Applicable √ Not applicable
IV. Assets and liability analysis
1. Major changes of assets
In RMB
End of 2013 End of 2012 Ratio
Ratio in total Ratio in total changes Notes of major changes
Amount Amount
assets (%) assets (%) (%)
444,522,271.2 Cash received with financing activities
Monetary fund 3.9% 155,417,742.97 1.38% 2.52%
1 concerned increased in the year
Account 250,524,757.6 Receivable account for wet lease from
2.2% 186,090,177.17 1.65% 0.55%
receivable 7 Air China increased in the year
107,973,473.3
Inventory 0.95% 116,944,913.89 1.04% -0.09%
5
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Long-term equity
88,352,100.00 0.77% 88,352,100.00 0.78% -0.01%
investment
7,564,658,140. 8,132,786,866.
Fix assets 66.34% 72.22% -5.88%
23 22
Construction in 1,647,915,995. 1,430,885,814.
14.45% 12.71% 1.74%
progress 78 11
2. Major changes of liability
In RMB
2013 2012 Ratio
Ratio in total Ratio in total changes Notes of major changes
Amount Amount
assets (%) assets (%) (%)
434,137,220.0 New short-term loans have not expired
Short-term loans 3.81% 321,378,829.28 2.85% 0.96%
0 in the year yet
3,525,047,206. 3,854,676,638.
Long-term loans 30.91% 34.23% -3.32%
06 03
3. Assets and liability measure by fair value
In RMB
Accumulative
Gains/losses of Impairment Amount
Opening changes in fair Closing
Item changes in fair accrual in this purchased in Sale amount
amount value reckoned amount
value period this period
into equity
Financial assets
Financial
7,198,783.59 -6,901,881.12 0.00 0.00 0.00 0.00 296,902.47
liability
Whether there have major changes on measurement attributes for main assets of the Company in report period or not
□ Yes √No
V. Investment analysis
1. Foreign equity investment
Invested company
Proportion of equity in invested company
Name Main business
for listed company (%)
Qingdao International Aviation Logistics
Air cargo warehousing, ground delivery 100%
Center Co., Ltd.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Qingdao Feisheng International Aviation
Technology Development Training Co., Pilot training 100%
Ltd.
Shandong Rainbow Corporate Aircraft Co.,
Air transport 45%
Ltd.
Civil aviation information technology
TravelSky Technology Limited 0.45%
service
Sichuan Airlines Co., Ltd. Air transport 10%
Jinan International Airport Co., Ltd. Civil airport 2.53%
2. Use of fund raised
In reporting period, there are no funds raised or fund raised in previous that last to this period.
3. Main subsidiaries and stock-jointly companies
Particular about main subsidiaries and stock-jointly companies
In RMB
Main
Company Register Operating Operating
Type Industries products or Total assets Net Assets Net profit
name capital revenue profit
service
Qingdao
Air cargo
Internationa Transportati
warehousin
l Aviation on and 30,000,000. 104,996,495 42,548,761. 13,523,527.
Subsidiary g, ground -504,680.36 -394,691.79
Logistics warehousin 00 .81 70 22
delivery;
Center Co., g industry
E-business
Ltd.
Qingdao
Feisheng
Internationa
l Aviation Pilot Pilot 51,545,500. 72,424,256. 70,429,810. 10,347,822. 3,346,243.9 2,501,878.2
Subsidiary
Technology training training 00 34 65 88 2 4
Developme
nt Training
Co., Ltd.
Shandong
Rainbow Air
Stock-jointl Air 50,000,000. 2,119,218.8 -165,812,19 -1,129,654. -2,321,195.
Corporate transport
y company transport 00 4 9.49 01 73
Aircraft industry
Co., Ltd.
Particular about subsidiaries obtained or disposed in report period
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
□ Applicable √ Not applicable
VI. Special purpose vehicle controlled by the Company
No special purpose vehicle controlled by the Company
VII. Prospect for future development of the Company
In 2014, the economic development will continue to make progress while maintaining stability, and the comprehensive and deepened
renovation will bring new opportunities to development. The competition both inside and outside of the industry will increase, and
the high-growth and low fares will become the industry normalcy. From the passengers’ demand, the market space is still there, but
the source structure will continue to change. From the industry supply side, the introduction speed of the aircraft is still more than
two-digit number, but the relative surplus of transport capacity will continue. From the external competition perspective, "four
vertical and four horizontal" high-speed rail network will fully open, and the passenger diversion effect will further increase. In
addition, the fluctuations in international oil prices and exchange rate are difficult to grasp, and the peripheral security situation is
complicated. As it were, the internal and external competition in the aircraft industry will gradually become more complex, the low
fare will continue for a long time, so the company needs to constantly innovate and develop so as to meet the requirements of the
market changes.
In order to cope with the complicated internal and external business environment and ensure the realization of strategic target and the
completion of work tasks, the Company will adhere to the main key tone of the "four unwavering" in 2014: First, adhere to the stable
operation and don’t waver. Grasp the relationship between safety and efficiency, and safety and services, and firmly establish the idea
of "safety first". Second, adhere to the structural optimization and don’t waver. Structural optimization is the fundamental aspect
related to the promotion of future operation quality and production efficiency, it is required to constantly optimize the aircraft
structure, the route structure, the human structure, the asset structure and the capital structure. The third is to adhere to the ability
promotion and don’t waver. The main starting point is to promote the quality of leadership and key positions, start the development
and implementation of learning. Fourth, adhere to the innovation and development and don’t waver. It is required to comprehensively
promote the concept innovation, system innovation, management innovation, technology innovation and development pattern
innovation so as to rapidly improve the overall efficiency.
VIII. Explanation from the Board and Supervisory Committee for “Qualified Opinion” from
the CPA
In reporting period, the Ruihua Certified Public Accountants (LLP) issued a standard unqualified auditors’ report for the Company.
IX. Comparing with last year’s financial report, explain changes in aspect of accounting policy,
accounting estimates and calculation measures
The “Proposal of Inventory Accounting Methods Changed” (found more in Notice No.: 2013-47) was deliberated and approved by
4th extraordinary meeting of 5th session of the Board dated 10 July 2013.
To achieve the integrated management of mechanical and financial and further enhance the company's core competitiveness, the
Company has started using SAP software since July 1st, 2013. In order to keep the same as the software, the inventory valuation
method is changed from the "FIFO" to "moving weighted average method."
The business scope involved in the change of accounting policies is the company's inventory and costing businesses, which can
17
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
reflect the company’s financial situation and operating results more objectively and fairly and provide more reliable and accurate
accounting information, the accounting policy changes will not make substantial impacts on the owners’ equity and net profits of the
Company.
X. Particular about major accounting errors correction that needs retroactive re-statement in
reporting period
No major accounting errors correction that needs retroactive re-statement in reporting period.
XI. Compare with last year’s financial report, explain changes in consolidation statement’s
scope
Scope of consolidation statement in this year is the same as last year’s
XII. Profit and dividend distribution
The Company implemented a positive profit distribution plan, and also attaches importance to the reasonable return for investors as
well as taking sustainable development of the Company into consideration. In accordance with requirement of “Notice on Further
Implementation of Matters with Cash Dividend Concerned for Listed Company” from CSRC and “Letter of Regulation of
Establishment & Improvement of Cash Dividend Mechanism for Listed Company in Province-controlled District” from Shandong
Securities Regulatory Bureau, relevant clauses with profit distribution concerned in Article of Association were revised by the
Company on First Extraordinary Shareholders General Meeting of 2013 held on 5 March 2013. Decision-making procedure and
mechanism of profit distribution was well-defined after revised, and fully listening to the opinions from independent directors and
minority shareholders.
The profit distribution plan and capitalizing of common reserves plan in reporting period are meet a relevant regulations of Article of
Association.
Profit distribution plan and capitalizing of common reserves plan in latest three years (including the reporting period):
2011: distributed 4 Yuan (tax included) bonus for every 10 shares in cash based on total stock issued 400,000,000 shares ended as 31
December 2011;
2012: distributed 4 Yuan (tax included) bonus for every 10 shares in cash based on total stock issued 400,000,000 shares ended as 31
December 2012;
2013: distributed 2.5 Yuan (tax included) bonus for every 10 shares in cash based on total stock issued 400,000,000 shares ended as
31 December 2013;
Cash dividend in latest three years
In RMB
Net profit attributable to Ratio in net profit attributable to
Amount for cash bonus (tax shareholders of listed company shareholders of listed company
Year for bonus shares
included) in consolidation statement for contained in consolidation
bonus year statement (%)
2013 100,000,000.00 389,081,811.72 25.7%
2012 160,000,000.00 589,810,932.47 27.13%
18
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
2011 160,000,000.00 771,225,549.05 20.75%
XIII. Profit distribution plan and capitalizing of common reserves plan for the Period
Bonus shares for every 10-share (Share) 0
Dividends for every 10-share (RMB) (Tax
2.50
included)
Equity base of distribution plan (Share) 400,000,000
Total cash dividend(RMB) (Tax included) 100,000,000.00
Distributable profits (RMB) 397,067,863.95
Ratio of cash dividend in total profit distribution
100%
(%)
Cash dividend policy:
The Company is in a development stage and has the arrangement of major capital expenses, ratio of cash dividend in profit
distribution should reach a minimum of 20% while the profit distributed
XIV. Social responsibility
As a listed company, to protect the interest of shareholders, minority shareholders in particular, is the basic social responsibility for
the Company. According to laws and regulations from Company Law, Security Law and Code of Corporate Governance for Listed
Company, the Company continues to improved its governance structure, established and perfected internal control system, created a
decision-making and operation system with core of shareholders’ general meeting, board of directors, supervisory committee and
management levels, to protect legal interest of all shareholders, minority shareholders in particular.
During the reporting period, the Company timely submitted the energy consumption data and the energy conservation and emission
reduction summary to the higher units such as the municipal government, Civil Aviation Authority monthly, and regularly supervised
the completion the energy saving index. The Company summarized the energy saving and emission reduction work and compiled
“Handbook of energy saving and emission reduction” as the company-level manual for management, which provided support for the
company to carry out the policy of energy conservation. During the "Twelfth Five-Year", the company was listed in the low-carbon
action organized by hundreds of companies in Jinan City, the overall goal of energy saving and emission reduction was to save
25,000 tons of standard coal, and signed the goal responsibility of energy saving with People's Government of Jinan.
As the partner of the Tenth China Arts Festival in 2013 and Qingdao International Horticultural Exposition in 2014, the Company
took full advantage of "air superiority", strengthened the promotion to "Tenth China Arts Festival ", " International Horticultural
Exposition " and the overall image of Shandong, provided safe, accessible and seamless air transport security. Meanwhile, the
Company actively developed the social activities such as the donation for education, supporting the poor, etc., and took the social
responsibility.
In 2014, the Company will continue to improve the stakeholder participation mechanisms, improve the management level,
consolidate the development advantages, and better fulfill the social responsibilities.
XV. In the report period, reception of research, communication and interview
19
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Contents discussed and
Time Place Way Type Reception
material provided
Telephone Operation of the Company
Jan.- Dec. 2013 Jinan Individual Individual investor
communication and no material required
News media, legal
person’s Operation of the Company
2013-03-05 Jinan Field research Other
shareholders and and no material required
individual investor
News media, legal
person’s Operation of the Company
2013-05-08 Jinan Field research Other
shareholders and and annual report required
individual investor
News media, legal
person’s Operation of the Company
2013-10-28 Jinan Field research Other
shareholders and and no material required
individual investor
20
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section V. Important Events
I. Significant lawsuits and arbitrations of the Company
No significant lawsuits and arbitration in reporting period
II. Question from media
No universal questioned by media in reporting period
III.Controlling shareholder’s and its related party’s non-business capital occupying
There are no controlling shareholder and its related party occupying non-business capital of the Company in Period
IV. Bankruptcy reorganization
No bankruptcy reorganization occurred in reporting period
V. Assets transaction
Assets sold
Net
profit
contribu Ratio of
ted to net
Assets
the profit
The rights
The listed contribu
related with Credit
other Compan ted by
Sales Impact relations ownersh and
party of y from the sold Related
price (in on Pricing hip(appl ip liability Date of Index of
transacti Assets Sales the assets transacti
10 Compan principl icable concern fully disclosu disclosu
on or sold date begin of for on
thousan y(Note3 e for ed transferr re re
final the listed (Y/N)
d Yuan) ) related fully ed
controll reportin compan
transacti transferr (Y/N)
er g to y in
on) ed
the sales total net
(Y/N)
date(in profit
10 (%)
thousan
d Yuan)
4 Based
China
aircrafts 2013.4. 13,405. -1,239.9 on 2013-10
Postal -7,911.4 -20.33% N N N 2013-65
of 28 62 1 market -08
Airlines 8
B737-3 supply
21
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
00 with and
its own demand
property and
rights aircraft
conditio
ns
VI. Implementation of the Company’s equity incentive and the effects
Equity incentive has not been implemented by the Company in the Period
VII. Material related transactions
Related transaction with routine operation concerned
Proportio Market
Trading
n in the price of
Type of Content amount
Related
Related related of related Pricing Dealing amount of Means of similar Date of Index of
relationsh (in 10
party transactio transactio principles price the same payments transactio disclosure disclosure
ip thousand
n n
transactio n
Yuan)
n (%) available
Shandong Subsidiar
Taikoo y of Airplane
Labor
Aircraft controllin maintena Market 83,756,98 Cash 83,756,98 2013-03-
service 8,375.7 12.46% 2013-19
Engineeri g nce price 0.25 settlement 0.25 19
received
ng Co., sharehold charge
Ltd. er
Rent of
Controllin
Labor office and
g Market 28,893,59 Cash 28,893,59 2013-03-
SDA service board&lo 2,889.36 34.93% 2013-19
sharehold price 2.73 settlement 2.73 19
received dging
er
expenses
Shandong
Subsidiar
Xiangyu
y of
Air Labor Maintena
controllin Market 39,708,45 Cash 39,708,45 2013-03-
Technolo service nce 3,970.85 5.44% 2013-19
g price 6.88 settlement 6.88 19
gy received charge
sharehold
Service
er
Co., ltd
Beijing Subsidiar
Aircraft y of 2nd Labor Maintena
Market 11,178,13 Cash 11,178,13 2013-03-
Maintena largest service nce 1,117.81 1.53% 2013-19
price 3.31 settlement 3.31 19
nce sharehold received charge
Engine er
22
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Co., Ltd
Beijing
Subsidiar
Aircraft
y of 2nd Labor Ground
Maintena Market 17,172,87 Cash 17,172,87 2013-03-
largest service service 1,717.29 1.5% 2013-19
nce price 1.84 settlement 1.84 19
sharehold received expenses
Engine
er
Co., Ltd
2nd
Labor Ground
largest Market 17,077,55 Cash 17,077,55 2013-03-
Air China service service 1,707.76 1.5% 2013-19
sharehold price 1.66 settlement 1.66 19
received expenses
er
2nd
Labor Maintena
largest Market 38,441,79 Cash 38,441,79 2013-03-
Air China service nce 3,844.18 5.27% 2013-19
sharehold price 1.87 settlement 1.87 19
received charge
er
Sichuan
Internatio
Subsidiar
nal
y of 2nd Labor Maintena
Airlines Market 144,373,7 Cash 144,373,7 2013-03-
largest service nce 14,437.38 19.78% 2013-19
Engine price 56.70 settlement 56.70 19
sharehold received charge
maintena
er
nce Co.,
Ltd.
2nd Other
largest related Agreeme 601,828,3 Cash 601,828,3 2013-03-
Air China Wet lease 60,182.84 100% 2013-19
sharehold transactio nt price 80.56 settlement 80.56 19
er n
2nd Other
Accrued
largest related Agreeme 93,860,00 Cash 93,860,00 2013-03-
Air China points 9,386 100% 2013-19
sharehold transactio nt price 0.00 settlement 0.00 19
transfer
er n
2nd Other Frequent
largest related passenger Agreeme 29,000,00 Cash 29,000,00 2013-03-
Air China 2,900 100% 2013-19
sharehold transactio cooperati nt price 0.00 settlement 0.00 19
er n on
110,529.1
Total -- -- -- -- -- -- --
7
Details of return of sales in significant
N/A
amount
Necessity and continuity of related The above said transactions are necessary related transaction with normal operation
transaction, and reason for entering into activity concerned; board of director of the Company guarantee the fair value pricing
23
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
related transaction with related parties and reasonable for the related transactions from the point of protecting investors’
(other than other participants in the interest and the Company
market)
Affect of related transaction on No influence on independence of the Company; main business of the Company shows
independence of listed company no dependency with related party(or being control)
Dependence of the Company on related
N/A
party and relevant measures (if any)
Report the actual implementation of the
normal related transactions which were Implemented by the agreement, no amount exceed the budget approved in general
projected about their total amount by types meeting
during the reporting period (if any)
Reasons for major difference between
trading price and market reference price (if N/A
applicable)
VIII. Major contract and implantation
1. Trusteeship, contract and leasing
No trusteeship, contract and leasing occurred in reporting period
2. Guarantee
No external guarantee occurred in reporting period
3. Other material contracts
No other material contracts undisclosed
IX. Implementation of commitments
Commitments made by the Company or shareholders holding above 5% shares of the Company in reporting period or extending to
reporting period.
Commitment Commitmen Implementa
Commitments Accepter Contents
time t period tion
In February 2004, China National Aviation
Holding Company (CNAHC) entered into a
Commitments in
equity transfer agreement with SDA , that is Strictly
report of Long-term
Air China promise “to avoiding horizontal competition 2004-12-06 implement
acquisition or equity effective
with the Company through reasonable business timely
change
arrangement”; in December, being approved,
the equity assignee was replaced by Air China,
24
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
and all rights and obligations under the
agreement was transfer to Air China as the party
who implemented the commitments
Controlling shareholder—SDA provide a
Commitments make in Strictly
commitment letter of avoiding horizontal Long-term
initial public offering SDA 2000-09-12 implement
competition to the Company in year of 2000 effective
or re-financing timely
when the Company initial public offering shares
Completed on time
Y
(Y/N)
X. Appointment and non-reappointment (dismissal) of CPA
Accounting firm appointed
Name of domestic accounting firm Ruihua CPAs (LLP)
Remuneration for domestic accounting firm (in 10
115
thousand Yuan)
Continuous life of auditing service for domestic
1
accounting firm
Name of domestic CPA Yang Ganlin, Yang Yunhui
Whether re-appointed accounting firms in this period or not
√Yes □ No
Whether re-appointed accounting firms during auditing period or not
√Yes □ No
Whether completed approval process while changing accounting firms or not
√Yes □ No
Explanation on re-engagement and changes of accounting firms
As RSM China CPAs (LLP) who used to take charge of the auditing of the Company merged with Crowe Horwath China CPAs (LLP)
into Ruihua CPAs (LLP), in order to keep the consistency of audit services and ensure the auditing quality of the company’s financial
report, the company engaged Ruihua CPAs (LLP) as the audit institution for the 2013 annual financial report after the deliberation of
the company’s stockholders' meeting, and the financial report auditing fee was 800,000 Yuan.
Appointment of internal control auditing accounting firm, financial consultant or sponsor
√ Applicable □Not applicable
Take consistency into consideration, the Company also engaged Ruihua CPAs (LLP) as the audit institution for internal control for
year of 2013, and auditing efficiency of internal control and issued the audit report of internal control of 2013 for the Company. The
auditing charge for internal control was RMB 0.35 million.
XI. Penalty and rectification
In the report period, the Company and the Board of Directors have not received check, administrative punishment and notice of
25
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
criticism from the CSRC, and public criticism from the securities exchange.
Particular about directors, supervisors, senior executives and shareholders with over 5% shares held suspected illegal dealings of the
stock of the Company and earnings of illegal dealings taken back by the Company that disclosed
□Applicable √ Not applicable
XII. Explanation on other significant events
Significant events of the Company and announcement are published on China Securities Journal, Securities Times, Hong Kong
Commercial Daily and Juchao Website (http: //www.cninfo.com.cn) , more details can be found in the above said media
26
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section VI. Changes in Shares and Particulars about Shareholders
I. Changes in shares
In Share
Before change Increase/decrease in this time (+ , - ) After change
Capitalizat
Bonus ion of
Amount Ratio (%) New issue Other Subtotal Amount Ratio (%)
share public
reserve
260,000,0 260,000,0
I. Unlisted shares 65% 65%
00 00
168,601,0 168,601,0
1. Sponsor’s shares 42.15% 42.15%
00 00
Including: State-owned 168,402,0 168,402,0
42.1% 42.1%
shares 00 00
Domestic legal
199,000 0.05% 199,000 0.05%
person’s shares
4. Preference shares or 91,399,00 91,399,00
22.85% 22.85%
other 0 0
140,000,0 140,000,0
II. Listed shares 35% 35%
00 00
2. Domestically listed 140,000,0 140,000,0
35% 35%
foreign shares 00 00
400,000,0 400,000,0
III. Total shares 100% 100%
00 00
II. Securities issue and listing
The previous three year ended by the period-end, the Company has no securities and derivative securities issued for listing
Changes of total shares and shareholders structure as well as explanation on changes of assets and liability structure
During the report period, there were no changes in the total number and structure of the Company’s shares due to bonus share, capital
public reserve transferring into share capital, rationed share, additional issuance, share merger, convertible company’s bonds
transferring shares, disinvestments, listing of inner employees’ shares or company’s employee’s shares
III. Shareholders and actual controller
1. Number of shareholders of the Company and share-holding
In Share
27
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Total shareholders at end of the Total shareholders ended as the 5th trading day
17,064 17,034
period before annual report disclosed
Particulars about shares held above 5% by shareholders or top 10 shareholding
Amount Number of shares pledged/frozen
Shares Amount of
Changes of
Proportion held at listed
Nature of
Shareholders of shares in report un-listed
shareholder end of shares
held (%) State of share Amount
period shares
Period held
held
Shandong State-owned legal 42% 168,004,0 0 168,004,0 0
Aviation Group
Air China person
State-owned legal 00
22.8% 91,200,00 0 00
91,200,00 0
Limited person 0 0
GUOTAI Foreign legal 0.88% 3,537,773 143,045 0 3,537,773
JUNAN
WANXIANG person legal
Foreign 0.45% 1,805,525 0 0 1,805,525
INTERNATION person
Chen Jinjiang Domestic nature 0.36% 1,438,800 58,000 0 1,438,800
Ou Yanping person nature
Domestic 0.24% 945,043 0 0 945,043
person
Yao Ming Domestic nature 0.23% 927,000 -908,679 0 927,000
HUANG LIU person nature
Foreign 0.23% 918,917 0 0 918,917
LIA person
Ye Qufa Domestic nature 0.2% 810,000 0 0 810,000
Bao Xiuzhen person nature
Domestic 0.2% 800,000 0 0 800,000
person
1. Shandong Aviation Group(SDA) is the first largest shareholder of the Company, who holds
the shares of the Company on behalf of the State with unlisted shares;
2. Air China Limited is the second largest shareholder of the Company, who holds the shares
Explanation on related relationship of the Company on behalf of the State with unlisted shares;
or concerted action among the 3. Among the above top ten shareholders, Air China Limited is the first largest shareholder of
abovementioned shareholders the SDA, and there exists no associated relationship between SDA and Air China and the
other shareholders, and they don’t belong to the consistent actionist regulated by the
Management Regulation of Information Disclosure on Change of Shareholding for Listed
Companies with the other shareholders.
Shareholding of top 10 circulated shareholders
Type of shares
Shareholders Amount of listed shares held at end of the Period
Type Amount
GUOTAI JUNAN Domestically
SECURITIES(HONGKONG) 3,537,773 listed foreign 3,537,773
LIMITED shares
Domestically
WANXIANG INTERNATIONAL
1,805,525 listed foreign 1,805,525
INVESTMENT CORPORATION
shares
Domestically
Chen Jinjiang 1,438,800 1,438,800
listed foreign
28
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
shares
Domestically
Ou Yanping 945,043 listed foreign 945,043
shares
Domestically
Yao Ming 927,000 listed foreign 927,000
shares
Domestically
HUANG LIU LIA 918,917 listed foreign 918,917
shares
Domestically
Ye Qufa 810,000 listed foreign 810,000
shares
Domestically
Bao Xiuzhen 800,000 listed foreign 800,000
shares
Domestically
Zhu Guanhong 795,293 listed foreign 795,293
shares
Domestically
JOHN POSS 793,400 listed foreign 793,400
shares
Explanation on related relationship
or concerted action among the top
The Company is not aware of their associated relationship among the top ten shareholders of
ten shareholders with un-restricted circulation share, and is unknown whether other circulation shareholders belong to the
shares held and between the top ten consistent actionist regulated by the Management Regulation of Information Disclosure on
Change of Shareholding for Listed Companies.
shareholders with un-restricted
shares held and top ten shareholders
2. Controlling shareholders and actual controller of the Company
Controlling shareholders, Date of Organization
Legal rep. Register capital Main operation business
actual controller foundation code
General business: investment and
management of air transport industry
and aviation maintenance industry;
Shandong Aviation Group Ma Chongxian 1995-02-09 61407164-7 RMB 580 million conference and exhibition services;
office services; daily necessities,
handicrafts, sales of souvenirs, rental
housing; pre-licensed business:
29
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
lodging, food and beverage services,
retail of tobacco products (restricted
to be operated only by the branches)
Changes of controlling shareholders and actual controller in reporting period
□Applicable √Not applicable
Property right and controlling relationship between the actual controller and the Company is as follow:
Shandong Aviation Group
42%
Shandong Airlines Co., Ltd.
3. Second largest shareholder of the Company
Corporate Organization Register Main operation business or management
Legal rep. Date of foundation
shareholder code capital activities
Domestic and overseas transportation
business such as periodic and un-periodic
aviation passenger, cargo, letter and
baggage; domestic and overseas official
flight business; airplane management
Air China Wang RMB 12.892
2004-09-30 71787100-6 business; repairing of aerostat; business
Limited Changshun billion
agent among air companies; ground
service and air courier services related with
the main operations (excluding letter and
articles with the nature of letters); tax-free
commodities in airplane.
30
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section VII. Particulars about Directors, Supervisors, Senior Executives
and Employees
I. Changes of shares held by directors, supervisors and senior executives
Increasing Decreasing
Shares Shares
shares held shares held
Working Start dated End date held at held at
Title Sex Age of office of office in this in this
Name status period-beg period-end
term term
period period
in (Share) (Share)
(Share) (Share)
Zhang Currently 2012-06-2 2015-06-2
Chairman M 59 0 0 0 0
Xingfu in office 8 7
Ma Chong Deputy Currently 2012-06-2 2015-06-2
M 49 0 0 0 0
Xian Chairman in office 8 7
Director & Currently 2012-06-2 2015-06-2
Yu Haitian M 45 0 0 0 0
GM in office 8 7
Sun Currently 2013-10-2 2015-06-2
Director M 52 0 0 0 0
Xiujiang in office 8 7
Xu Director&
Guojian deputy
Currently 2012-06-2 2015-06-2
GM & M 50 0 0 0 0
in office 8 7
Chief
accountant
Wang Currently 2012-06-2 2015-06-2
Director M 49 0 0 0 0
Mingyuan in office 8 7
Wang Currently 2012-06-2 2015-06-2
Director F 56 0 0 0 0
Jieming in office 8 7
Currently 2012-06-2 2015-06-2
Li Xiuqing Director F 51 0 0 0 0
in office 8 7
Wang Independe Currently 2012-06-2 2015-06-2
M 71 0 0 0 0
Kaiyuan nt director in office 8 7
Ping Independe Currently 2012-06-2 2015-06-2
M 65 0 0 0 0
Xiaofeng nt director in office 8 7
Independe Currently 2012-06-2 2015-06-2
Li Chun M 57 0 0 0 0
nt director in office 8 7
Qu Independe Currently 2012-06-2 2015-06-2
M 42 0 0 0 0
Wenzhou nt director in office 8 7
Wang Chairman Currently M 49 2013-10-2 2015-06-2 0 0 0 0
31
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Wuping of in office 8 7
Supervisor
y
Committee
Xue Currently 2012-06-2 2015-06-2
Supervisor M 53 0 0 0 0
Ruitao in office 8 7
Currently 2012-06-2 2015-06-2
Zhang Kai Supervisor M 49 0 0 0 0
in office 8 7
Dong Employee Currently 2012-06-2 2015-06-2
M 45 0 0 0 0
Jianmin supervisor in office 8 7
Zhou Employee Currently 2012-06-2 2015-06-2
F 39 0 0 0 0
Qiaoyan supervisor in office 8 7
Deputy
Miao GM, Currently 2013-10-2 2015-06-2
M 43 0 0 0 0
Liubin Safety in office 8 7
Director
Deputy
Zhang Currently 2013-10-2 2015-06-2
GM, Chief M 56 0 0 0 0
Qingshe in office 8 7
Pilot
Deputy Currently 2012-06-2 2015-06-2
Li Qing’en M 59 0 0 0 0
GM in office 8 7
Xiong Deputy Currently 2013-10-2 2015-06-2
M 49 0 0 0 0
Jianbo GM in office 8 7
Wang Deputy Currently 2013-10-2 2015-06-2
M 49 0 0 0 0
Xianlin GM in office 8 7
Zhou Deputy Currently 2013-07-3 2015-06-2
M 50 0 0 0 0
Lixin GM in office 1 7
Secretary
Dong Currently 2012-06-2 2015-06-2
of the M 52 0 0 0 0
Qiantang in office 8 7
Board
Zeng Office 2012-06-2 2013-10-0
Director M 61 0 0 0 0
Guoqiang leaving 8 8
Chairman
of
Wang Office 2012-06-2 2013-10-1
Supervisor M 61 0 0 0 0
Fuzhu leaving 8 5
y
Committee
Standing
Su Office 2012-06-2 2013-09-1
Deputy M 60 0 0 0 0
Zhongmin leaving 8 7
GM
32
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Jiang Deputy Office 2012-06-2 2013-09-1
M 55 0 0 0 0
Chengda GM leaving 8 7
Deputy Office 2012-06-2 2013-07-3
Qiu Feng M 47 0 0 0 0
GM leaving 8 1
Total -- -- -- -- -- -- 0 0 0 0
II. Post-holding
Major working experience of directors, supervisors and senior executive at the present in latest five years
Name Main working experience
Zhang Xingfu 2005.12-present CPC secretary and deputy President of Shandong Airlines Group
2006.03-present Chairman of the Company
Ma Chongxian 2006.07-2009.06 GM and CPC deputy secretary of Zhejiang Branch of Air China
2009.06-2010.04 GM and CPC deputy secretary of Hubei Branch of Air China
2010.04-present Member of CPC and Vice President of Air China, and Chairman, President and CPC Vice
Secretary of Shandong Airlines Group
2010.04-present Vice President of the Company
Yu Haitian 2003.03-2011.03 Deputy General Manager of the Company
2011.03-2012.06 General Manager of the Company
2012.06-present Director and General Manager of the Company
Sun Xiujiang 2005.05-2011.07 Director of Hualu Holdings Co., Ltd, Deputy GM and Member of CPC Committee of Hualu
Holdings Co., Ltd. and Chairman of Shandong Hualu Lihua Real Estate Co., Ltd.
2011.07-2013.08 Director, Deputy GM and Member of CPC Committee of Hualu Holdings Co., Ltd., Chairman
of Shandong Hualu Lihua Real Estate Co., Ltd. and Director of Shandong Hualu Hengsheng
Group Co., Ltd.
2013.08-present Deputy Party Secretary and Secretary of Committee for Discipline Inspection of SDA
2013.10-present Director of the Company
Xu Guojian 2007.10-2010.01 General Manager of Financial Dividend in Engineer Technology Branch of Air China
2010.01-present Deputy GM and Chief Accountant of the Company
2010.04-present Director, Deputy GM and chief accountant of the Company
Wang 2008.07-2011.02 Director of Commerce Commission of Air China
Mingyuan 2011.02-present Member of the Party Committee and Deputy Chairman of Air China
2006.03-present Director of the Company
Wang Jieming 2003.02-present Director of Planning Financial Department of Shandong Economic Development and
Investment Company
2006.03-present Director of the Company
Li Xiuqin 2010.03-present Director of Assets Management Department of Shandong Economic Development and
Investment Company
2012.06-present Director of the Company
Wang Kaiyuan He successively served as vice director of secretariat of political dept. of Civil Aviation, vice political commissar
and political commissar of 22nd fighter Group of Civil Aviation, CPC secretary of Civil Aviation Shenyang Repair
Shop, director of political dept. of Civil Aviation Administration of Shenyang, director of Shenyang
33
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Administration, General Manager of China Northern Airlines, vice director of CAAC, President of Air China and
General Manager of China National Aviation Holding Company. Now he serves as outside director of Cinotrans &
CSC Holdings Co., Ltd., independent director of Commercial Aircraft Corporation of China Ltd., DongFeng
Automobile Co., Ltd., China International Travel Service Corp. Lt., and Xi’an Aircraft International Corporation.
2012.06-present Independent director of the Company
Ping Xiaofeng He successively served as cadre and vice director of Office in Jianan Farm Tools Plant, secretary, vice director and
director of Office in Jinan Engineering Bureau, vice director of General Office of Jinan Municipal Government,
vice secretary of Jinan People’s Government, CPC secretary and director of Local Taxation Bureau of Jinan City.
Now he serves as standing director of China International Taxation Research Institute (CITRI), president of
International Taxation Research Institute of Jinan City, independent director of Shandong Iron & Steel Co., Ltd and
Shandong Jinan Runfeng Rural Cooperative Bank
2012.06-present Independent director of the Company
Li Chun He was Chairman of Shenzhen Lawyers Association; Now he is Vice-director of Development Strategy Committee
of Chinese National Lawyers Association; Chief Researcher of Venture Investment Law Research Center; Chief
Jurist and executive director of Grandall Institution; Executive Partner of Grandall Laws Firm.
2009.06-present Independent director of the Company
Qu Wenzhou He successively served as Manager of Investment Bank Department of Xiamen Jianfa Investment Trust
Corporation, GM of Xiamen Boyi Investment Consultancy Co., Ltd.; researcher of Shenzhen Stock Exchange. He
is teaches in Xiamen University since 2005; taking the positions of professor of management institution, Xiamen
University; doctorial tutor and vice director of financial dept.; vice dean of financial management and accounting
institution and director of research center of Chinese capital market.
2009.06-present Independent director of the Company
Wang Wuping 2009.02-2013.09 GM of Financial Dept. of the Company
2013.09-present Chief Accountant and GM of Financial Dept of SDA
2013.10-present Chairman of Supervisory Committee of the Company
Xue Ruitao 2009.03-2013.09 GM of Financial Dept of SDA
2013.09-present GM of Planning & Investment Management Dept. of SDA
2009.06-present Supervisor of the Company
Zhang Kai 2006.01-present Senior Manager of Assets Management Dept. of Air China
2009.06-present Supervisor of the Company
Dong Jianmin 2007.08-2012.05 Deputy GM of Flight Dept. of the Company
2012.05-present GM of Flight Dept. of the Company
2012.06-present Employee supervisor of the Company
Zhou Qiaoyan 2003.03-2012.05 Deputy GM of Cabin Service Dept. of the Company
2012.05-present Secretary of Party General Branch of Cabin Dept. of the Company
2006.03-present Employee supervisor of the Company
Miao Liubin 2007.08-2011.03 GM of Flight Dept. of the Company
2009.06-2011.03 Employee supervisor of the Company
2011.03-2013.10 Deputy GM of the Company
2013.10-present Deputy GM and Safety Director of the Company
Zhang Qingshe 2001.10-2013.10 Chief Pilot of the Company
2013.10-present Deputy GM and Chief Pilot of the Company
Li Qing’en 2005.01-2009.03 Deputy GM and Secretary of the Board of the Company
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
2009.03-2011.12 Deputy GM of the Company
2011.12-present Deputy GM of the Company and Party Secretary of Qingdao Branch of the Company
Xiong Jianbo 2008.05-2009.12 GM of Engineering Technology Company of the Company
2009.12-2011.03 Chief Engineer of the Company
2011.03-2013.10 Chief Engineer of the Company and General Manager of Qingdao Branch of the Company
2013.10-present Deputy GM of the Company and GM of Qingdao Branch of the Company
Wang Xianlin 2009.02-2013.10 Safety Director of the Company
2013.10-present Deputy GM of the Company
Zhou Lixin 2007.11-2013.07 Deputy GM of Centralized Purchasing Dept. of Air China and Member of the Party Committee
2013.07-present Deputy GM of the Company
Dong Qiantang 2003.01-2009.02 Minister of Enterprise Planning and Development Department of SDA
2009.02-2011.03 General Manager of Enterprise Management of the Company
2011.03-present Director of the General Office of the Company
2009.06-present Secretary of the Board of the Company
Post-holding in shareholder’s unit
Receiving remuneration from
Name Name of shareholder’s units Position
shareholder’s units (Y/N)
Member of the Party Committee,
Air China Y
Ma Chongxian Deputy President
Chairman, President and Deputy Party
SDA Y
Secretary
Zhang Xingfu SDA Party Secretary, Deputy President Y
Yu Haitian SDA Deputy Party Secretary N
Deputy Party Secretary , Secretary of
Sun Xiujiang SDA Y
Committee for Discipline Inspection
Wang Wuping SDA Chief Accountant Y
GM of Planning & Investment
Xue Ruitao SDA Y
Management Dept.
Wang Member of the Party Committee,
Air China Y
Mingyuan Deputy President
Senior Manager of Assets Management
Zhang Kai Air China Dept. of Investment Enterprise Y
Management
Post-holding in other unit
Receiving remuneration from
Name Name of other units Position
other units(Y/N)
Shandong Economic
Director of finance & accounting
Wang Jieming Development Investment Y
division
Company
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Shandong Economic
Li Xiuqin Development Investment Director of Assets Management Dept. Y
Company
III. Remuneration for directors, supervisors and senior executives
The remuneration for directors, supervisors and senior management is paid according to relevant rules on time, and the remuneration
of directors and supervisors holding a post in shareholder units or other units is paid by relevant units; allowances standard for
independent directors is deliberated and approved by shareholders’ general meeting and will determine based on actual working days;
Remuneration of the senior management is approved by the remuneration and appraisal committee of the board, the Company will
pay to senior management with their owned working situation and performance appraisal results based on the evaluation on
individual performance from internal “temporary method of performance appraisal” of the Company.
Chairman Mr. Zhang Xingfu, Director Mr. Sun Xiujiang, Chairman of Supervisory Committee Mr. Wang Wuping together with
Supervisor Mr. Xue Ruitao drew their remunerations from Shandong Aviation Group (SDA), the controlling shareholder of the
Company, not from the Company; (Mr. Sun Xiujiang and Mr. Wang Wuping received remuneration from SDA since September
2013 ) Chairman Mr. Ma Chongxian, Director Mr. Wang Mingyuan and Supervisor Mr. Zhang Kai drew their remunerations from Air
China not from the Company and Director Ms. Wang Jieming and Ms. Li Xiuqin received remuneration from Shandong Economic
Development Investment Company not form the Company.
Remuneration for directors, supervisors and senior executives in reporting period In ten thousand yuan
Total
Total Remuneration
remuneration
Post-holding remuneration actually
Name Title Sex Age obtained from
status obtained from obtained at
shareholder’s
the Company period-end
unit
Currently in
Yu Haitian Director, GM M 45 87.2 0 87.2
office
Director,
Deputy GM Currently in
Xu Guojian M 50 69.17 0 69.17
and Chief office
Accountant
Independent Currently in
Wang Kaiyuan M 71 7.4 0 7.4
director office
Independent Currently in
Ping Xiaofeng M 65 7.4 0 7.4
director office
Independent Currently in
Li Chun M 57 7.4 0 7.4
director office
Independent Currently in
Qu Wenzhou M 42 7.4 0 7.4
director office
Dong Jianmin Employee M 45 Currently in 43.32 0 43.32
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
supervisor office
Employee Currently in
Zhou Qiaoyan F 39 37.42 0 37.42
supervisor office
Deputy GM, Currently in
Miao Liubin M 43 77.04 0 77.04
Safety Director office
Deputy GM, Currently in
Zhang Qingshe M 56 88.11 0 88.11
Chief Pilot office
Currently in
Li Qing’en Deputy GM M 59 80.6 0 80.6
office
Currently in
Xiong Jianbo Deputy GM M 49 69.06 0 69.06
office
Currently in
Wang Xianlin Deputy GM M 49 75.8 0 75.8
office
Deputy
GM(since Currently in
Zhou Lixin M 50 22.41 0 22.41
September office
2013)
Secretary of Currently in
Dong Qiantang M 52 41.06 0 41.06
the Board office
Zeng Guoqiang Director M 61 Office leaving 102.1 0 102.1
Standing
Su Zhongmin M 60 Office leaving 81.68 0 81.68
Deputy GM
Jiang Chengda Deputy GM M 55 Office leaving 68.61 0 68.61
Qiu Feng Deputy GM M 47 Office leaving 41.87 0 41.87
Total -- -- -- -- 1,015.05 0 1,015.05
Delegated equity incentive for directors, supervisors and senior executives in reporting period
□ Applicable √ Not applicable
IV. Position changes for Directors, Supervisor and Senior Executives
Name Title Type Date Reasons
Office
Zeng Guoqiang Director 2013-10-08 Retirement
leaving
Candidate of
Sun Xiujiang Director 2013-10-28 General Meeting Election
an election
Chairman of
Office
Wang Fuzhu Supervisory 2013-10-15 Retirement
leaving
Committee
Wang Wuping Chairman of Candidate of 2013-10-28 General Meeting Election, Supervisory
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Supervisory an election Committee Election
Committee
Office
Qiu Feng Deputy GM 2013-07-31 Occupation mobility
leaving
Zhou Lixin Deputy GM Appointment 2013-07-31 Appointed by the Board
Office
Su Zhongmin Standing Deputy GM 2013-09-17 Retirement
leaving
Office
Jiang Chengda Deputy GM 2013-09-17 Occupation mobility
leaving
Deputy GM, Safety
Miao Liubin Appointment 2013-10-28 Occupation mobility
Director
Deputy GM, Chief
Zhang Qingshe Appointment 2013-10-28 Occupation mobility
Pilot
Xiong Jianbo Deputy GM Appointment 2013-10-28 Occupation mobility
Wang Xianlin Deputy GM Appointment 2013-10-28 Occupation mobility
V. Employees of the Company
By the end of this report period, the Company had 6,975 employees in total, including 207 persons of postgraduates (Master Degree
and Doctor Degree) or above, 6380 persons graduated from 3-years regular college or above. Ended as report period, there were 105
retirees in the Company.
The staff structure is as follows:
Type of employee Number Proportion in total employees
Flight personnel 913 13.09%
Steward 1621 23.24%
Security guard 296 4.24%
Maintenance 1072 15.37%
personnel
Transport control 241 3.46%
personnel
Salesman 826 11.84%
Freight personnel 291 4.17%
Ground attendant 529 7.58%
Financial personnel 161 2.31%
Others 1025 14.70%
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
39
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section VIII. Corporate Governance
I. Corporate governance of the Company
During the report period, the Company constantly completes the corporate governance structure, standardize the company operation
in accordance with “Corporation Law”, “Security Law”, “Governance Principles of Listed Company”, “Listing Rules of Shenzhen
Stock Exchange”, “Basic Norms of Enterprise internal control” and requirements of other related laws and regulations, feasibly gives
play to guidance and supervisory role of “Three meetings” in corporate governance and information disclosure so as to further
improve the corporate governance level.
(I) Shareholders and general meeting
In reporting period, totally three general meetings are held by the Company, including one annual general meeting and two
extraordinary general meeting. All the proposals submitted in the meetings are being deliberated and passed, totally 14 proposals as
Article of Association Amendments and Aircraft Introduction Plan are deliberated. The Company strictly follows the procedures
ruled by the Articles of Association and Rules of Procedure for General Meeting of Shareholders to convene the general meeting of
stockholders, deliberate the motion and make policy, and ensure all shareholders, especially the medium and small shareholders, can
enjoy equal status and fully exercise their rights.
(II) Directors and the board of directors
During the report period, the board of directors convoked regular and interim meetings to deliberate the company’s major issues by
taking the principles of being responsible for the stockholders' meeting and actively maintaining the shareholders’ benefits and
strictly following the relevant laws and regulations and the procedures ruled by the Articles of Association and Rules of Procedure
for Board of Directors. In 2013, the company totally convoked 11 board meetings, deliberated 32 motions including the relevant
financial reports, the profit distribution, the related transactions, top management turnover, of which the convening, holding and
voting procedures were legitimate and effective, and timely made announcement of the resolution of the board of directors, protected
the rights to know and to supervise of the company's shareholders, and promoted the company's standard operation.
(III) Supervisors and board of supervisors
During the report period, the board of supervisors of the Company convoked five meetings and attended all the general meetings of
stockholders and board meetings the Company convoked in 2013. The convening, convoking and motion consideration and
decision-making of the supervisor meeting were implemented in strict accordance with the procedures ruled by the Articles of
Association and Rules of Procedure for Board of Supervisors, all supervisors attended the board of supervisors as required, seriously
performed their duties, supervised and made opinions on the major events, related transaction and financial situation of the Company,
and maintained the legitimate rights and interests of the Company and the shareholders.
(IV) System construction
In order to further standardize and improve the compliance and scientific of the board meeting’s consideration and decision-making,
the company’s board of directors passed four systems in 2013, including “Management System of related Transactions”, “Rules of
Procedure of the Audit Committee”, “Rules of Procedure of the Remuneration and Appraisal Committee” and “Rules of Procedure of
the Strategy and Nomination Committee” in accordance with relevant laws and regulations of "Company Law", “Governance
Principles of Listed Company”, "Stock Listing Rules" and the "Articles of Association", etc., the system basis of the company’s
governance has been further improved .
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
(V) Information disclosure managment
The company attached great importance to the information disclosure, strictly supervised all layers to disclose information timely and
fairly as required so as to ensure that the disclosure is true, accurate and complete, the company totally disclosed 4 regular reports
and 75 interim announcements. The company is the first train units for information disclosure of Shenzhen Stock Exchange,
continued to maintain the good information disclosure quality, and successfully completed the information disclosure of 2013
without any violation disclosure occurred.
(VI) The development of special activities for corporate governance, and establishment and implementation of registration and
management system for inside information insider
In accordance with the “Rules about establishing registration and management system for inside information insider in listed
companies” issued by the China Securities Regulatory Commission in October 2011 and the requirements of “Regulatory circulars
about further accomplishing the registration and management system for inside information insider” issued by Shandong Securities
Regulatory Bureau in November 2011, and combining with actual situation of the Company, the Company further completed the
revision and disclosed the “Management system for report of inside information insider and submission of external information”. The
board of directors of the Company fully realized the seriousness and complexity of preventing insider trading, took various measures
to implement the regulatory requirement, comprehensively strengthened the management to inside information, completed the
registration and management system for inside information, and feasibly and effectively prevented relevant personnel from insider
trading at the very beginning. At present, the Company has drafted a set of control program for inside information, which involved
information collection, delivery, verification and release and covered the management and control for all information to be disclosed.
II. Annual General Meeting (AGM) and extraordinary general meeting held in reporting
period
1. AGM
Session of Date of Index of
Date Name of meeting motion Situation
meeting disclosure disclosure
1. “Work Report of the Board for year of 2012”
2. “Debriefing Report of Independent Directors for year of
2012”
Annual 3.’”Work Report of Supervisory Committee for year of 2012”
All has been
General 2013-05-0 4. “Annual Report of 2012” and its Summary No.:
deliberated 2013-05-09
Meting for 8 5. “Financial Result for year of 2012” 2013-34
and passed
year of 2012 6.”Profit Distribution Plan for year of 2012”
7.”Daily Related Transaction for year of 2013”
8.”Aircraft Acquisition Plan for year of 2013”
9. “Re-engagement of Accounting Firm”
2. Extraordinary general meeting
Session of Date of Index of
Date Name of meeting motion Situation
meeting disclosure disclosure
First
2013-03-0 1. “Change of the Financial Auditing Institution for year of All has been No.:
Extraordinar 2013-03-06
5 2012 and Auditing Institution of Internal Control Appointment” deliberated 2013-15
y General
41
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
meeting of
2. “Modification to Article of Association of Shandong Airlines and passed
2013
Co., Ltd.”
Second
1. “Change of Members in Directors”
Extraordinar All has been
2013-10-2 2. “Change of Members Supervisors” No.:
y General deliberated 2013-10-29
8 3. “Change of the Financial Auditing Institution for year of 2013-72
meeting of and passed
2013 and Auditing Institution of Internal Control”
2013
III. Responsibility performance of independent directors in report period
1. The attendance of Board meetings and general meeting for independent directors
Attendance of Board meetings for independent directors
Times of Board
Absent the
meeting Times of Times of
Times of present Times of Meeting for the
Independent director supposed to attending by entrusted
in person Absence second time in a
attend in the communication presence
row (Y/N)
report period
Wang Kaiyuan 11 1 9 1 0N
Ping Xiaofeng 11 2 9 0 0N
Li Chun 11 1 9 1 0N
Qu Wenzhou 11 2 9 0 0N
Times presented in general meeting by
3
independent directors
2. Objection for relevant events from independent directors
Independent directors have no objection about company’s relevant matters in reporting period
3. Other explanation about responsibility performance of independent directors
During the reporting period, four independent directors of the company conscientiously fulfilled the responsibilities given by the laws
and regulations, "Articles of Association" and the " Working System of the Independent Directors", checked and guided the
company’s production and operation, attended the board meetings the general meeting of stockholders, made independent opinion on
the relevant motions such as the related transactions, changes in accounting policies, and the impairment of assets, diligently fulfilled
their duties in the daily work and important decision-making of the board of directors, dutifully and earnestly maintained the interests
of the company and all shareholders.
IV. Responsibility performance of subordinate special committee of the Board in report
period
The 5th session of the Board set up three specialized committees: the Audit Committee, the Remuneration and Appraisal Committee,
and the Strategy and Nomination Committee. In 2013, all specialized committees held nine meetings, thereinto, five meetings of the
Audit Committee, one meeting of the Remuneration and Appraisal Committee, and three meetings of the Strategy and Nomination
Committee. The specialized committees of the board of directors performed their duties by strictly following the requirements of
China Securities Regulatory Commission and Shenzhen Stock Exchange, the "Articles of Association", and the rules of procedure of
42
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
the committees, and played an important role in the scientific decision-making of the board of directors.
(I) Duty performing of the audit committee of the board
During the reporting period, the audit committee of the board paid close attention to the internal control system construction and the
related transaction; made opinion on changing and reappointing the accounting firm; regularly checked the financial report of the
company; the audit committee of the board of directors effectively performed the responsibilities, diligently did their duties in the
annual financial report audit work, gave full play to the supervisory role, and maintained the independence of audit in auditing of the
2013 annual financial report.
(II) Duty performing of the remuneration and appraisal committee of the board
During the reporting period, the remuneration and appraisal committee of the board investigated the remuneration policy and
program for the directors and senior management, did annual performance appraisal to the duty performing of directors and senior
management according to related assessment criterion; checked and approved the 2013 annual report about the remuneration
disclosure of the directors and the senior management, and thought the remuneration amount of relevant personnel disclosed in the
2013 annual report was true and accurate.
(III) Duty performing of the strategy and nomination committee of the board
During the reporting period, the strategy and nomination committee of the board made opinions on changes of the directors and
senior executive members, verified the qualification of related personnel, and did not find directors or senior management whose
qualifications don’t comply with laws, regulations or requirements of the Articles of Association.
V. Works from Supervisory Committee
Whether the Company has risks or not in reporting period that found in supervisory activity from supervisory committee
□ Yes √ No
Supervisory committee has no objections for the supervise matters in reporting period
VI. Independency of the Company relative to controlling shareholders’ in aspect of businesses,
personnel, assets, institution and finance
The company and its controlling shareholders Shandong Aviation Group has been separated totally in business, personnel, assets,
institution and finance, possessing independent complete business and independent operation ability.
(I) In business aspect: The Company’s business has difference with its controlling shareholder’s. The Company engaged in
manufacturing management independently without dependency with controlling shareholders and other related enterprise.
(II) In personnel aspect: The Company is totally independent with its controlling shareholders in labor, personnel and salary
management. Directors, supervisors and senior management in accordance with the Articles of Association and relevant laws and
regulations, and through the legal procedures of election or employment, no situation of the controlling shareholders in accordance
with legal procedures intervention Company’s personnel appointment and removing. The senior management is not in double office
performance in the listed company and the controlling shareholders and they all get salaries from the Company.
(III) In asset aspect: The property right relationship between the Company and controlling shareholders is clear and the assets of a
corporation are totally independent of the controlling shareholders. The Company has full control and domination without assets and
funds occupied by controlling shareholders and interests of the Company being damaged.
(IV) In institution aspect: The Company established an organization totally independent with the controlling shareholders, the board
of directors and the supervisory committee operated independently without superior and subordinate relationship with the
organization established in controlling shareholders and affiliate enterprises. Controlling shareholder has no intervention in operation
activities of the Company.
(V) In finance aspect: The Company has an independent financial department and independent financial accounting system. Owns
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
standard and independent accounting mechanism and financial management system as well as independent bank account,
furthermore, paying tax in accordance with the law.
VII. Horizontal competition
There is no horizontal competition between the Company and controlling shareholder
VIII. Appraisal and incentive mechanism for senior executives
In accordance with the “temporary method of performance appraisal”, the Company checks and evaluated the individual performance,
and paid merit based on appraisal results to enhance the incentive efficiency.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section IX. Internal control
I. The Construction of Internal Control (“IC”)
The Company started the IC system construction in March 2012, systemized whole business processes related to the internal control,
identified the risks, constructed the control matrix, raised specific control measures, established internal control manual by taking risk
control as guidance and responsibility process as principal line. Established an internal control system, supervised system and file
system, rectified and eliminated relevant defects via rectification notice and system meeting, comprehensively evaluated the
operation of the Company’s whole IC system, issued self-evaluation report of internal control and obtained a standard and
unqualified opinion from auditing institution outside in first IC auditing of the Company.
In 2013, the Company further improved the organization system of internal control management and the functional distribution of
internal control by taking the elaboration, perfection and effectiveness of implementation as the goal, and gradually deepened the risk
management and the elaboration of the internal control system at the headquarters level after elaborating and clarifying the
responsibilities of the board of directors, the board of supervisors and all functional departments, the rules of procedure and the
working procedures in the internal control construction.
II. Statement of the Board of Directors on Responsibility of Internal Control
In accordance with the provisions to the normative system of internal control, it is the responsibility of the Board of Directors of the
Company to establish and improve and effectively implement the internal control, and evaluate its effectiveness and truthfully
disclose the internal control evaluation report. The Board of Supervisors supervises the establishment of the board of directors and
the implementation of internal control. The managers take responsible for organizing and leading the daily operation of the internal
control. The Board of Supervisors and Directors, the directors, supervisors and senior management ensure that the contents of this
report do not contain any false records, misleading statements or material omissions, and take individual and joint legal responsibility
for the authenticity, accuracy and completeness of the contents of the report.
Target of the Company’s internal control is reasonably guarantee the validity and legality of operation, assets safety and authenticity
and completeness of financial report and the relevant information, improve the operating efficiency and effects, promote and achieve
the strategy of development.
III. Basis of establishing internal control for financial report
In accordance with “Basic Norms of Enterprise Internal Control” jointly issued by five ministries and commissions including
ministry of finance and the requirements of supporting guidelines, and in premise of carrying out “Accounting Standards for
Business Enterprises” and other rules, the Company has established a series of provisions for financial management system and has
effectively implemented them in the practical work, so that the Company has completed and strengthened the function and authority
of financial accounting and financial management. Regarding to the job setting, manning and major accounting procedures, the
Company has established independent accounting department, the personnel in accounting department faithfully implement the
national financial policies and all laws and regulations, and manage the accounting events by strictly following relevant regulations
of the “Accounting Law” and “Accounting Standards for Business Enterprises”
IV. Evaluation report of internal control
Details of major defects in evaluation report that found in reporting period
According to the identification to the significant defects about the internal control over the company's financial reporting, on the
45
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
base day of the evaluation report over internal control, there is no significant defects existed in the internal control over financial
reporting, the company has kept effective internal control over financial reporting in all the significant aspects in accordance with
the requirements of the normative system of enterprise internal control system and the relevant provisions.
According to the identification to the significant defects about the internal control over the company's non-financial reporting, on
the base day of the evaluation report over internal control, the company found no significant defects in the internal control over
non-financial reporting
Date of evaluation report of internal
2014-03-22
control (full-text) disclosed
Index of evaluation report of
Published on Juchao Website (http://www.cninfo.com.cn) dated 22 March 2014
internal control (full-text) disclosed
V. Auditing report of internal control
√ Applicable □ Not applicable
Auditing comments section in audit report of internal control
To the Shareholders of Shandong Airlines Co., Ltd.:
We have audited the effectiveness of internal control of financial report under the name of Shandong Airlines Co., Ltd. (“the
Company”) dated 31 December 2013 in accordance with relevant requirements of “Internal Control Audit Guideline for
Enterprises” and China Standards on Auditing and Quality Control,
I. Company's responsibility for internal control
The Company is responsible for the establishment & perfection and efficiency implementation of internal control as well as
evaluated its effectiveness, regulated by “Basic Standard of Internal Control for Enterprises”, “Application Guidelines of Internal
Control for Enterprises” and “Evaluation Guidelines of Internal Control for Enterprises”.
II. Auditor's responsibility
Our responsibility is to express an audit opinion on effectiveness of internal control of financial report based on our audit. And
disclosed the major defects noted in internal control of non-financial report.
III. Inherent limitations of internal control
Internal control has an inherent limitations, and there is possibility of in-prevention and false reported. Furthermore, internal control
will comes to inappropriate due to the changes of circumstances, or the controlling policy and procedure maintenance will fail in
implementation; there has a certain risk in presuming the efficiency of future internal control based on internal control’s audit
results.
IV. Audit opinions on internal control of financial report
In our opinion, Shandong Airlines Co., Ltd. maintain an efficiency of internal control of financial report, in all major aspects, as of
31 December 2013 based on relevant regulations and “Basic Standard of Internal Control for Enterprises”.
Ruihua CPAs (LLP) Chinese CPA: Yang Ganlin
BeijingChina Chinese CPA: Yang Yunhui
20 March 2014
Date of audit report of internal
2014-03-22
control (full-text) disclosed
Index of audit report of internal Published on Juchao Website (http://www.cninfo.com.cn) dated 22 March 2014
46
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
control (full-text) disclosed
Whether CPA carries out qualified opinion for audit report of internal control or not
□Yes √No
Whether the opinions are consistent in audit report of internal control carrying out by CPA and the self-evaluation report of the Board
√Yes □ No
VI. Establishment and enforcement of Accountability Mechanism for Major Errors in Annual
Report
In accordance with the laws, regulations and normative documents such as “Company Law”, “Accounting Law”, “Management
method of listed company for information disclosure”, etc., the Company has formulated “Accountability system for significant
errors in information disclosure”, defined the confirmation of responsibility and accountability of significant errors in information
disclosure for the periodical reports, and stipulated that the Company will seriously handle the person in charge in accordance with
this system once there are significant accounting errors or information disclosure omission. During the report period, there is no
correction for significant accounting errors, supplement for significant information omission or revision for earnings
preannouncement.
47
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section X. Financial Report
I. Auditor report
Type of audit opinion Standard unqualified
Date for audited report signed 2014-03-20
Name of audit institution Ruihua CPAs (LLP)
Reference number Ruihua Shen Zi [2014] No. 48390002
CPA Yang Ganlin, Yang Yunhui
Auditor’s Report
To the Shareholders of Shandong Airlines Co., Ltd.:
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereinafter as “the
Group”), including balance sheet as of 31st December 2013 and the related consolidated balance sheet, profit
statement of 2013 and related consolidated profit statement, cash flow statement and related consolidated cash
flow statement, statement on changes of owners’ equity and related consolidated statement on changes of
shareholders’ equity and other explanatory notes.
I. Management’s responsibility for the financial statements
Management of the Company is responsible for prepare and present financial statement of the Company, which
including:
(1) Prepare financial statements with fair presentation in line with Accounting Standards for Business Enterprises;
(2) Designing, executed and maintaining necessary internal control in order to prevent fundamental miscarrying
in financial statement from fraudulent or errors.
II. Auditor's responsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed
our audit in accordance with the Standards on Accounting for Certified Public Accountants. Those standards
require that we comply with ethical requirements, and to plan and perform our audit so as to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on auditor's judgment, including the assessment of the risks
of material misstatement of the financial statements, whether due to frauds or errors. In making those risk
assessments, the CPA will take relevant internal control into consideration which has concerned with the
preparation and fair presentation of financial statements, in order to design audit procedures that are appropriated
in the circumstances. An audit also includes evaluating the appropriateness of accounting policies adopted and
the reasonableness of the accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
III. Auditing opinion
In our opinion, the aforesaid financial statements, in major aspects, give a fair presentation of consolidated
financial status and consolidated operation results and consolidated cash flow of Shandong Airlines Co., Ltd.
ended as 31 December 2013
Ruihua CPAs (LLP) Chinese CPA: Yang Ganlin
BeijingChina Chinese CPA: Yang Yunhui
20 March 2014
48
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated Balance Sheet
Prepared by Shandong Airlines Co., Ltd
In RMB
Item Closing balance Opening balance
Current assets:
Monetary funds 444,522,271.21 155,417,742.97
Settlement provisions
Capital lent
Transaction finance asset
Notes receivable
Accounts receivable 250,524,757.67 186,090,177.17
Accounts paid in advance 88,182,040.98 56,927,205.61
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance
receivable
Interest receivable
Dividend receivable 14,325,586.06
Other receivables 236,105,804.44 252,147,802.11
Purchase restituted finance asset
Inventories 107,973,473.35 116,944,913.89
Non-current asset due within one
year
Other current assets 71,828,962.65
Total current assets 1,213,462,896.36 767,527,841.75
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
49
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Investment property
Fixed assets 7,564,658,140.23 8,132,786,866.22
Construction in progress 1,647,915,995.78 1,430,885,814.11
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 101,127,636.82 78,814,771.55
Expense on Research and
Development
Goodwill 10,220,816.22
Long-term expenses to be
347,945,540.61 301,867,908.75
apportioned
Deferred income tax asset 439,662,119.02 450,885,311.43
Other non-current asset
Total non-current asset 10,189,661,532.46 10,493,813,588.28
Total assets 11,403,124,428.82 11,261,341,430.03
Current liabilities:
Short-term loans 434,137,220.00 321,378,829.28
Loan from central bank
Absorbing deposit and interbank
deposit
Capital borrowed
Transaction financial liabilities 296,902.47 7,198,783.59
Notes payable 100,000.00
Accounts payable 1,132,126,690.25 950,968,778.60
Accounts received in advance 343,468,052.97 215,107,573.13
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 338,866,981.54 343,703,794.71
Taxes payable 110,064,437.61 229,684,478.03
Interest payable 16,064,294.43 16,466,095.25
Dividend payable 11,940.00 11,940.00
Other accounts payable 193,868,858.34 210,075,013.94
Reinsurance payables
Insurance contract reserve
50
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Security trading of agency
Security sales of agency
Non-current liabilities due within 1
533,150,658.42 392,573,521.87
year
Other current liabilities
Total current liabilities 3,102,056,036.03 2,687,268,808.40
Non-current liabilities:
Long-term loans 3,525,047,206.06 3,854,676,638.03
Bonds payable 500,000,000.00 500,000,000.00
Long-term account payable 1,542,515,998.39 1,554,204,331.04
Special accounts payable
Projected liabilities
Deferred income tax liabilities
Other non-current liabilities 25,367,524.34 186,135,800.28
Total non-current liabilities 5,592,930,728.79 6,095,016,769.35
Total liabilities 8,694,986,764.82 8,782,285,577.75
Owner’s equity (or shareholders’
equity):
Paid-in capital (or share capital) 400,000,000.00 400,000,000.00
Capital public reserve 75,410,363.70 75,410,363.70
Less: Inventory shares
Reasonable reserve
Surplus public reserve 297,349,585.70 257,642,799.31
Provision of general risk
Retained profit 1,935,377,714.60 1,746,002,689.27
Balance difference of foreign currency
translation
Total owner’s equity attributable to
2,708,137,664.00 2,479,055,852.28
parent company
Minority interests
Total owner’s equity ( or shareholders’
2,708,137,664.00 2,479,055,852.28
equity)
Total liabilities and owner’s equity( or
11,403,124,428.82 11,261,341,430.03
shareholders’ equity)
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
51
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
2. Balance Sheet of Parent Company
Prepared by Shandong Airlines Co., Ltd
In RMB
Item Closing balance Opening balance
Current assets:
Monetary funds 421,826,370.62 143,242,750.59
Transaction finance asset
Notes receivable
Accounts receivable 243,767,591.18 178,623,467.86
Accounts paid in advance 87,961,234.82 56,697,404.55
Interest receivable
Dividend receivable 14,325,586.06
Other receivables 278,365,290.97 287,010,996.18
Inventories 107,972,423.35 116,944,913.89
Non-current asset due within one
year
Other current assets 71,828,962.65
Total current assets 1,226,047,459.65 782,519,533.07
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 7,454,288,584.97 8,016,147,993.09
Construction in progress 1,647,839,995.78 1,430,885,814.11
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 86,384,749.30 64,037,228.25
Expense on Research and
Development
Goodwill
Long-term expenses to be
347,945,540.61 301,798,566.81
apportioned
52
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Deferred income tax asset 439,209,204.04 450,970,591.69
Other non-current asset
Total non-current asset 10,170,020,860.13 10,458,192,979.38
Total assets 11,396,068,319.78 11,240,712,512.45
Current liabilities:
Short-term loans 434,137,220.00 321,378,829.28
Transaction financial liabilities 296,902.47 7,198,783.59
Notes payable 100,000.00
Accounts payable 1,130,120,671.84 947,683,544.83
Accounts received in advance 338,572,262.93 211,382,526.62
Wage payable 338,104,603.04 343,449,526.33
Taxes payable 109,369,269.33 229,290,824.09
Interest payable 16,064,294.43 16,466,095.25
Dividend payable 11,940.00 11,940.00
Other accounts payable 195,015,301.41 204,933,548.07
Non-current liabilities due within 1
533,150,658.42 392,573,521.87
year
Other current liabilities
Total current liabilities 3,094,843,123.87 2,674,469,139.93
Non-current liabilities:
Long-term loans 3,525,047,206.06 3,854,676,638.03
Bonds payable 500,000,000.00 500,000,000.00
Long-term account payable 1,542,515,998.39 1,554,204,331.04
Special accounts payable
Projected liabilities
Deferred income tax liabilities
Other non-current liabilities 25,367,524.34 186,135,800.28
Total non-current liabilities 5,592,930,728.79 6,095,016,769.35
Total liabilities 8,687,773,852.66 8,769,485,909.28
Owner’s equity (or shareholders’
equity):
Paid-in capital (or share capital) 400,000,000.00 400,000,000.00
Capital public reserve 86,911,168.71 86,911,168.71
Less: Inventory shares
Reasonable reserve
Surplus public reserve 296,688,881.17 256,982,094.78
53
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Provision of general risk
Retained profit 1,924,694,417.24 1,727,333,339.68
Balance difference of foreign
currency translation
Total owner’s equity ( or shareholders’
2,708,294,467.12 2,471,226,603.17
equity)
Total liabilities and owner’s equity( or
11,396,068,319.78 11,240,712,512.45
shareholders’ equity)
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
3. Consolidated Profit Statement
Prepared by Shandong Airlines Co., Ltd
In RMB
Item This Period Last Period
I. Total operating income 11,427,157,933.15 10,993,024,914.41
Including: Operating income 11,427,157,933.15 10,993,024,914.41
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 11,174,234,367.33 10,361,111,969.46
Including: Operating cost 9,709,865,647.38 8,576,272,368.85
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 238,665,537.66 363,292,935.61
Sales expenses 775,204,419.75 745,690,102.02
54
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Administration expenses 225,319,947.49 238,415,387.65
Financial expenses 142,819,611.58 243,510,475.66
Losses of devaluation of asset 82,359,203.47 193,930,699.67
Add: Changing income of fair
6,901,881.12 -5,053,262.49
value(Loss is listed with “-”)
Investment income (Loss is listed
14,163,176.50 14,394,514.79
with “-”)
Including: Investment income on
affiliated company and joint venture
Exchange income (Loss is listed
with “-”)
III. Operating profit (Loss is listed
273,988,623.44 641,254,197.25
with “-”)
Add: Non-operating income 270,407,969.61 147,187,472.57
Less: Non-operating expense 13,449,762.40 7,392,852.70
Including: Disposal loss of
9,856,591.93 6,908,093.55
non-current asset
IV. Total Profit (Loss is listed with
530,946,830.65 781,048,817.12
“-”)
Less: Income tax expense 141,865,018.93 191,237,884.65
V. Net profit (Net loss is listed with “-”) 389,081,811.72 589,810,932.47
Including: Net profit of combined
party realized before combination
Net profit attributable to owner’s of
389,081,811.72 589,810,932.47
parent company
Minority shareholders’ gains and
losses
VI. Earnings per share -- --
i. Basic earnings per share 0.97 1.47
ii. Diluted earnings per share 0.97 1.47
VII. Other consolidated income
VIII. Total consolidated income 389,081,811.72 589,810,932.47
Total consolidated income
attributable to owners of parent 389,081,811.72 589,810,932.47
company
Total consolidated income
attributable to minority shareholders
55
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
4. Profit Statement of Parent Company
Prepared by Shandong Airlines Co., Ltd
In RMB
Item This Period Last Period
I. Operating income 11,411,894,387.57 10,975,580,616.97
Less: Operating cost 9,701,412,394.23 8,570,545,554.82
Operating tax and extras 238,106,240.18 362,295,788.73
Sales expenses 780,085,329.96 748,222,436.40
Administration expenses 218,483,884.21 233,679,178.89
Financial expenses 142,873,515.27 243,533,200.81
Losses of devaluation of asset 70,348,934.03 194,946,539.59
Add: Changing income of fair
6,901,881.12 -5,053,262.49
value(Loss is listed with “-”)
Investment income (Loss is
14,163,176.50 14,394,514.79
listed with “-”)
Including: Investment income
on affiliated company and joint venture
II. Operating profit (Loss is listed
281,649,147.31 631,699,170.03
with “-”)
Add: Non-operating income 270,405,947.11 147,181,559.72
Less: Non-operating expense 13,435,099.03 7,382,942.99
Including: Disposal loss of
9,841,928.56 6,905,518.55
non-current asset
III. Total Profit (Loss is listed with
538,619,995.39 771,497,786.76
“-”)
Less: Income tax expense 141,552,131.44 189,210,011.19
IV. Net profit (Net loss is listed with
397,067,863.95 582,287,775.57
“-”)
V. Earnings per share -- --
i. Basic earnings per share
ii. Diluted earnings per share
VI. Other consolidated income
VII. Total consolidated income 397,067,863.95 582,287,775.57
56
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
5. Consolidated Cash Flow Statement
Prepared by Shandong Airlines Co., Ltd
In RMB
Item This Period Last Period
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 11,821,940,861.03 10,958,543,064.30
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 concerning
298,723,497.82 138,366,954.40
operating activities
Subtotal of cash inflow arising from
12,120,664,358.85 11,096,910,018.70
operating activities
Cash paid for purchasing
8,296,965,395.58 7,134,742,062.38
commodities and receiving labor
57
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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 workers 1,491,076,519.28 1,280,713,318.55
Taxes paid 687,341,028.75 706,663,961.17
Other cash paid concerning
234,094,893.09 248,473,175.85
operating activities
Subtotal of cash outflow arising from
10,709,477,836.70 9,370,592,517.95
operating activities
Net cash flows arising from operating
1,411,186,522.15 1,726,317,500.75
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
2,447,115.15 16,247,366.84
income
Net cash received from disposal of
fixed, intangible and other long-term 174,681,542.77 82,725.86
assets
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning
investing activities
Subtotal of cash inflow from investing
177,128,657.92 16,330,092.70
activities
Cash paid for purchasing fixed,
1,723,086,948.06 2,233,827,146.00
intangible and other long-term assets
Cash paid for investment
Net increase of mortgaged loans
58
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Net cash received from
subsidiaries and other units
Other cash paid concerning
2,609,524.71 1,852,852.05
investing activities
Subtotal of cash outflow from investing
1,725,696,472.77 2,235,679,998.05
activities
Net cash flows arising from investing
-1,548,567,814.85 -2,219,349,905.35
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 1,707,943,187.26 1,677,158,004.62
Cash received from issuing bonds 500,000,000.00
Other cash received concerning
903,064,822.94 7,470,000.00
financing activities
Subtotal of cash inflow from financing
2,611,008,010.20 2,184,628,004.62
activities
Cash paid for settling debts 1,664,222,540.40 1,243,570,158.09
Cash paid for dividend and profit
343,574,678.36 326,407,154.44
distributing or interest paying
Including: Dividend and profit of
minority shareholder paid by
subsidiaries
Other cash paid concerning
175,939,104.72 207,713,467.59
financing activities
Subtotal of cash outflow from financing
2,183,736,323.48 1,777,690,780.12
activities
Net cash flows arising from financing
427,271,686.72 406,937,224.50
activities
IV. Influence on cash and cash
equivalents due to fluctuation in -755,865.78 1,297,175.59
exchange rate
V. Net increase of cash and cash
289,134,528.24 -84,798,004.51
equivalents
59
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Add: Balance of cash and cash
155,387,742.97 240,185,747.48
equivalents at the period -begin
VI. Balance of cash and cash
444,522,271.21 155,387,742.97
equivalents at the period -end
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
6. Cash Flow Statement of Parent Company
Prepared by Shandong Airlines Co., Ltd
In RMB
Item This Period Last Period
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 11,804,162,169.30 10,940,139,794.93
services
Write-back of tax received
Other cash received concerning
284,668,066.98 142,167,899.49
operating activities
Subtotal of cash inflow arising from
12,088,830,236.28 11,082,307,694.42
operating activities
Cash paid for purchasing
commodities and receiving labor 8,294,746,672.13 7,140,620,035.20
service
Cash paid to/for staff and workers 1,486,359,737.00 1,276,278,315.90
Taxes paid 685,735,029.36 702,281,591.79
Other cash paid concerning
237,896,956.32 269,198,909.75
operating activities
Subtotal of cash outflow arising from
10,704,738,394.81 9,388,378,852.64
operating activities
Net cash flows arising from operating
1,384,091,841.47 1,693,928,841.78
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment 2,447,115.15 16,247,366.84
60
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
income
Net cash received from disposal of
fixed, intangible and other long-term 174,669,237.27 64,695.86
assets
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning
investing activities
Subtotal of cash inflow from investing
177,116,352.42 16,312,062.70
activities
Cash paid for purchasing fixed,
1,706,500,870.09 2,209,331,003.27
intangible and other long-term assets
Cash paid for investment
Net cash received from
subsidiaries and other units
Other cash paid concerning
2,609,524.71 1,852,852.05
investing activities
Subtotal of cash outflow from investing
1,709,110,394.80 2,211,183,855.32
activities
Net cash flows arising from investing
-1,531,994,042.38 -2,194,871,792.62
activities
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Cash received from loans 1,707,943,187.26 1,677,158,004.62
Cash received from issuing bonds 500,000,000.00
Other cash received concerning
903,064,822.94 7,470,000.00
financing activities
Subtotal of cash inflow from financing
2,611,008,010.20 2,184,628,004.62
activities
Cash paid for settling debts 1,664,222,540.40 1,243,570,158.09
Cash paid for dividend and profit
343,574,678.36 326,407,154.44
distributing or interest paying
Other cash paid concerning
175,939,104.72 207,713,467.59
financing activities
Subtotal of cash outflow from financing
2,183,736,323.48 1,777,690,780.12
activities
61
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Net cash flows arising from financing
427,271,686.72 406,937,224.50
activities
IV. Influence on cash and cash
equivalents due to fluctuation in -755,865.78 1,297,175.59
exchange rate
V. Net increase of cash and cash
278,613,620.03 -92,708,550.75
equivalents
Add: Balance of cash and cash
143,212,750.59 235,921,301.34
equivalents at the period -begin
VI. Balance of cash and cash
421,826,370.62 143,212,750.59
equivalents at the period -end
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
7. Statement of Changes in Owners’ Equity (Consolidated)
Prepared by Shandong Airlines Co., Ltd
This Period
In RMB
This Period
Owners’ equity attributable to parent company
Paid-up Provisio Minor Total
Item Less: Reasona
capital( Capital Surplus n of Retaine sharehold owners’
inventor ble Other
or share reserves reserves general d profit ers’ equity equity
y shares reserve
capital) risk
I. Balance at the end of last 400,000 75,410,3 257,642 1,746,00 2,479,055,
year ,000.00 63.70 ,799.31 2,689.27 852.28
Add: Change of
accounting policy
Correcting of
previous errors
Other
II. Balance at the beginning of 400,000 75,410,3 257,642 1,746,00 2,479,055,
current year ,000.00 63.70 ,799.31 2,689.27 852.28
III. Changed in current 39,706, 189,375, 229,081,81
term(Loss is listed with “-”) 786.39 025.33 1.72
389,081, 389,081,81
(I) Net profit
811.72 1.72
(II) Other consolidated income
62
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
389,081, 389,081,81
Subtotal of (I) and (II)
811.72 1.72
(III) Owners’ input and
withdraw of share capital
1. Capital input by owners
2. Share payment accounted
into owners’ equity
3. Others
39,706, -199,70 -160,000,0
(IV) Profit distribution
786.39 6,786.39 00.00
1. Providing of surplus 39,706, -39,706,
reserves 786.39 786.39
2. Common risk provision
3. Dividend to owners’(or -160,00 -160,000,0
shareholders) 0,000.00 00.00
4. Others
(V) Internal settlement of
owners’ equity
1. Capital reserves transferred
to share capital
2. Surplus reserves transferred
to share capital
3. Making up losses by
surplus reserves
4. Others
(VI) Reasonable reserve
1. Withdrawal in the report
period
2. Usage in the report period
(VII) Other
IV. Balance at the end of this 400,000 75,410,3 297,349 1,935,37 2,708,137,
term ,000.00 63.70 ,585.70 7,714.60 664.00
Last year
In RMB
Last year
Owners’ equity attributable to parent company
Paid-up Provisio Minor Total
Item Less: Reasona
capital( Capital Surplus n of Retaine sharehold owners’
inventor ble Other
or share reserves reserves general d profit ers’ equity equity
y shares reserve
capital) risk
I. Balance at the end of last 400,000 75,410,3 199,414 1,374,42 2,049,244,
year ,000.00 63.70 ,021.75 0,534.36 919.81
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Add: retroactive adjustment
arising from enterprise
combination under same
control
Add: Change of accounting
policy
Correcting of previous errors
Other
II. Balance at the beginning of 400,000 75,410,3 199,414 1,374,42 2,049,244,
current year ,000.00 63.70 ,021.75 0,534.36 919.81
III. Changed in current 58,228, 371,582, 429,810,93
term(Loss is listed with “-”) 777.56 154.91 2.47
589,810, 589,810,93
(I) Net profit
932.47 2.47
(II) Other consolidated income
589,810, 589,810,93
Subtotal of (I) and (II)
932.47 2.47
(III) Owners’ input and
withdraw of share capital
1. Capital input by owners
2. Share payment accounted
into owners’ equity
3. Others
58,228, -218,22 -160,000,0
(IV) Profit distribution
777.56 8,777.56 00.00
58,228, -58,228,
1. Providing of surplus reserves
777.56 777.56
2. Common risk provision
3. Dividend to owners’(or -160,00 -160,000,0
shareholders) 0,000.00 00.00
4. Others
(V) Internal settlement of
owners’ equity
1. Capital reserves transferred
to share capital
2. Surplus reserves transferred
to share capital
3. Making up losses by surplus
reserves
4. Others
(VI) Reasonable reserve
1. Withdrawal in the report
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
period
2. Usage in the report period
(VII) Other
IV. Balance at the end of this 400,000 75,410,3 257,642 1,746,00 2,479,055,
term ,000.00 63.70 ,799.31 2,689.27 852.28
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
8. Statement of Changes in Owners’ Equity (Parent Company)
Prepared by Shandong Airlines Co., Ltd
This Period
In RMB
This Period
Paid-up
Less: Provision Total
Item capital(or Capital Reasonable Surplus Retained
inventory of general owners’
share reserves reserve reserves profit
shares risk equity
capital)
400,000,00 86,911,168 256,982,09 1,727,333, 2,471,226,
I. Balance at the end of last year
0.00 .71 4.78 339.68 603.17
Plus: Change of accounting
policy
Correcting of previous
errors
Other
II. Balance at the beginning of 400,000,00 86,911,168 256,982,09 1,727,333, 2,471,226,
current year 0.00 .71 4.78 339.68 603.17
III. Changed in current 39,706,786 197,361,07 237,067,86
term(Loss is listed with “-”) .39 7.56 3.95
397,067,86 397,067,86
(I) Net profit
3.95 3.95
(II) Other consolidated income
397,067,86 397,067,86
Subtotal of (I) and (II)
3.95 3.95
(III) Owners’ input and withdraw
of share capital
1. Capital input by owners
2. Share payment accounted
into owners’ equity
3. Others
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
39,706,786 -199,706,7 -160,000,0
(IV) Profit distribution
.39 86.39 00.00
1. Providing of surplus 39,706,786 -39,706,78
reserves .39 6.39
2. Common risk provision
3. Dividend to owners’(or -160,000,0 -160,000,0
shareholders) 00.00 00.00
4. Others
(V) Internal settlement of
owners’ equity
1. Capital reserves transferred
to share capital
2. Surplus reserves transferred
to share capital
3. Making up losses by surplus
reserves
4. Others
(VI) Reasonable reserve
1. Withdrawal in the report
period
2. Usage in the report period
(VII) Other
IV. Balance at the end of this 400,000,00 86,911,168 296,688,88 1,924,694, 2,708,294,
term 0.00 .71 1.17 417.24 467.12
Last year
In RMB
Last year
Paid-up
Less: Provision Total
Item capital(or Capital Reasonabl Surplus Retained
inventory of general owners’
share reserves e reserve reserves profit
shares risk equity
capital)
400,000,00 86,911,168 198,753,31 1,363,274, 2,048,938,
I. Balance at the end of last year
0.00 .71 7.22 341.67 827.60
Add: Change of accounting
policy
Correcting of previous
errors
Other
II. Balance at the beginning of 400,000,00 86,911,168 198,753,31 1,363,274, 2,048,938,
current year 0.00 .71 7.22 341.67 827.60
III. Changed in current term(Loss 58,228,777 364,058,99 422,287,77
is listed with “-”) .56 8.01 5.57
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
582,287,77 582,287,77
(I) Net profit
5.57 5.57
(II) Other consolidated income
582,287,77 582,287,77
Subtotal of (I) and (II)
5.57 5.57
(III) Owners’ input and withdraw
of share capital
1. Capital input by owners
2. Share payment accounted
into owners’ equity
3. Others
58,228,777 -218,228,7 -160,000,0
(IV) Profit distribution
.56 77.56 00.00
1. Providing of surplus 58,228,777 -58,228,77
reserves .56 7.56
2. Common risk provision
3. Dividend to owners’(or -160,000,0 -160,000,0
shareholders) 00.00 00.00
4. Others
(V) Internal settlement of
owners’ equity
1. Capital reserves transferred to
share capital
2. Surplus reserves transferred
to share capital
3. Making up losses by surplus
reserves
4. Others
(VI) Reasonable reserve
1. Withdrawal in the report
period
2. Usage in the report period
(VII) Other
IV. Balance at the end of this 400,000,00 86,911,168 256,982,09 1,727,333, 2,471,226,
term 0.00 .71 4.78 339.68 603.17
Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
for the Year Ended 31 December 2013
(All amounts are expressed in CNY unless otherwise stated)
Note 1 Corporation profile
1.1 Company’s history
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign-invested limited liability company
incorporated in the People’s Republic of China. The Company was incorporated through the restructuring
project jointly initiated by Shandong Airlines Group Co., Ltd. (hereafter, SDA Group), Inspur Co., Ltd.
(previously known as Inspur Electronic Information Industry Group Company (浪潮电子信息产业集团公
司), Shandong Hualu Group Co., Ltd, Shandong Group Corp. of Fisheries Enterprises and Luyin Investment
Group (鲁银投资集团股份有限公司) following the approval (LuTiGaiQiZi(1999)No.88 (鲁体改企字
(1999)第 88 号)) granted by the Economic Reform Commission of Shandong Province (山东省经济体制改
革委员会) on July 29th, 1999.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares (国有法人股), with
CNY 1.00 at par, of the Company by transferring its air transportation operation and the related assets and
liabilities to the Company on November 25th, 1999. Inspur Co., Ltd., Shandong Hualu Group Co., Ltd. and
Shandong Group Corp. of Fisheries Enterprises each acquired 199,000 state-owned corporate shares, with
CNY 1.00 at par, by cash investment of CNY 200,000.00 each on November 26th, 1999. Luyin Investment
Group acquired 199,000 domestic corporate shares (国内法人股), with CNY 1.00 at par, by cash investment
of CNY 200,000.00 on November 26th, 1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign currency (境内上市外
资股) (hereafter, B share(s)), with par value at CNY 1.00 each and issue price at HKD 1.58 each, on August
28th, 2000 upon the approval (ZhengJianFaXingZi[2000]No.116 (证监发行字[2000]116 号)) granted by the
China Securities Regulatory Commission on August 22nd, 2000; and, the Company was listed on the
Shenzhen Stock Exchange on September 12th, 2000. Immediately after the issuance of the B shares, the
capital of the Company increased to CNY 400,000,000.00.
The Agreement of Share Transfer (《股份转让协议》) signed by SDA Group and China National Aviation
Holding Company (hereafter, China Aviation Group) on February 28th, 2004 authorised the transfer of
91,200,000 shares of the Company, equal to 22.8% shareholding, from SDA Group to China Aviation Group.
Immediately after the share transfer, SDA Group’s shareholding in the Company was 42.00%. In November
2004, the Board of Directors of the Company, in accordance with the approval (GuoZiChanQuan[2004]No.956
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
(国资产权[2004]956 号：《关于中国航空集团公司将受让山东航空股份有限公司国有股的合同
实 施 转 让 有 关 问 题 的 批 复 》 )) issued by the State-owned Assets Supervision and Administration
Commission of the State Council, authorised China Aviation Group to transfer the state-owned corporate
shares received from SDA Group to Air China Co., Ltd. (hereafter, Air China). As so provided in
GuoZiChanQuan[2004]No.956, the rights and obligation attributable to China Aviation Group as specified in
the Agreement of Share Transfer shall be afforded by Air China. The change of share ownership was
registered at the China Securities Depository and Clearing Corporation Limited Shenzhen Office by SDA
Group and Air China on December 3rd, 2004; And, 91,200,000 shares of the Company then became held by
Air China.
Legal representative of the Company: ZHANG, Xingfu
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746 – East 2nd Ring Road, Jinan, Shandong
1.2 Industry of operation
The Company operates in the industry of transportation.
1.3 Operating capacity
The Company is permitted to undertake international and domestic passenger and cargo transportation, hotel
and beverage related operation (limited to operation through branch); provision of aircraft maintenance,
training of civil aviation pilots and air crew, insurance brokerage (limited to air accident insurance, with period
of operation valid until September 3rd, 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 services
The principal service supplied by the Company is domestic air transportation.
1.5 The financial statements of the Company has been approved by the board of directors on 20 Mar
2014
Note 2 Basis of Preparation
The financial statements of the Company have been prepared on the basis of going concern in conformity with
Enterprise Accounting Standard - General Standard and 38 specific standards issued by the Ministry of
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Finance of People’s Republic of China on 15 February 2006, and the application guidance, explanation and
relevant regulations subsequently issued (hereafter, collectively as Enterprise Accounting Standards or CASs);
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 impairment are made in accordance with
relevant requirements.
Note 3 Statement of Compliance with Enterprise Accounting Standards
The financial statements of the Company are prepared in accordance with the requirements of the Enterprise
Accounting Standards and give a true and complete view of the consolidated and separate financial position of
the Company as at 31 December 2013, and the consolidated and separate business result and cash flows for
the year then ended. In addition, the consolidated and separate 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. A complete 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 as the functional currency to prepare its financial 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
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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 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.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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 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.
For business combination involving entities not under common control achieved through multiple
transactions (acquistion in stages), the multiple agreements are assessed to determine whether they should
be viewed as a whole with reference the conditions stipulated by the Notice of the Ministry of Finance on the
No. 5 Explanation of Enterprise Accounting Standards (Cai Kuai [2012] No. 19) (see Note 4.4.2 for details).
Where multiple agreements of an acquisition in stages are viewed as a whole, the accounting treatment for the
multiple agreements shall be performed in accordance with the previous paragraphs and Note 4.10; and,
where multiple agreements of an acquistion in stages fail the conditions of CaiKuai[2012]19Hao, the
accounting treatments shall be perfomed as follow.
For the purpose of the separate financial statements, the cost of acquistion is measured as the sum of the
carrying amount of investment in the investee immediately prior to the acquistion and the consideration for the
addition investment. Cumulative other comprehensive income relevant to the investment recognised prior to
the acquistion is reclassfied to profit or loss as investment income at the time of acquistion.
For the purpose of the consolidated financial statements, the investment in the investee prior to the acquistion
is remeasured by fair value, difference between the acquistion date fair value of the investment in the investee
prior to the acquisition and its carrying amount is recognised in profit or loss as investment income at the time
of acquistion. Cumulative other comprehensive income relevant to the investment recognised prior to the
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
acquistion is reclassfied to profit or loss as investment income at the time of acquistion.
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.
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
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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.
Where loss of control over a subsidiary results from multiple transactions (agreements), asssessment shall be
made as to whether the multiple agreements shall be viewed as a whole as a single transaction. Multiple
agreements giving rise to loss of control over a subsidiary is generally viewed as a whole as a single
transaction if the terms, conditions and economic implications of the multiple agreements satisfy one or more
of the following conditions: 1) the agreements are entered into simultaneously or taking into account the
implication of each other; 2) the business objective cannot be achieved without successful completion of all the
agreements; the occurrance of one agreement is dependent on the result of at least another one agreement;
and/or 4) any one single agreement is not recognised as economic and the agreements as a whole is
economic. Where multiple agreements do not satisfy the conditions of being viewed as a single transaction,
each agreement shall be treated and accounted for in accordance with the provisions of disposal of long-term
equity investments not resulting loss of control (see Note 4.10.2.2)) or loss of control due to disposal of shares
or other events (see the previous paragraph). Where nultiple agreements satisfy the conditions of being
viewed as a single transaction, each agreement shall be treated and accounted for as a transaction which
results in loss of control; differences between the consideration for disposals prior to loss of control and the net
assets proportionate to the shares disposed prior to loss of control are recognised as other comprehensive
income in the consolidated financial statements and transfered to profit or loss at the time of loss of control.
4.5 Cash equivalent
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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
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
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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
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.
(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-sale 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.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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:
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
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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-sale
Financial assets available-for-sale 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.
The cost of an available-for-sale debt instrument at each balance sheet date is determined by the amortised
cost, ie. the residual amount after adjustment on the cost upon initial recognition for the following items:
a. repaid principal (negative adjustment);
b. cumulative amortisation of the difference between the amount upon expiry and the amount upon initial
recognition using teh effective interest rate method (positive adjustment if expiry amount higher than amount
upon initial recognition and vice versa);
c. cumulative impairment.
The cost of an available-for-sale instrument at each balance sheet date is its cost upon initial recognition.
Financial assets available-for-sale 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 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-sale are held, are recognized in investment gains.
(3) Impairment of financial assets
The Company 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.
An impairment test shall be made on the financial assets with significant single amounts. The financial assets
which single amount is not significant shall be tested for asset impairment or be included in any combination of
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financial assets with similar risk features for any impairment test. Where,upon independent test, the financial
assets (including those financial assets with significant single amounts and those with insignificant amounts)
has not been impaired, it shall be included in a combination of financial assets with similar risk features so as
to conduct another impairment test. The financial assets which have suffered from an impairment loss in any
single amount shall not be included in any combination of financial assets with similar risk features for any
impairment test.
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-sale 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 Company 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
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“pass-through” arrangement; or
3) the enterprise has transferred its rights to receive cash flows from the asset and either (a) has 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.
For financial assets transferred in which the Company has continued involvement, the financial assets are
accounted for in accordance with the following criteria:
a. if the risks and rewards associated with the ownership of the financial assets are transferred to the
transferee, the Company de-recognises the financial assets;
b. if the risks and rewards associated with the ownership of the financial assets are retained by the Company,
the Company continue to recognise the financial assets;
c. if the Company neither retain nor transfer the risks and rewards associated with the ownership of the
financial assets, the Company accounts for the financial assets in accordance with the provisions present in
previous paragraph with reference to whether the Company retains control of the financial assets.
(5) Classification and measurement of financial liabilities
The Company’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
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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, 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 Company 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
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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 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
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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 receivables is recognised at
Categorisation by nature of receivables
the actual rate of loss for the previous year of the same or similar category bearing
similar credit risk characteristics after adjustment for the current year circumstances.
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.
Provisions for difference portfolios:
Item Provision
Categorisation by nature of receivables Percentage of carrying amount
a. Portfolio 1 by Aging analysis
Percentage of carrying amount for recognition of
Percentage of carrying amount for recognition of
Category allowance for bad debt applicable to accounts
allowance for bad debt applicable to other receivables
receivable
Categorisation by nature of
5% 5%
receivables
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
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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 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
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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.
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
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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.
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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.
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(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
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 furniture 4-10 0-5.00 9.5-23.75
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.
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(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.
(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.
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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 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
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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.
(2) the expenditure of research and development
The expenditures for its internal research and development projects of the Company shall be classified
into research expenditures and developmentexpenditures.
The research expenditures shall be recorded into the profits and losses of the current period when they are
incurred.
Development expenditures in internal research and development projects shall be recognized as intangible
assets where they satisfy all of the following conditions:
①Technical feasibility of completing the intangible asset so that it will be available for use or sale;
②Intention to complete the intangible asset and use or sell it;
③How the intangible asset will generate economic benefits, including the ability to demonstrate the existence
of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset;
④Availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset;
⑤Ability to measure reliably the expenditure that is attributable to the intangible asset during its development.
The expenses which can not be distinguished between research and development stage,
shall be recorded into the profit or loss for the current period.
(3) Impairment testing methods and recognition of impairment provision of intangible assets
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.
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
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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 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
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when the service is rendered
③ 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. Government grants
obtained by the Company which are relevant to construction or acquisition of long-term assets are classified
as asset-related government grants; all other government grants are classified as revenue-related government
grants. For government grants without speficied beneficiary, the Company performs classification in
accordance with the following criteria.
(1) Where a grant is obtained for a specified project, the grant is spitted into asset-related and revenue related
portions proportionate to the project's investment to expense ratio; the classification is reviewed on each
balance sheet date and revised if necessary.
(2) Where a grant is obtained for general purpose, the grant as a whole is classified as a revenue-related
government grant.
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
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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 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
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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 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
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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 Leasor under operating Lease
Lease income from operating leases shall be recognized by the leasor 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 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 leasor 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
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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 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.
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4.24 Changes in major accounting policies and accounting estimates
(1) Change of accounting policies
Monetary unit: CNY
The contents and reasons for the changes of approval procedure The names of the The
accounting policies affected items affected
amounts
Before July 1, 2013, the inventories are valued Decisions shall take Due to variety within the N/A
using the First-In-First-Out method when sending effect upon approval by inventory, and frequent
out. the fourth interim board sending and receiving
The SAP software was used on July 1, 2013 for the meeting of the fifth factors, it is not feasible to
purpose of establishment of engineering and session of the Board of determine the cumulative
financial integrated management, and Directors, which was held effects resulting from
enhancement of the corporation’s on 10th July, 2013. changes in accounting
core competence . principles. According to
The company believes that, with the adopting of the 《Accounting Standards
moving weighted average method instead of the for Enterprises- Changes
First-In-First-Out method, the inventory value can of Accounting Policies
be adjusted timely, the inventory unit price and the and Accounting Estimates
total inventory amount can be promptly reflected. and Error Correction》the
prospective approach will
Under the moving weighted average method, the
be implemented
inventory cost sending out comes close to the true
beginning on July 1,
cost and the ending inventory cost is close to the
2013.
current market price, and the inventory price risk
can be reduced.
The moving weighted average method is employed
by the SAP software. The
changes in accounting policies to comply with the
SAP software can ensure the proper functioning of
the software and improve the management level.
With the purpose of ensuring timeliness and
accuracy of accounting records, the moving
weighted average method shall
come into force as of July, 2013.
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(2) Change of accounting estimates
There is no significant change of accounting estimates for the Company during the reporting period.
4.25 Correction of prior period errors
There is no significant change of previous accounting errors for the Company during the reporting period.
4.26 Significant accounting judgments 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 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
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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 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.
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(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 Company 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) 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.
(9) Aircraft operating lease and engine overhaul expenses
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.
Note 5 Taxation
5.1 Major taxes and tax rate
Tax Tax rate (%)
The Company pays the value-added tax based on value-added amount from sale of
Value Added Tax goods or rendering of services, which will be subject to deduction of the input tax credit,
and the rate of value-added tax of the main goods is 11%.
Business Tax Business tax rate is the 3%-5% of taxable income
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Tax Tax rate (%)
Enterprise income tax Income tax is calculated with the ratio of 25%.
Civil aviation development fund shall be calculated using the rates set out within
Civil Aviation Development Fund applicable to the relevant category of flight routes, maximum departure weight and flight
distance adopted by the civil aviation industry.
Prior to 1 August 2013, revenue arising from air transportation was taxable for business tax at the rate of 3%. As from
1 August 2013, value added tax, instead of business tax, became chargeable on such revenue at the rate of 11% in
accordance with the Tax Policy Concerning Nationwide Implementation of VAT Pilot Program for Transport and
Modern Services Sectors (Cai Shui [2013] No. 37).
5.2 Tax incentives
5.2.1. Revenue earned by domestic individuals and incorporation domiciled in the PRC for the provision
of international transportation services is exempted for operating tax purposes as from January 1st, 2010 as
provided by Caishui[2010]No.8 (财政部国家税务总局关于国际运输劳务免征营业税的通知)
5.2.2. According to CAI SHUI [2013] No. 37 (Circular 37) Notice on Tax Policy Concerning Nationwide
Implementation of VAT Pilot Program for Transport and Modern Services Sectors, as from 1 August 2013,
the zero VAT rate applies to international transport services provided by any entity or individual
within the territory of the people's republic of china (hereinafter referred to as within chinese territory), foreign
research and develop services, roundtrip transportation services between Hongkong, Marcau,and Taiwan, as
well as transport services provided in Hongkong, Marcau, and Taiwan.
5.2.3. 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 30, 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 31, 2008 continues to apply from January 1, 2010
to the expiry date of the relevant contract.
5.2.4. 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. As provided by CaiShui[2013]No.53, the tax rate of
imported planes, which were obligated to be levied at a reduced tax rate of 4%, shall be adjusted to 5%.
Note 6 Business combination and consolidated financial statements
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
6.1 Subsidiaries
6.1.1 Subsidiaries acquired through establishment or investment
Unit: CNY ten thousand yuan
Registered Scope of
Subsidiary Type of subsidiary Place of registration Nature of operation
capital operation
Qingdao International Strorage and
Air Logistics Centre ground logistics
Wholly-owned
Co., Ltd Qingdao, Shandong Logistics and storage 3,000.00 for aero cargo,
Subsidiary
(hereafter, Qingdao electionic
Logistics) commerce, etc.
(Continued)
Balance of
Type of Acutal investment as other de facto
Subsidiary Legal representative Institution code
incorporation at the reporting date investment in
subsidiary
Qingdao International
Air Logistics Centre
Limited liability
Co., Ltd SU, Zhongmin 73349654-1 4,832.32 0.00
company
(hereafter, Qingdao
Logistics)
(Continued)
Equity attributable to minority interst for
Shareholding Voting right Minority
Subsidiary Consolidation set-off of profit or loss attributable to Note
(%) (%) interests
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
Unit: CNY ten thousand yuan
103
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Nature of
Subsidiary Type of subsidiary Place of registration Registered capital Scope of operation
operation
Qingdao Feisheng Ddevelopment and
International Aviation application of civil
Training Technology Wholly-owned aviation new
Qingdao, Shandong Pilot training 5,154.55
Development Co., Ltd Subsidiary technology, pilot
(hereafter, Qingdao training and related
Feisheng) consultancy
(Continued)
Balance of
Type of Acutal investment as other de facto
Subsidiary Legal representative Institution code
incorporation at the reporting date investment in
subsidiary
Qingdao Feisheng
International Aviation
Training Technology Limited liability
SONG, Yuxia 72557262-0 5,767.75 0.00
Development Co., Ltd company
(hereafter, Qingdao
Feisheng)
(Continued)
Equity attributable to minority
Shareholding Voting right Consolidatio Minority
Subsidiary interst for set-off of profit or loss Note
(%) (%) n interests
attributable to minority intterest
Qingdao Feisheng 100.00 100.00 Yes 0.00 0.00
6.2 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 2013", "31st December 2013", "the year
ended 31st December 2013", and "the year ended 31st December 2012" respectively.
7.1 Monetary funds
104
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
C/f B/f
Item Currency Exchange CNY Currency Exchange CNY
amount rate amount amount rate amount
Cash at hand: 348,205.99 349,489.05
- CNY — — 258,386.68 — — 277,891.69
USD 13,137.00 6.0969 80,094.98 4,881.63 6.2855 30,683.48
GBP 308.55 10.0556 3,102.66 1,658.55 10.1611 16,852.69
Others — — 6,621.67 — — 24,061.19
Bank deposit: 444,168,730.31 155,038,253.92
- CNY — — 441,037,854.80 — — 144,719,592.51
USD 444,224.11 6.0969 2,708,389.97 1,424,159.60 6.2855 8,951,555.18
Others — — 422,485.54 — — 1,367,106.23
Other monetary funds: 5,334.91 30,000.00
- CNY — — — — — 30,000.00
USD 875.02 6.0969 5,334.91 — — —
Total 444,522,271.21 155,417,742.97
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 impairment 179,936,813.57 70.72 0.00 0.00
assessment
Accounts receivable subject to impairment
assessment by portfolio
Portfolio by nature 60,090,747.20 23.62 3,004,537.36 5.00
Subtotal 60,090,747.20 23.62 3,004,537.36 5.00
105
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Accounts receivable of individual insignificance
but subject to individual impairment 14,418,242.31 5.66 916,508.05 6.36
assessment
Total 254,445,803.08 100.00 3,921,045.41 1.54
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance
and subject to individual impairment 137,210,577.33 72.52 0.00 0.00
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 impairment 8,114,191.72 4.29 916,508.05 11.30
assessment
Total 189,200,448.86 100.00 3,110,271.69 1.64
7.2.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 240,499,205.27 94.52 181,367,393.86 95.86
1 to 2 years 7,722,963.06 3.04 3,699,462.88 1.96
2 to 3 years 2,163,566.48 0.85 1,121,571.85 0.59
Over 3 years 4,060,068.27 1.59 3,012,020.27 1.59
Total 254,445,803.08 100.00 189,200,448.86 100.00
7.2.3 Allowance for bad debt
106
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
① Accounts receivable of individual significance and subject to individual impairment assessment
Rate of allowance
Debtor Carrying amount Allowance for bad debt Reason for allowance
(%)
No indication of impairment
Air China 123,439,238.90 0.00 0.00
upon individual assessment
No indication of impairment
BSP-CHINA 56,497,574.67 0.00 0.00
upon individual assessment
Total 179,936,813.57 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 60,090,747.20 5.00 3,004,537.36
Total 60,090,747.20 5.00 3,004,537.36
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
Allowance for bad Rate of
Debtor Carrying amount Reason for allowance
debt allowance (%)
BSP-JAPAN No indication of impairment
320,905.02 0.00 0.00
upon individual assessment
BSP-TAIWAN No indication of impairment
2,149,104.94 0.00 0.00
upon individual assessment
UATP No indication of impairment
1,770,413.66 0.00 0.00
upon individual assessment
Accounting Center of China Aviation No indication of impairment
9,261,310.64 0.00 0.00
Limited Company upon individual assessment
CR Airways Non recoverable upon
916,508.05 100.00 916,508.05
individual assessment
Total 14,418,242.31 6.36 916,508.05
7.2.4 Accounts receivable owed by investors holding 5% or more of the shares of the Company
Investor C/f B/f
107
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt
Air China 123,439,238.90 0.00 54,927,044.11 0.00
Total 123,439,238.90 0.00 54,927,044.11 0.00
7.2.5 Top five accounts receivable
Relationship to the % of total accounts
Debtor Amount Age
Company receivable
Air China Related party 123,439,238.90 Within 1 year 48.51
BSP-CHINA Third party 56,497,574.67 Within 1 year 22.20
Accounting Center of China Aviation
Third party 9,261,310.64 Within 1 year
Limited Company 3.64
Air China Cargo Co., Ltd. Related party 2,585,423.47 Within 1 year 1.02
Hainan Airlines Company Limited Third party 2,360,400.00 Within 1 year 0.93
Total 194,143,947.68 76.30
7.2.6 Related party balances
See Note 8.6 Related party balances for details.
7.3 Prepayments
7.3.1 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 87,515,232.08 99.24 56,117,454.43 98.58
1 to 2 years 87,000.00 0.10 163,289.18 0.29
2 to 3 years 2,315.50 0.00 159,468.60 0.28
Over 3 years 577,493.40 0.66 486,993.40 0.85
Total 88,182,040.98 100.00 56,927,205.61 100.00
7.3.2 Top five prepaid suppliers
Relationship to the Reason for pending
Supplier Amount Age
Company settlement
Prepayment for aircraft
Supplier #1 Third party 22,053,240.02 Within 1 year
lease rental
Supplier #2 Third party 7,112,809.59 Within 1 year Prepayment for aircraft
108
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
lease rental
Prepayment for aircraft
Supplier #3 Third party 6,835,033.31 Within 1 year
lease rental
Prepayment for aircraft
Supplier #4 Third party 5,542,565.51 Within 1 year
lease rental
Prepayment for aircraft
Supplier #5 Third party 5,355,323.68 Within 1 year
lease rental
Total 46,898,972.11
7.3.3 No prepayment was owed by investors holding 5% or more of the shares of the Company.
7.4 Dividends receivable
Current year Current year Reason for Indication of
Item B/f C/f
increase decrease unsettlement impairment
Dividends receivable within 1 year 0.00 16,772,701.21 2,447,115.15 14,325,586.06
including:
TravelSky Technology Limited 0.00 1,735,051.50 1,735,051.50 0.00
Payment
Sichuan Airlines 0.00 14,325,586.06 0.00 14,325,586.06 No
pending
Shandong International Airport
0.00 712,063.65 712,063.65 0.00
Company Limited
Total 0.00 16,772,701.21 2,447,115.15 14,325,586.06
7.5 Other receivables
7.5.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
178,108,064.87 51.89 101,551,717.65 57.02
subject to individual impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 112,247,264.53 32.70 5,612,363.23 5.00
Subtotal 112,247,264.53 32.70 5,612,363.23 5.00
109
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual insignificance but
52,914,555.92 15.41 0.00 0.00
subject to individual impairment assessment
Total 343,269,885.32 100.00 107,164,080.88 31.22
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
170,529,977.31 46.45 109,051,717.65 63.95
subject to individual 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
78,577,743.62 21.41 0.00 0.00
subject to individual impairment assessment
Total 367,099,088.12 100.00 114,951,286.01 31.31
7.5.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 139,365,183.80 40.60 156,252,301.80 42.56
1 to 2 years 23,296,453.58 6.79 9,668,933.94 2.64
2 to 3 years 5,178,629.05 1.51 15,390,105.67 4.19
Over 3 years 175,429,618.89 51.10 185,787,746.71 50.61
Total 343,269,885.32 100.00 367,099,088.12 100.00
7.5.3 Allowance for bad debt
110
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
① Other receivables of individual significance and subject to individual impairment assessment
Rate of
Allowance for bad
Debtor Carrying amount allowance Reason for allowance
debt
(%)
Impaired collectibility
Shandong Rainbow Commercial Jet Co.,
101,551,717.65 101,551,717.65 100.00 identified upon individual
Ltd.
assessment
No indication of impairment
CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #1 17,901,423.94 0.00 0.00 upon individual
assessment
No indication of impairment
Debtor #2 17,300,360.00 0.00 0.00 upon individual
assessment
Total 178,108,064.87 101,551,717.65 57.02
② Other receivables 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 112,247,264.53 5.00 5,612,363.23
Total 112,247,264.53 5.00 5,612,363.23
③ Other receivables of individual insignificance but subject to individual impairment assessment
Rate of allowance
Debtor Carrying amount Allowance for bad debt Reason for allowance
(%)
No indication of impairment
Air China 13,047,895.61 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #1 185,361.00 0.00 0.00
upon individual assessment
Debtor #2 166,824.90 0.00 0.00 No indication of impairment
111
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Rate of allowance
Debtor Carrying amount Allowance for bad debt Reason for allowance
(%)
upon individual assessment
No indication of impairment
Debtor #3 469,581.20 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #4 490,736.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #5 617,870.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #6 4,942,960.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #7 3,262,353.60 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #8 4,238,588.20 0.00 0.00
upon individual assessment
No indication of impairment
Jinan Customs 11,472,711.51 0.00 0.00
upon individual assessment
No indication of impairment
Capital Airport Customs 14,019,673.90 0.00 0.00
upon individual assessment
Total 52,914,555.92 0.00 0.00
7.5.4 Other receivables 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 13,047,895.61 0.00 9,336,264.20 0.00
Total 13,047,895.61 0.00 9,336,264.20 0.00
7.5.5 Top five other receivables
Relationship to the % of total other
Debtor Amount Age
Company receivables
Shandong Rainbow Commercial Jet Co.,
Related party 101,551,717.65 Over 3 years 29.58
Ltd.
Debtor #1 Third party 61,213,069.70 Within 1 year 17.83
112
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Relationship to the % of total other
Debtor Amount Age
Company receivables
CBD-leasing Co., Ltd. Third party 41,354,563.28 Over 3 years 12.05
Debtor #2 Third party 17,901,423.94 Over 3 years 5.22
Debtor #3 Third party 17,300,360.00 Over 3 years 5.04
Total 239,321,134.57 69.72
7.5.6 Related party balances
See Note 8.6 Related party balances for details.
7.5.7 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 20,080,940.89 6.0969 122,431,488.54 13,821,767.06 6.2855 86,876,716.86
7.6 Inventories
Disclosure by type
C/f
Type Impairment
Gross carrying amount Net carrying amount
allowance
Consumable air quipements 104,936,631.52 0.00 104,936,631.52
Low-value consumables 2,075,509.92 0.00 2,075,509.92
Materials 961,331.91 0.00 961,331.91
Total 107,973,473.35 0.00 107,973,473.35
(Continued)
B/f
Type
Gross carrying amount Impairment allowance Net carrying amount
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
113
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Total 116,944,913.89 0.00 116,944,913.89
7.7 Other current assets
Type C/f B/f
VAT deductible 13,184,687.03 0.00
Income tax overpaid 58,644,275.62 0.00
Total 71,828,962.65 0.00
7.8 Long-term equity investments
7.8.1 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
7.8.2 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 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 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
114
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year
Investee B/f C/f
movement
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)
Investee Shareholding Voting right Reason for disagreement between
(%) (%) shareholding and voting right
China Travelsky Technology Co., Ltd. 0.45 0.45 In agreement
Sichuan Airlines 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
(Continued)
Impairment allowance Impairment allowance recognised Cash dividend in current
Investee
in current year year
China Travelsky Technology Co., Ltd. 0.00 0.00 1,735,051.50
Sichuan Airlines 0.00 0.00 14,325,586.06
Jinan International Airport Co., Ltd. 0.00 0.00 712,063.65
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 0.00
Total 22,500,000.00 16,772,701.21
7.8.3 Details of long-term equity investments in associates
Investee Type of Place of registration Legal Nature of operation
incorporation representative
Shandong Rainbow Commercial Jet Co., Ltd. Limited liability Jinan, Shandong ZHAO, Hong Aero
company transportation
(Continued)
Investee Registered capital Shareholding (%) Voting right(%)
Shandong Rainbow Commercial Jet Co., Ltd. 50.00 million 45.00 45.00
115
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
(Continued)
Investee Total assets c/f Total liabilities c/f Net assets c/f
Shandong Rainbow Commercial Jet Co., Ltd. 2,119,218.84 167,931,418.33 -165,812,199.49
(Continued)
Revenue for Net profit for Relationship to the
Investee Institution code
current year current year company
Shandong Rainbow Commercial Jet Co., Ltd. 0.00 -2,321,195.73 Associate 72497146X
7.8.4 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
7.9 Fixed assets
7.9.1 General information
Current year Current year
Category B/f C/f
increase decrease
1. Historical cost 12,502,314,115.70 400,162,087.51 776,260,421.91 12,126,215,781.30
Houses and buildings 283,494,370.54 26,509,810.31 0.00 310,004,180.85
Aircrafts and engines 11,425,420,286.95 220,065,472.81 738,508,309.35 10,906,977,450.41
High-value rotables 620,652,258.77 94,411,502.28 27,089,139.68 687,974,621.37
Transportation vehicles 57,414,226.49 5,455,103.39 2,110,161.52 60,759,168.36
Others 115,332,972.95 53,720,198.72 8,552,811.36 160,500,360.31
2. Cumulative depreciation Addition Recognition
Total cumulative
3,985,755,426.26 787,573,958.19 530,774,983.32 4,242,554,401.13
depreciation
Houses and buildings 44,880,915.72 8,895,408.20 0.00 53,776,323.92
Aircrafts and engines 3,635,313,040.46 728,461,662.99 516,874,879.88 3,846,899,823.57
116
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year Current year
Category B/f C/f
increase decrease
High-value rotables 218,256,536.65 32,667,613.39 5,686,334.44 245,237,815.60
Transportation vehicles 24,348,244.01 4,617,873.62 1,850,551.79 27,115,565.84
Others 62,956,689.42 12,931,399.99 6,363,217.21 69,524,872.20
3. NBV before impairment
8,516,558,689.44 7,883,661,380.17
allowance
Houses and buildings 238,613,454.82 256,227,856.93
Aircrafts and engines 7,790,107,246.49 7,060,077,626.84
High-value rotables 402,395,722.12 442,736,805.77
Transportation vehicles 33,065,982.48 33,643,602.52
Others 52,376,283.53 90,975,488.11
4. Impairment allowance 383,771,823.22 79,114,818.66 143,883,401.94 319,003,239.94
Houses and buildings 0.00 0.00 0.00 0.00
Aircrafts and engines 351,887,855.38 79,114,818.66 142,757,186.08 288,245,487.96
High-value rotables 31,883,967.84 0.00 1,126,215.86 30,757,751.98
Transportation vehicles 0.00 0.00 0.00 0.00
Others 0.00 0.00 0.00 0.00
5. NBV 8,132,786,866.22 7,564,658,140.23
Houses and buildings 238,613,454.82 256,227,856.93
Aircrafts and engines 7,438,219,391.11 6,771,832,138.88
High-value rotables 370,511,754.28 411,979,053.79
Transportation vehicles 33,065,982.48 33,643,602.52
Others 52,376,283.53 90,975,488.11
Note: Depreciation recognised during the current year amounted to 787,573,958.19; historical cost of fixed
assets transferred from construction in progress during the current year amounted to 71,852,227.56.
7.9.2 Fixed assets with imposed restriction on ownership
As at reporting date, aircrafts and engines with NBV amounting to 4,970,849,215.75 (historical cost amounting
to 6,882,550,190.06; 2012 comparative: NBV and historical cost amounting to 5,290,960,014.07 and
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
6,784,301,763.02 respectively) were pledged as security for long-term borrowings amounting to
3,218,251,198.06 (2012 comparative: 3,854,676,638.03, see Note 7.27) and long-term borrowings due within
one year amounting to 283,870,512.12 (2012 comparative: 283,051,698.10, see Note 7.26); ownership of
aircrafts and engines with NBV amountig to 1,069,241,837.97 (historical cost amounting to 1,737,112,531.96;
2012 comparative: NBV and historical cost amounting to 1,191,901,011.49 and 1,737,224,257.96 respectively)
was restricted as the fact that they were acquired under financial leases.
7.9.3 Fixed assets acquired under financial leases
Category C/f B/f
1. Historical cost
Aircrafts and engines 1,737,112,531.96 1,737,224,257.96
Total 1,737,112,531.96 1,737,224,257.96
2. Cumulative depreciation
Aircrafts and engines 667,870,693.99 545,323,246.47
Total 667,870,693.99 545,323,246.47
3. NBV before impairment allowance
Aircrafts and engines 1,069,241,837.97 1,191,901,011.49
Total 1,069,241,837.97 1,191,901,011.49
4. Impairment allowance
Aircrafts and engines 0.00 0.00
Total 0.00 0.00
5. NBV
Aircrafts and engines 1,069,241,837.97 1,191,901,011.49
Total 1,069,241,837.97 1,191,901,011.49
7.9.4 Fixed assets pending ownership registration
Item Reason for pending Estimated registration NBV
Jinan cargo arrival and departure Land rented from Jinan Air Control, not eligible for
warehouses ownership registration —— 14,245,708.27
Qingdao aircraft maintenance
Ownership registration in process
workshops 2014 37,468,457.04
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Yantai terminal building Ownership registration in process 2014 25,293,122.35
Total 77,007,287.66
7.9.5 Impairment of fixed assets
Impairment allowance amounting to 79,114,818.66 for five 737-300 aircrafts was recognised during the current
year with reference to the disposal plan signed with China Post Air for the said aircrafts.
7.10. Construction in progress
7.10.1 General information
C/f
Project
Gross carrying amount Impairment allowance Net carrying amount
Prepayment for aircrafts 1,611,984,965.18 0.00 1,611,984,965.18
Others 35,931,030.60 0.00 35,931,030.60
Total 1,647,915,995.78 0.00 1,647,915,995.78
(Continued)
B/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
Others 16,316,585.89 0.00 16,316,585.89
Total 1,430,885,814.11 0.00 1,430,885,814.11
7.10.2 Significant projects
Project Budget B/f Current year increase
Prepayment for aircrafts 5,939,797,500.00 1,414,569,228.22 1,169,204,218.46
Others 192,431,000.00 16,316,585.89 22,743,013.71
Total 6,132,228,500.00 1,430,885,814.11 1,191,947,232.17
(Continued)
Transferred to fixed assets in
Project Other decrease C/f
current year
Prepayment for aircrafts 68,723,658.56 903,064,822.94 1,611,984,965.18
Others 3,128,569.00 0.00 35,931,030.60
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Total 71,852,227.56 903,064,822.94 1,647,915,995.78
(Continued)
Cumulative borrowing costs Borrowing costs capitalised Rate of interest capitalisation
Project
capitalised in the current year for the current year
Prepayment for aircrafts -1,965,738.22 -522,887.25 2.46-3.95
Others 0.00 0.00 N/A
Total -1,965,738.22 -522,887.25 —
(Continued)
Percentage of Source of
Project % of investment : budget
completion finance
Borrowings from
Prepayment for aircrafts 27.14 27.14 financial
institutions
Others 18.67 18.67 Self-financing
Total — —
7.10.3 Impairment of construction in progress
No indication of impairment on construction in progress was present as at the reporting date, therefore no
impairment allowance was recognised.
7.11 Intangible assets
7.11.1 General information
Current year Current year
Category B/f C/f
increase decrease
1. Historical cost 84,663,933.13 24,196,624.41 0.00 108,860,557.54
Land rights 84,663,933.13 0.00 0.00 84,663,933.13
Software 0.00 24,196,624.41 0.00 24,196,624.41
2. Cumulative depreciation 5,849,161.58 1,883,759.14 0.00 7,732,920.72
Land rights 5,849,161.58 1,428,139.77 0.00 7,277,301.45
Software 0.00 455,619.27 0.00 455,619.27
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year Current year
Category B/f C/f
increase decrease
3. Impairment allowance 0.00 0.00 0.00 0.00
Land rights 0.00 0.00 0.00 0.00
Software 0.00 0.00 0.00 0.00
4. NBV 78,814,771.55 101,127,636.82
Land rights 78,814,771.55 77,386,631.68
Software 0.00 23,741,005.14
Amortisation recognised during the current year amounted to 1,883,759.14.
7.11.2 Impairment of intangible assets
No indication of impairment on intangible assets was present as at the reporting date, therefore no impairment
allowance was recognised.
7.12 Goodwill
7.12.1 General information
Current year Current year Impairment alowance
Investee B/f C/f
increase decrease c/f
Qingdao Feisheng 10,220,816.22 0.00 0.00 10,220,816.22 10,220,816.22
Total 10,220,816.22 0.00 0.00 10,220,816.22 10,220,816.22
7.12.2 Impairment and provisions of goodwill
Management concluded that impairment on goodwil arising from Qingdao Feisheng was present, and the full
provisions of goodwill shall be taken 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.
7.13 Deferred charges
Current year Current year Other Reason for other
Item B/f C/f
increase amortisation decrease decrease
Pilot training 283,833,279.68 97,907,569.95 48,083,707.83 0.00 333,657,141.80
Decoration expenditure 18,034,629.07 419,244.00 4,165,474.26 0.00 14,288,398.81
Total 301,867,908.75 98,326,813.95 52,249,182.09 0.00 347,945,540.61
7.14 Deferred tax assets
Category C/f B/f
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Deductible temporary Deductible temporary
Deferred tax Deferred tax
difference and tax loss difference and tax loss
assets assets
carried forwards carried forwards
Allowance for bad debt 27,771,281.57 111,085,126.29 29,515,389.43 118,061,557.70
Impairment allowance for fixed assets 79,750,809.99 319,003,239.94 95,942,955.81 383,771,823.22
Fair value movement of financial
74,225.62 296,902.47 1,799,695.90 7,198,783.59
liabilities held for trading
Provisions 242,560,865.24 970,243,460.92 198,150,745.16 792,602,980.62
Employment benefits payable 83,026,150.77 332,104,603.04 85,129,768.80 340,519,075.19
Deferred income 6,341,881.10 25,367,524.34 40,300,683.54 161,202,734.16
Tax loss carried forwards 136,904.73 547,618.90 46,072.79 184,291.18
Total 439,662,119.02 1,758,648,475.90 450,885,311.43 1,803,541,245.66
7.15 Allowance for asset impairment
Current year Current decrease
Category B/f C/f
recognition Reversal Expanded
1. Allowance for bad debt 118,061,557.70 523,568.59 7,500,000.00 0.00 111,085,126.29
2. Impairment allowance for long-term
22,500,000.00 0.00 0.00 0.00 22,500,000.00
equity investments
3. Impairment allowance for fixed
383,771,823.22 79,114,818.66 0.00 143,883,401.94 319,003,239.94
assets
4. Impairment allowance for goodwill 0.00 10,220,816.22 0.00 0.00 10,220,816.22
Total 524,333,380.92 89,859,203.47 7,500,000.00 143,883,401.94 462,809,182.45
7.16 Assets with imposed restriction on ownership
Category C/f Reason of restriction
Assets pledged as security
Aircrafts and engines 4,970,849,215.75 Pledge as security for borrowings
Other form of restriction:
Aircrafts and engines 1,069,241,837.97 Assets acquired under financial lease
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category C/f Reason of restriction
Total 6,040,091,053.72
7.17 Short-term borrowings
Type C/f B/f
Credit loans 434,137,220.00 321,378,829.28
Total 434,137,220.00 321,378,829.28
7.18 Financial liabilities held for trading
Item Fair value c/f Fair value b/f
Interest rate swaps 296,902.47 7,198,783.59
Total 296,902.47 7,198,783.59
The immature interest rate swaps held by the Company had a principal amount of USD 117,018,877.60 as at
the reporting date; bankers confirmed that the reporting date fair value of these interest rate swaps is
-296,902.47 (USD -48,697.28).
7.19 Notes payable
Type C/f B/f
Bankers' acceptance 0.00 100,000.00
Commercial acceptance 0.00 0.00
Total 0.00 100,000.00
7.20 Accounts payable
7.20.1 General information
Item C/f B/f
Aircraft maintenance costs 370,702,424.44 253,358,086.69
Fuel cost 281,866,639.72 296,059,868.05
Landing fee 225,666,680.33 194,407,548.18
Aero equipments 81,971,026.18 45,048,851.36
Flight catering 61,129,425.69 53,351,961.08
Computer booking fee 42,333,567.66 58,105,416.36
Lease rental 3,950,584.37 20,551,734.38
Others 64,506,341.86 30,085,312.50
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Total 1,132,126,690.25 950,968,778.60
7.20.2 See Note 8.6 Related party balances for accounts payable owed to investors investors holding 5% or
more of the shares of the Company.
7.20.3 No significant account payable due for more than 1 year as at the reporting date.
7.21 Advance from customers
7.21.1 General information
Item C/f B/f
Ticket clearing 318,907,952.74 191,551,691.08
Advanced payment for tickets 15,493,312.51 15,459,309.56
Others 9,066,787.72 8,096,572.49
Total 343,468,052.97 215,107,573.13
7.21.2 See Note 8.6 Related party balances for advance from customers owed to investors investors holding
5% or more of the shares of the Company.
7.21.3 No significant advance from customers due for more than 1 year as at the reporting date.
7.22 Employment benefits payable
Current year Current year
Category B/f C/f
increase decrease
(1) Wages and salaries, bonuses, subsidies
306,610,783.99 1,214,713,527.13 1,210,477,555.28 310,846,755.84
and allowances
(2) Employee benefits 0.00 54,961,766.22 54,961,766.22 0.00
(3) Social insurance 2,930,451.14 153,708,791.26 156,639,242.40 0.00
Within: ①Medical insurance 0.00 35,423,544.34 35,423,544.34 0.00
②Basic retirement insurance 0.00 68,325,064.96 68,325,064.96 0.00
③Annuity fee 2,930,451.14 38,268,275.24 41,198,726.38 0.00
④Unemployment fee 0.00 2,833,257.50 2,833,257.50 0.00
⑤Work injury insurance 0.00 2,793,774.26 2,793,774.26 0.00
⑥Pregnancy insurance 0.00 3,770,453.16 3,770,453.16 0.00
⑦Reserved funds for disable
0.00 2,294,421.80 2,294,421.80 0.00
jobseekers
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year Current year
Category B/f C/f
increase decrease
(4) Housing provident fund 18,808.40 45,480,722.96 45,487,498.96 12,032.40
(5) Labor union fee and employee
34,143,751.18 17,668,385.46 23,803,943.34 28,008,193.30
education fee
(6) Non-monetary benefits 0.00 0.00 0.00 0.00
(7) Redemption of termination of labor
0.00 139,823.46 139,823.46 0.00
contract
(8) Others 0.00 8,815.38 8,815.38 0.00
Total 343,703,794.71 1,486,681,831.87 1,491,518,645.04 338,866,981.54
7.23 Taxes and fees payable
Tax (Fee) C/f B/f
VAT 23,173,422.56 2,889.52
Business tax 517,483.64 21,097,209.73
Urban construction and maintenance tax 1,131,299.11 1,422,656.41
Education surcharge 799,023.02 1,031,247.63
Enterprise income tax 321,144.21 139,026,409.94
Property tax 1,313,944.58 1,225,434.50
Land tax 142,738.11 150,775.11
Personal income tax 5,178,599.23 4,736,473.47
Stamp duty 4,456,114.47 3,651,170.17
Civil aviation development fund 70,197,348.09 59,423,302.82
Provision for income tax deducted at source 1,886,243.81 -3,000,686.74
Sales tax deducted at source 779,876.14 703,487.16
Others 167,200.64 214,108.31
Total 110,064,437.61 229,684,478.03
7.24 Interests payable
Item C/f B/f
125
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Interest on long-term borrowings with repayment by
3,538,461.10 3,939,751.55
installments
Interest on corporate bond 12,035,833.33 12,035,833.33
Interest on short-term borrowings 490,000.00 490,510.37
Total 16,064,294.43 16,466,095.25
7.25 Other payables
7.25.1 General information
Item C/f B/f
Payable for construction projects 19,941,754.75 24,002,111.06
Payable for down payments 68,715,061.67 57,843,473.65
Payables associated with aircraft purchase 3,949,505.02 19,098,882.67
Taxes deducted at source 36,330,461.25 25,039,913.23
Others 64,932,075.65 84,090,633.33
Total 193,868,858.34 210,075,013.94
7.25.2 See Note 8.6 Related party balances for other payables owed to investors investors holding 5% or more
of the shares of the Company.
7.25.3 Significant other payables due for more than 1 year
Post reporting date
Creditor Amount Reason for pending settlement
repayment
Margin deposit to be settled upon expiry of immature
Air China 20,000,000.00 No
wet lease
Total 20,000,000.00
7.25.4 Significant other payables
Creditor C/f Description
Air China 20,000,000.00 Margin deposit for wet lease
Total 20,000,000.00
7.26 Non-current liabilities due within one year
7.26.1 General information
Category C/f B/f
Long-term borrowings due within one year (Note 7.27) 443,609,292.12 283,051,698.10
126
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Long-term payables due within one year (Note 7.29) 89,541,366.30 109,521,823.77
Total 533,150,658.42 392,573,521.87
7.26.2 Long-term borrowings due within one year
① General information
Category C/f B/f
Secured loans 283,870,512.12 283,051,698.10
Credit loans 159,738,780.00 0.00
Total 443,609,292.12 283,051,698.10
② Top five long-term borrowings due within one year
Creditor Start date Expiry date Currency
Creditor #1 2013-10-31 Step repayment USD
Creditor #2 2005-10-19 Step repayment USD
Creditor #3 2013-11-29 Step repayment USD
Creditor #4 2005-4-7 Step repayment CNY
Creditor #5 2008-9-26 Step repayment USD
Total
(Continued)
Creditor C/f B/f
Currency CNY Currency CNY
amount amount Amount amount
Creditor #1 17,200,000.00 104,866,680.00 — —
Creditor #2 11,200,000.00 68,285,280.00 11,200,000.00 70,397,600.00
Creditor #3 9,000,000.00 54,872,100.00 — —
Creditor #4 — 50,000,000.00 — 50,000,000.00
Creditor #5 4,455,150.00 27,162,604.04 4,000,000.00 25,142,000.00
Total 305,186,664.04 145,539,600.00
Notes: Interest rates of the above-mentioned long-term borrowings due within one year range from 1.0441% to
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
6.55%.
7.26.3 Long-term payables due within one year
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. 44,296,895.25 73,629,868.84 Financial lease for aircraft
CALC Jian Zhao Limited 15,789,212.15 15,911,497.46 Financial lease for aircraft
Total 60,086,107.40 89,541,366.30
7.27 Long-term borrowings
① Disclosure by category
Category C/f B/f
Secured loans (by tangible assets) 3,502,121,710.18 4,137,728,336.13
Credit loans 466,534,788.00 0.00
Less: Long-term borrowings due within one year (Note 7.26) 443,609,292.12 283,051,698.10
Total 3,525,047,206.06 3,854,676,638.03
② Top five long-term borrowings
Creditor Start date Expiry date Currency
Creditor #1 2012/5/7 Repayment on expiry USD
Creditor #2 2012/11/30 Repayment on expiry USD
Creditor #3 2012/12/27 Repayment on expiry USD
Creditor #4 2005/12/21 Step repayment USD
Creditor #5 2012/10/9 Step repayment USD
Total
(Continued)
128
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
C/f B/f
Creditor Currency CNY Currency CNY
amount amount amount amount
Creditor #1 35,180,000.00 214,488,942.00 50,000,000.00 314,275,000.00
Creditor #2 31,000,000.00 189,003,900.00 31,000,000.00 194,850,500.00
Creditor #3 28,500,000.00 173,761,650.00 28,500,000.00 179,136,750.00
Creditor #4 26,213,260.00 159,819,624.89 26,213,260.00 164,763,445.73
Creditor #5 25,000,000.00 152,422,500.00 25,000,000.00 157,137,500.00
Total 145,893,260.00 889,496,616.89 160,713,260.00 1,010,163,195.73
Notes: Interest rates of the above-mentioned long-term borrowings range from 1.0441 % to 5.8950 %.
7.28 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)
Bond Interest payable b/f Interest accrued Interest paid in current Interest payable C/f
in current year year c/f
Medium-term bond 12,035,833.33 21,450,000.00 21,450,000.00 12,035,833.33 500,000,000.0
0
Total 12,035,833.33 21,450,000.00 21,450,000.00 12,035,833.33 500,000,000.0
0
7.29. Long-term payables
7.29.1 Disclosure by category
Category C/f B/f
Financial lease rental payables 890,403,647.93 1,003,581,510.68
Maintenance payables for aircrafts and engines held under operating lease 961,121,308.95 783,480,828.66
Less: Financial lease rental payables due within one year (Note 7.26) 89,541,366.30 109,521,823.77
Less: Maintenance payables for aircrafts and engines held under operating lease
219,467,592.19 123,336,184.53
due within one year (Note 1)
129
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Total 1,542,515,998.39 1,554,204,331.04
Note : Maintenance payables for aircrafts and engines held under operating lease due within one year had
been included in accounts payable.
7.29.2 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. 137,626,412.99 582,970,789.53 Financial lease for aircraft
CALC Jian Zhao Limited 93,928,215.18 217,891,492.10 Financial lease for aircraft
Total 231,554,628.17 800,862,281.63
7.30 Other non-current liabilities
Item C/f B/f
Designated subsidy for snow disaster 2,988,958.34 3,488,458.34
PhoenixMiles Program 0.00 161,202,734.17
Desigated subsidy for IT construction 0.00 4,709,541.65
Designated subsidy for civil aviation energy-saving program 15,758,566.00 16,735,066.12
Designated subsidy for RNP aircraft equipment modification 6,620,000.00 0.00
Total 25,367,524.34 186,135,800.28
Details of deferred revenue:
Transfer to
Subsidy increased in Other
Item B/f non-operating income C/f
curent year movements
in current year
Designated subsidy for snow disaster 3,488,458.34 0.00 499,500.00 0.00 2,988,958.34
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Desigated subsidy for IT construction 4,709,541.65 0.00 4,709,541.65 0.00 0.00
Designated subsidy for RNP
0.00 6,620,000.00 0.00 0.00 6,620,000.00
aircraft equipment modification
Designated subsidy for civil aviation
16,735,066.12 0.00 976,500.12 0.00 15,758,566.00
energy-saving program
Total 24,933,066.11 6,620,000.00 6,185,541.77 0.00 25,367,524.34
7.31 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
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)
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Currency year movement (+, -)
Share issue Bonus issue Coversion 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 foreign 0.00 0.00 0.00 0.00 0.00
currency
2.3 Shares issued in foreign market in foreign currency 0.00 0.00 0.00 0.00 0.00
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
(Continue)
Category C/f
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
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category C/f
Amount %
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
7.32 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
7.33 Surplus reserves
Current year Current year
Category B/f C/f
increase decrease
Statutory surplus reserve 257,642,799.31 39,706,786.39 0.00 297,349,585.70
Total 257,642,799.31 39,706,786.39 0.00 297,349,585.70
Notes: according to the Company Law and the Articles of Association, 10% of net profit was transferred to
statutory surplus reserve.
The company may make allocations to the discretionary common reserve from the after-tax profits after
making allocations to the statutory surplus reserve from the after-tax profits. Approved surplus reserves can be
133
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
released to recover losses or for conversion into share capital.
7.34. Retained earnings
Movement of retained earnings
Rate of
Item Current year Prior year
appropriation
B/f 1,746,002,689.27 1,374,420,534.36
Total adjustment to retained earnings b/f (+, -) 0.00 0.00
Retained earnings b/f after adjustment 1,746,002,689.27 1,374,420,534.36
Add: Net profit attributable to shareholders of the parent 389,081,811.72 589,810,932.47
Loss recovery by surplus reserves 0.00 0.00
Others 0.00 0.00
Less: Appropriation to statutory surplus reserve 39,706,786.39 58,228,777.56
Appropriation to discretionary surplus reserve 0.00 0.00
Ordinary dividends declared 160,000,000.00 160,000,000.00
Bonus issue 0.00 0.00
C/f 1,935,377,714.60 1,746,002,689.27
7.35 Revenue and operating costs
7.35.1 General information
Category Current year Prior year
Principal operating income 11,293,341,843.56 10,892,489,041.34
Other operating income 133,816,089.59 100,535,873.07
Total 11,427,157,933.15 10,993,024,914.41
Principal operating cost 9,707,677,991.58 8,571,793,581.33
Other operating cost 2,187,655.80 4,478,787.52
Total 9,709,865,647.38 8,576,272,368.85
7.35.2 Disclosure by service line
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost
Aero transportation 11,232,141,639.73 9,666,874,791.95 10,845,887,973.75 8,539,879,426.57
Hospitality and catering 30,362,647.64 27,348,610.96 22,119,064.02 19,496,643.53
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost
Training 22,194,939.18 6,958,634.48 17,978,025.13 9,187,896.05
Freight logistics 8,642,617.01 6,495,954.19 6,503,978.44 3,229,615.18
Total 11,293,341,843.56 9,707,677,991.58 10,892,489,041.34 8,571,793,581.33
7.35.3 Operating income from top five customers
Year Operating income % of total operating income
2013 681,700,941.89 5.97
2012 701,094,111.08 6.38
7.36 Business tax and surcharges
Item Current year Prior year
Business tax 198,024,183.56 322,040,241.43
Urban maintenance and construction tax 22,330,168.35 22,407,051.10
Education surcharge and others 18,311,185.75 18,845,643.08
Total 238,665,537.66 363,292,935.61
Notes: Applicable rates for business tax and surcharges see Note 5 Taxation.
7.37 Sales expenses
Category Current year Prior year
Agency fees 440,471,809.02 397,328,163.87
Employment benefits 129,956,447.17 178,559,093.77
Computer booking 76,514,767.74 67,118,157.82
Online payment 27,857,792.92 21,600,770.07
Sales expense of annual tickets 27,304,337.80 18,302,127.40
Lease rental 15,777,216.30 14,356,560.06
Advertisement 13,358,997.77 12,104,590.05
Office 7,658,213.49 5,302,142.43
Travel 4,804,272.39 4,094,804.02
System and network 4,457,230.85 4,087,876.50
BSP data processing 2,124,907.23 2,165,963.39
135
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Depreiciation 1,923,549.14 2,117,377.88
Others 22,994,877.93 18,552,474.76
Total 775,204,419.75 745,690,102.02
7.38 General and administrative expenses
Category Current year Prior year
Employment benefits 116,426,147.20 143,402,835.27
Lease rental 16,265,877.85 14,105,149.76
Entertainment 12,185,173.59 16,891,805.85
Depreiciation 10,294,628.87 7,228,965.52
Taxes and fees 9,157,436.31 6,060,356.49
Office 9,073,671.10 4,846,659.27
Technology development 3,342,852.73 6,064,208.25
Amortisation of intangibles 1,883,759.21 1,434,350.49
Subscription for clearing system 1,684,856.05 3,961,952.36
Others 45,005,544.58 34,419,104.39
Total 225,319,947.49 238,415,387.65
7.39 Financial costs
Category Current year Prior year
Interest expenses 254,190,451.00 247,729,159.28
Less: Interest income 4,362,149.98 2,728,247.92
Exchange difference -109,295,243.48 -8,090,980.43
Bank charges and others 2,286,554.04 6,600,544.73
Total 142,819,611.58 243,510,475.66
7.40 Loss on asset impairment
Category Current year Prior year
Allowance for bad debt -6,976,431.41 2,770,999.67
Impairment allowance for fixed assets 79,114,818.66 191,159,700.00
136
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Impairment allowance for goodwill 10,220,816.22 0.00
Total 82,359,203.47 193,930,699.67
7.41 Gain from changes in fair value
Source Current year Prior year
Interest rate swaps 6,901,881.12 -5,053,262.49
Total 6,901,881.12 -5,053,262.49
7.42 Investment income
7.42.1 Disclosure by category
Category Current year Prior year
Income from long-term equity investments measured at cost 16,772,701.21 16,247,366.84
Income from holding of financial assets held for trading -2,609,524.71 -1,852,852.05
Total 14,163,176.50 14,394,514.79
7.42.2 Income from long-term equity investments measured at cost
Investee Current year Prior year
China Travelsky Technology Co., Ltd. 1,735,051.50 1,565,460.00
Sichuan Airlines 14,325,586.06 13,730,000.00
Jinan International Airport Co., Ltd. 712,063.65 951,906.84
Total 16,772,701.21 16,247,366.84
7.43 Non-operating income
Included in current
Category Current year Prior year year non-recurring
profit and loss
Gain on non-current asset disposals 78,847,533.50 59,901.02 78,847,533.50
Within: Gain on fixed asset disposals 78,847,533.50 59,901.02 78,847,533.50
Government grants (See details of government grants) 22,465,841.77 52,137,058.47 22,465,841.77
Subsidy for air routes 152,697,442.00 64,962,684.00 152,697,442.00
Others 16,397,152.34 30,027,829.08 16,397,152.34
137
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Included in current
Category Current year Prior year year non-recurring
profit and loss
Total 270,407,969.61 147,187,472.57 270,407,969.61
Details of government grants:
Government assitance Current year Prior year Description
Subsidy for side air routes 1,310,000.00 7,330,000.00 Granted by the CAAC regional office
Designated subsidy for snow disaster 499,500.00 499,500.00 Amortisation of utilised subsidy
Designated subsidy for civil aviation
976,500.12 976,500.12 Amortisation of utilised subsidy
energy-saving program
Subsidy for 12-5 construction of IT
4,709,541.65 5,290,458.35 Subsidy for expenditure on 12-5 construction of IT system
system
Subsidy for SMS 0.00 1,000,000.00 Subsidy for expenditure on SMS
Others 14,970,300.00 37,040,600.00 Granted by regional government
Tota 22,465,841.77 52,137,058.47
7.44 Non-operating expenses
Included in current year
Category Current year Prior year
non-recurring profit and loss
Loss on non-current asset disposals 9,856,591.93 6,908,093.55 9,856,591.93
Within: Loss on fixed asset disposals 9,856,591.93 6,908,093.55 9,856,591.93
Charitable donation 0.00 15,000.00 0.00
Fines 0.00 8,334.71 0.00
Others 3,593,170.47 461,424.44 3,593,170.47
Total 13,449,762.40 7,392,852.70 13,449,762.40
7.45 Income tax expenses
Category Current year Prior year
Current tax calculated in accordance with relevant tax law 130,641,826.52 411,720,977.67
Deferred tax 11,223,192.41 -220,483,093.02
138
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Total 141,865,018.93 191,237,884.65
7.46 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
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.
7.46.1 General disclosure
Current year Prior year
Category of earning
Basic EPS Diluted EPS Basic EPS Diluted EPS
Net profit attributable to ordinary shareholders 0.97 0.97 1.47 1.47
Recurring profit or loss attributable to ordinary
0.34 0.34 1.23 1.23
shareholders
7.46.2 Calculation
① Net profit attributable for ordinary shareholders for the calculation of basic EPS
Category Current year Prior year
Net profit attributable for ordinary shareholders 389,081,811.72 589,810,932.47
Within: From continuing operation 389,081,811.72 589,810,932.47
From curtailed operation 0.00 0.00
Recurring profit or loss attributable to ordinary shareholders 137,850,318.37 490,146,637.15
Within: From continuing operation 137,850,318.37 490,146,637.15
From curtailed operation 0.00 0.00
139
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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
7.47 Notes to the consolidated statement of cash flows
7.47.1 Other cash receipts relating to operating activities
Category Current year Prior year
Government assistance 22,900,300.00 52,060,600.00
Interest income on bank deposit 4,362,149.98 2,728,247.92
Cash receiptes from non-operating income 152,647,494.34 73,065,513.08
Cash receiptes from operating balance 118,813,553.50 10,012,593.40
Margin deposit repaid 0.00 500,000.00
Total 298,723,497.82 138,366,954.40
7.47.2 Other cash payments relating to operating activities
Category Current year Prior year
Bank charges 30,144,346.96 26,701,314.80
Cash payments for non-operating expenses 3,593,170.47 484,759.15
Cash payments for operating balance 17,260,954.51 62,031,683.41
Cash payments for sales and general and administrative expenses 183,096,421.15 159,255,418.49
Total 234,094,893.09 248,473,175.85
7.47.3 Other cash payments relating to investing activities
Category Current year Prior year
Cash payments of settlement of interest rate swaps 2,609,524.71 1,852,852.05
Total 2,609,524.71 1,852,852.05
7.47.4 Other cash receipts relating to financing activities
140
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Margin deposit for bankers' acceptance repaid 0.00 7,470,000.00
Cash receipts for disposal of purchase rights on aircrafts (which became
903,064,822.94 0.00
acquired under operating lease instead of purchase)
Total 903,064,822.94 7,470,000.00
7.47.5 Other cash payments relating to financing activities
Category Current year Prior year
Cash payments for aircraft financial lease rental 175,939,104.72 206,213,467.59
Cash payments for issuance of medium-term bonds 0.00 1,500,000.00
Total 175,939,104.72 207,713,467.59
7.48 Supplementary information to the consolidated statement of cash flows
7.48.1 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 389,081,811.72 589,810,932.47
Add: Loss on asset impairment 82,359,203.47 193,930,699.67
Depreciation of fixed assets, oil and gas assets, bioogical assets held for
787,573,958.19 726,168,020.56
production
Amortisation of intangible assets 1,883,759.14 1,434,350.49
Amortisation of deferred charges 52,249,182.09 45,703,686.59
Loss on non-current assets disposal (gain presented by "-" prefix) -71,764,546.71 -59,901.02
Loss on scrap of fixed assets (gain presented by "-" prefix) 2,773,605.14 6,908,093.55
Loss on fair value changes (gain presented by "-" prefix) -6,901,881.12 5,053,262.49
Fianncial costs (gain presented by "-" prefix) 148,244,330.64 238,341,003.26
Investment loss (gain presented by "-" prefix) -14,163,176.50 -14,394,514.79
Decrease of deferred tax assets (increase presented by "-" prefix) 11,223,192.41 -220,483,093.02
Increase of deferred tax liabilities (increase presented by "-" prefix) 0.00 0.00
Decrease of inventories (increase presented by "-" prefix) 8,971,440.54 9,195,192.86
Decrease of operating receivables (increase presented by "-" prefix) -114,011,884.25 -67,334,514.13
141
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Increase of operating payables (decrease presented by "-" prefix) 133,667,527.39 212,044,281.77
Others 0.00 0.00
Net cash flows generated from operating activities 1,411,186,522.15 1,726,317,500.75
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 0.00
Movement of cash and cash equivalents:
Cash C/f 444,522,271.21 155,387,742.97
Less: Cash B/f 155,387,742.97 240,185,747.48
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 289,134,528.24 -84,798,004.51
7.48.2 Compostion of cash and cash equivalents
Category Current year Prior year
① Cash 444,522,271.21 155,387,742.97
Including: Cash at hand 348,205.99 349,489.05
Demand bank deposit 444,168,730.31 155,038,253.92
Demand other monetary funds 5,334.91 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 444,522,271.21 155,387,742.97
Note 8 Related parties and related party transaction
8.1 Major investors
142
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Relationship to the Legal
Investor Type of incorporation Place of registration Nature of operation
Company representative
Investment and
Limited liability
SDA Group Largest shareholder Jinan MA, Chongxian management of aero
company
transportation
WANG,
Air China 2nd largest shareholder Joint stock company Beijing Aero transportation
Changshun
(Continued)
Shareholding in the Voting right in the Ultimate
Investor Registered capital Company Company controller of the Institution code
(%) (%) 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 7.8.3.
8.4 Other related parties
Other related party Relationship to the Company Institution code
Taikoo (Shandong) Aircraft Engineering Company Limited Controlled by major investors 70588297-1
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 Co., Ltd. Controlled by major investors 71188088-4
Aircraft Maintenance and Engineering Corporation (Ameco
Controlled by major investors 62591162-1
Beijing)
Chengfu FuKai Aircraft Engineering Co., Ltd. Controlled by major investors 72808856-X
143
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
8.5 Related party transactions
8.5.1 Purchase of goods and services
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)
Air China Ground service Market price
Air China Repairment Market price
Air China Agency service Market price
Shenzhen Airlines Co., Ltd. Agency service Market price
Air China Cargo Co., Ltd. Ground service Market price
Sichuan International Aero Engine Maintenance Co.,
Repairment Market price
Ltd.
Chengfu FuKai Aircraft Engineering Co., Ltd. Repairment Market price
Total
(Continue)
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the
same category same category
Taikoo (Shandong) Aircraft Engineering Company
83,756,980.25 12.46 79,492,346.10 14.86
Limited
SDA Group 28,893,592.73 34.93 22,369,102.37 36.74
Shandong XiangYu Air Technology Co., Ltd. 39,708,456.88 5.44 32,057,124.35 5.99
144
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the
same category same category
Aircraft Maintenance and Engineering Corporation
11,178,133.31 1.53 5,572,650.35 1.04
(Ameco Beijing)
Aircraft Maintenance and Engineering Corporation
17,172,871.84 1.50 9,244,562.66 0.93
(Ameco Beijing)
Air China 17,077,551.66 1.50 21,580,926.14 2.16
Air China 38,441,791.87 5.27 767,471.77 0.14
Air China 8,517,578.17 74.09 6,448,583.78 73.61
Shenzhen Airlines Co., Ltd. 726,162.08 6.32 774,279.40 8.84
Air China Cargo Co., Ltd. 2,140,251.90 0.19 2,468,814.84 0.25
Sichuan International Aero Engine Maintenance Co.,
144,373,756.70 19.78 146,045,495.96 27.29
Ltd.
Chengfu FuKai Aircraft Engineering Co., Ltd. 3,970,264.20 0.54 3,292,316.90 0.62
Total 395,957,391.59 330,113,674.62
8.5.2 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 Agency service Market price
Shenzhen Airlines Co., Ltd. Agency service Market price
Shenzhen Airlines Co., Ltd. Ground service Market price
Taikoo (Shandong) Aircraft Engineering Company
Training By agreement
Limited
Total
145
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
(Continued)
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the
same category same category
Air China 6,899,922.00 99.48 10,323,343.20 97.06
Air China 230,332.10 11.92 820,994.80 8.27
Air China 1,783,584.94 36.73 1,954,422.08 41.65
Shenzhen Airlines Co., Ltd. 721,460.00 14.86 827,854.78 17.64
Shenzhen Airlines Co., Ltd. 215,482.08 11.15 308,220.00 3.10
Taikoo (Shandong) Aircraft Engineering Company Limited 0.00 0.00 280,775.00 3.99
Total 9,850,781.12 14,515,609.86
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 2013-1-1 2013-12-31 By agreement 6,771,605.19
Air China The Company Simulators 2013-1-1 2013-12-31 By agreement 855,000.00
8.5.4 Lending between related parties
Related party Amount Start date Expiry date Description
Borrowed from:
China National Aviation Finance 50,000,000.00 2012/3/21 2013/3/21 Repaid
Co., Ltd.
China National Aviation Finance 100,000,000.00 2013/6/25 2013/8/12 Repaid
Co., Ltd.
China National Aviation Finance 100,000,000.00 2013/11/28 2014/5/27 Outstanding
Co., Ltd.
8.5.5 Asset transfer between related parties
Related party Type of transaction Transaction Pricing principle
146
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Shandong XiangYu Air Technology Co., Ltd. Sales Aero materials By agreement
(Continued)
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the
same category same category
Shandong XiangYu Air Technology Co., Ltd. 102,732.90 7.10 0.00 0.00
8.5.6 Remuneration to key management personel
Range of annual remuneration Current year Prior year
Total 10.1505 million 11.1800 million
Within: (Number of management peronnel in each range)
Over 500 thousands 10 Officers 11 Officers
100 thousands to 500 thousands 5 Officers 3 Officers
Up to 100 thousands 4 Officers 5 Officers
8.5.7 Other related party transactions
Related party Transaction Pricing principle
Air China Wet lease By agreement
Air China Code sharing By agreement
Air China Cargo Co., Ltd. Code sharing for cargo By agreement
Air China Reward Points Transfer By agreement
Air China Frequent flyer cooperation By agreement
(Continued)
Current year Prior year
Related party % in total transaction % in total transaction
Amount Amount
of the same category of the same category
Air China 601,828,380.56 100.00 643,189,241.11 100.00
147
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Current year Prior year
Related party % in total transaction % in total transaction
Amount Amount
of the same category of the same category
Air China -1,538,289.97 100.00 -907,911.39 100.00
Air China Cargo Co., Ltd. 3,098,201.89 100.00 3,576,765.21 100.00
Air China 93,860,000.00 100.00 0.00 0.00
Air China 29,000,000.00 100.00 0.00 0.00
Total 726,248,292.48 645,858,094.93
8.6 Related party balances
8.6.1 Receivables owed by and prepayments to related parties
C/f B/f
Related party Allowance for bad Allowance for bad
Carrying amount Carrying amount
debt debt
Accounts receivable
Air China 123,439,238.90 0.00 54,927,044.11 0.00
Shenzhen Airlines Co., Ltd. 3,448,445.83 172,422.29 1,849,400.00 92,470.00
Air China Cargo Co., Ltd. 2,585,423.47 129,271.17 0.00 0.00
Taikoo (Shandong) Aircraft Engineering Company Limited 6,300.00 315.00 11,100.00 555.00
Total 129,479,408.20 302,008.46 56,787,544.11 93,025.00
Prepayments
Chengfu FuKai Aircraft Engineering Co., Ltd. 0.00 0.00 252,000.00 0.00
Total 0.00 0.00 252,000.00 0.00
Other receivables
Air China 13,047,895.61 0.00 9,336,264.20 0.00
Taikoo (Shandong) Aircraft Engineering Company Limited 5,862.79 293.14 0.00 0,.00
Shandong Rainbow Commercial Jet Co., Ltd. 101,551,717.65 101,551,717.65 109,051,717.65 109,051,717.65
Shenzhen Airlines Co., Ltd. 75,900.00 3,795.00 55,400.00 2,770.00
Total 114,681,376.05 101,555,805.79 118,443,381.85 109,054,487.65
148
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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 2,415,571.68 1,358,745.52
(Ameco Beijing)
Sichuan International Aero Engine Maintenance Co., 275,714.73 9,189,096.07
Ltd.
Air China 42,636,103.76 4,363,260.34
Taikoo (Shandong) Aircraft Engineering Company 22,893,378.90 15,434,555.99
Limited
Shandong XiangYu Air Technology Co., Ltd. 5,868,612.81 0.00
Air China Cargo Co., Ltd. 2,571.66 211,086.76
Chengfu FuKai Aircraft Engineering Co., Ltd. 460,000.00 631,044.32
Shenzhen Airlines Co., Ltd. 5,360.12 3,360.00
Total 74,557,313.66 31,191,149.00
Notes payable
Shandong XiangYu Air Technology Co., Ltd. 0.00 100,000.00
Total 0.00 100,000.00
Other payables
Air China 20,000,000.00 20,000,000.00
SDA Group 898,021.66 1,967,892.49
Taikoo (Shandong) Aircraft Engineering Company 245,400.00 245,400.00
Limited
Shenzhen Airlines Co., Ltd. 1,850,144.00 1,850,144.00
Total 22,993,565.66 24,063,436.49
Note 9 Contingencies
No contingency is subject to disclosure as at the reporting date.
Note 10 Commitments
149
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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 4,362,887,276.54 6,381,289,558.12
Total 4,362,887,276.54 6,381,289,558.12
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 1,072,181,014.56 766,080,155.32
Within two years from the reporting date 1,059,880,518.81 764,243,425.08
Within three years from the reporting date 1,059,880,518.81 763,137,177.08
Subsequent years 5,552,796,027.63 3,734,609,417.85
Total 8,744,738,079.81 6,028,070,175.33
Note 11 Post balance sheet date events
11.1 Post balance sheet date profit appropriation
The Proposal for Profit Appropriation for the Year ended 31 December 2013 proposing cash dividend
amounting to CNY 2.50 (gross) per 10 shares for the 400 million shares outstanding as at the reporting date
which in total amounts to CNY 100 million was approved by the 5th Meeting of the 5th Term of Board of
Directors of the Company held on 20 March 2014; the Proposal was pending the approval of the General
Meeting of the Company.
11.2 Impact of the accounting standards published or revised by the Ministry of Finance which are to
be adopted as from 1 July 2014
Caikuai[2014]No.6, Caikuai[2014]No.7, Caikuai[2014]No.8, Caikuai[2014]No.10 and Caikuai[2014]No.11 were
issued by the Ministry of Finance in early 2014 for CAS No. 39 - Fair Value Measurement, CAS No.30 -
Presentation of Financial Statement (revised in 2014), CAS No.9 - Employee benefits (revised in 2014), CAS
150
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
No. 33 - Consolidated Financial Statements (revised in 2014) and CAS No. 40 - Joint Arrangements
respectively. The standards issued thereupon shall be adopted as from 1 July 2013 by the entities adopting
CASs; though early adoption by entities with oversea listing is encouraged.
The Company is going to adopt the said standards as from 1 July 2014 and the accounting policies are to be
revised accordingly.
11.2.1 The Enterprise Accounting Standards No.9 - Employee benefits (revised in 2014) stipulates
comprehensive accounting treatments for post-employment benefits by distinguishing such benefits into
Defined Contribution Plan (hereafter, DCP) and Defined Benefit Plan (hereafter, DBP). Under a DCP, the
employer is not responsible for payment for post-employment benefits once it makes fixed payment to the
independent fund(s). A DBP is any post-employment benefit plan that is not a DCP. For a DCP, the payable
calculated per the plan shall be recognised as a liability and an equal amount is either charged to the profit or
loss for the relevant period or capitalised in the relevant assets. For a DBP, the obligation for the plan shall be
calculated based on appropriate actuarial assumptions using the estimated cumulative number of beneficiary
units; the calculated obligation shall be allocated over the periods in which services are obtained from
employees using the formula applicable to the plan; any gain or loss arising from re-measurement of the net
assets or net liabilities of the plan shall be recognised in other comprehensive income for the relevant period.
The revised standard stipulates comprehensive accounting treatments for employment benefits by the
introduction of enhanced accounting treatments for short-term employment benefits, enhanced accounting
treatments for dismissal beneifts, and other long-term employment benefits.
11.2.2 The Enterprise Accounting Standards No.30 - Presentation of Financial Statements (revised in 2014)
provides enhanced standardisation on presentation of financia statements; improves requirements for going
concern assessment, normal operation cycle, and note disclosure; and stipulates that it is mandatory to
present supplementary information to the income statement in the form of presentation expenses by nature.
The standard also stipulates that other comprehensive income presented on the face of the income statement
shall be distinguished into 1) other comprehensive income not reclassifiable to profit or loss in subsequent
periods and 2) other comprehensive income reclassifiable to profit or loss in subsequent periods upon
satisfaction of relevant conditions.
11.2.3 The Enterprise Accounting Standards No.33 - Consolidated Financial Statements (revised in 2014)
stipulates that the scope of consolidation shall be determined on the basis of control presence. The standard
provides the single model for control presence assessment. For an investor's control over an investee to be
present, the following criteria must be satisfied:
a. the investor has power over the investee; and
b. the investor is able to obtain variable economic return through participation in the investee's activities; and
c. the investor has the ability to affect the economic return from the investee through the application of its
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
power of the investee.
The standard also provides more comprehensive guidance for determination of control presence in
comparison with the previous version. In accordance with the standard, management of the Company shall
exercise significant amount of judgement in the assessment of control presence over investees.
11.2.4 As represented in the the Enterprise Accounting Standards No. 40 - Joint Arrangements , the
classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and
obligations of the parties to the arrangement. A joint operation is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement have the rights to the net assets of the arrangement. The equity method shall be used in
accounting for investments in joint ventures. As for joint operation, a joint operator shall recognize in relation to
its interest in a joint operation: (1) its assets, including its share of any assets held jointly; (2) its liabilities,
including its share of any liabilities incurred jointly; (3) its revenue from the sale of its share of the output
arising from the joint operation; (4) its expenses, including its share of any expenses incurred jointly.
11.2.5 The Enterprise Accounting Standards No. 39 - Fair Value Measurement standardise the definition of fair
value, stipulates measurement of fair value by distinguishing fair value measurement into three hierarchies
with reference for inputs used, and stipulates disclosure requirements for information relevant to measurement
of fair value. The standard, however, does not amend the provisions of other CASs as to the circumstances
when fair value measurement is applicable.
Note 12 Other significant events
12.1 Assets and liabilities measured by fair value
Cumulative fair value
Current year fair value Current year
Item B/f movement recognised in C/f
movement impairment
equity
Financial liabilities
Derivative financial liabilities 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47
Total 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47
12.2 Financial assets and liabilities denominated in foreign currencies
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Cumulative fair
Current year fair value movement Current year
Item B/f C/f
value movement recognised in impairment
equity
Financial liabilities
Derivative financial liabilities 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47
Total 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47
Note 13 Notes to the separate financial statements
13.1 Accounts receivable
13.1.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance and
179,936,813.57 73.02 0.00 0.00
subject to individual impairment assessment
Accounts receivable subject to impairment
assessment by portfolio
Portfolio by nature 52,977,940.37 21.50 2,648,897.02 5.00
Subtotal 52,977,940.37 21.50 2,648,897.02 5.00
Accounts receivable of individual insignificance
13,501,734.26 5.48 0.00 0.00
but subject to individual impairment assessment
Total 246,416,488.20 100.00 2,648,897.02 1.07
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance and
137,210,577.33 76.05 0.00 0.00
subject to individual impairment assessment
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
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
7,197,683.67 3.99 0.00 0.00
but subject to individual impairment assessment
Total 180,424,246.80 100.00 1,800,778.94 1.00
13.1.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 246,299,519.24 99.95 180,029,268.67 99.78
1 to 2 years 25,803.14 0.01 252,427.26 0.14
2 to 3 years 13,173.40 0.01 107,775.05 0.06
Over 3 years 77,992.42 0.03 34,775.82 0.02
Total 246,416,488.20 100.00 180,424,246.80 100.00
13.1.3 Allowance for bad debt
① Accounts receivable of individual significance and subject to individual impairment assessment
Allowance for bad Rate of allowance
Debtor Carrying amount Reason for allowance
debt (%)
No indication of impairment
Air China 123,439,238.90 0.00 0.00
upon individual assessment
No indication of impairment
BSP-CHINA 56,497,574.67 0.00 0.00
upon individual assessment
Total 179,936,813.57
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 52,977,940.37 5.00 2,648,897.02
Total 52,977,940.37 5.00 2,648,897.02
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
Allowance for bad Rate of
Debtor Carrying amount Reason for allowance
debt allowance (%)
BSP-JAPAN No indication of impairment upon
320,905.02 0.00 0.00
individual assessment
BSP-TAIWAN No indication of impairment upon
2,149,104.94 0.00 0.00
individual assessment
UATP No indication of impairment upon
1,770,413.66 0.00 0.00
individual assessment
Accounting Center of China Aviation No indication of impairment upon
9,261,310.64 0.00 0.00
Limited Company individual assessment
Total 13,501,734.26 0.00 0.00
13.1.4 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 123,439,238.90 0.00 54,927,044.11 0.00
Total 123,439,238.90 0.00 54,927,044.11 0.00
13.1.5 Top five accounts receivable
Relationship to the % of total accounts
Debtor Amount Age
Company receivable
Air China Related party 123,439,238.90 Within 1 year 50.09
BSP-CHINA Third party 56,497,574.67 Within 1 year 22.93
Accounting Center of China Aviation
Third party 9,261,310.64 Within 1 year 3.76
Limited Company
Air China Cargo Co., Ltd. Related party 2,585,423.47 Within 1 year 1.05
Hainan Airlines Company Limited Third party 2,360,400.00 Within 1 year 0.96
Total 194,143,947.68 78.79
13.1.6 Related party balances
Debtor Relationship to the Company Amount % of total
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
accounts
receivable
Air China Major investor 123,439,238.90 50.09
Shenzhen Airlines Co., Ltd. Controlled by the main investor 1,599,045.83 0.65
Qingdao International Air Logistics
The subsidiary of the company 1,479,640.16 0.60
Centre Co., Ltd
Air China Cargo Co., Ltd. Controlled by the main investor 2,585,423.47 1.05
Taikoo (Shandong) Aircraft Engineering
Controlled by the main investor 6,300.00 0.00
Company Limited
Total 129,109,648.36 52.39
13.2 Other receivables
13.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
185,011,727.43 47.99 101,551,717.65 54.89
subject to individual impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 112,409,411.93 29.16 5,620,470.60 5.00
Subtotal 112,409,411.93 29.16 5,620,470.60 5.00
Other receivables of individual insignificance but
88,116,339.86 22.86 0.00 0.00
subject to individual impairment assessment
Total 385,537,479.22 100.00 107,172,188.25 27.80
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Other receivables of individual significance and
150,406,280.93 37.25 109,051,717.65 72.50
subject to individual 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
Other receivables of individual insignificance but
98,701,440.00 24.44 0.00 0.00
subject to individual impairment assessment
Total 403,797,187.14 100.00 116,786,190.96 28.92
13.2.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 145,558,853.12 37.76 181,310,421.00 44.90
1 to 2 years 47,973,303.18 12.44 21,442,689.76 5.31
2 to 3 years 16,699,480.03 4.33 15,259,329.67 3.78
Over 3 years 175,305,842.89 45.47 185,784,746.71 46.01
Total 385,537,479.22 100.00 403,797,187.14 100.00
13.2.3 Allowance for bad debt
① Other receivables of individual significance and subject to individual impairment assessment
Rate of
Allowance for bad
Debtor Carrying amount allowance Reason for allowance
debt
(%)
Impaired collectibility
Shandong Rainbow Commercial Jet Co., Ltd. 101,551,717.65 101,551,717.65 100.00 identified upon individual
assessment
Qingdao International Air Logistics Centre No indication of impairment
42,105,446.50 0.00 0.00
Co., Ltd upon individual assessment
No indication of impairment
CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00
upon individual assessment
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Rate of
Allowance for bad
Debtor Carrying amount allowance Reason for allowance
debt
(%)
Total 185,011,727.43 101,551,717.65 54.89
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 112,409,411.93 5.00 5,620,470.60
Total 112,409,411.93 5.00 5,620,470.60
③ Other receivables of individual insignificance but subject to individual impairment assessment
Allowance for Rate of allowance
Debtor Carrying amount Reason for allowance
bad debt (%)
No indication of impairment
Air China 13,047,895.61 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #1 17,901,423.94 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #2 17,300,360.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #3 185,361.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #4 166,824.90 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #5 469,581.20 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #6 490,736.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #7 617,870.00 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #8 4,942,960.00 0.00 0.00
upon individual assessment
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Allowance for Rate of allowance
Debtor Carrying amount Reason for allowance
bad debt (%)
No indication of impairment
Debtor #9 3,262,353.60 0.00 0.00
upon individual assessment
No indication of impairment
Debtor #10 4,238,588.20 0.00 0.00
upon individual assessment
No indication of impairment
Ji'nan Customs 11,472,711.51 0.00 0.00
upon individual assessment
No indication of impairment
Capital Airport Customs 14,019,673.90 0.00 0.00
upon individual assessment
Total 88,116,339.86 0.00 0.00
13.2.4 Other receivables 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 13,047,895.61 0.00 9,336,264.20 0.00
Total 13,047,895.61 0.00 9,336,264.20 0.00
13.2.5 Top five other receivables
Relationship to the % of total other
Debtor Amount Age
Company receivables
Shandong Rainbow Commercial Jet Co., Ltd. Related party 101,551,717.65 Over 3 years 26.34
Debtor #1 Third party 61,213,069.70 Within 1 year 15.88
Qingdao International Air Logistics Centre
Related party 42,105,446.50 Within 3 year 10.92
Co., Ltd
CBD-leasing Co., Ltd. Third party 41,354,563.28 Over 3 years 10.73
Debtor #2 Third party 17,901,423.94 Over 3 years 4.64
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Total 264,126,221.07 68.51
13.2.6 Related party balances
% of total other
Debtor Relationship to the Company Amount
receivables
Shandong Rainbow Commercial Jet Co.,
Associate 101,551,717.65 26.34
Ltd.
Qingdao Logistics Wholly owned subsidiary 42,105,446.50 10.92
Air China Major investor 13,047,895.61 3.38
Qingdao Feisheng Wholly owned subsidiary 1,503,226.70 0.39
Shenzhen Airlines Co., Ltd. Controlled by major investor 75,900.00 0.02
Total 158,284,186.46 41.05
13.2.7 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 20,080,940.89 6.0969 122,431,488.54 13,821,767.06 6.2855 86,876,716.86
13.3 Long-term equity investments
13.3.1 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
13.3.2 Details of long-term equity investments
Measurement Cost of Current year
Investee B/f 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 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
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Measurement Cost of Current year
Investee B/f C/f
method investment movement
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 Co., Ltd. Equity method 22,500,000.00 22,500,000.00 0.00 22,500,000.00
Total 216,852,785.43 216,852,785.43 0.00 216,852,785.43
(Continued)
Reason for
Impairment
disagreement
Shareholding Voting right Impairment allowance Cash dividend in
Investee between
(%) (%) allowance recognised in current year
shareholding and
current year
voting right
China Travelsky Technology Co.,
0.45 0.45 In agreement 0.00 0.00 1,735,051.50
Ltd.
Sichuan Airlines 10.00 10.00 In agreement 0.00 0.00 14,325,586.06
Jinan International Airport Co., Ltd. 2.53 2.53 In agreement 0.00 0.00 712,063.65
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 Commercial
45.00 45.00 In agreement 22,500,000.00 0.00 0.00
Jet Co., Ltd.
Total 22,500,000.00 0.00 16,772,701.21
13.3.3 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 Jet Co.,
22,500,000.00 0.00 0.00 22,500,000.00
Ltd.
Total 22,500,000.00 0.00 0.00 22,500,000.00
13.4 Revenue and operating costs
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
13.4.1 General information
Category Current year Prior year
Principal operating income 11,278,078,297.98 10,875,044,743.90
Other operating income 133,816,089.59 100,535,873.07
Total 11,411,894,387.57 10,975,580,616.97
Principal operating cost 9,699,224,738.43 8,566,066,767.30
Other operating cost 2,187,655.80 4,478,787.52
Total 9,701,412,394.23 8,570,545,554.82
13.4.2 Disclosure by service line
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost
Aero transportation 11,232,141,639.73 9,666,874,791.95 10,845,887,973.75 8,543,555,576.57
Hospitality and catering 30,362,647.64 27,348,610.96 22,119,064.02 19,496,643.53
Training 15,574,010.61 5,001,335.52 7,037,706.13 3,014,547.20
Total 11,278,078,297.98 9,699,224,738.43 10,875,044,743.90 8,566,066,767.30
13.4.3 Operating income from top five customers
Year Operating income % of total operating income
2013 681,700,941.89 5.97
2012 701,094,111.08 6.39
13.5 Investment income
13.5.1 Disclosure by category
Category Current year Prior year
Income from long-term equity investments measured at cost 16,772,701.21 16,247,366.84
Income from holding of financial assets held for trading -2,609,524.71 -1,852,852.05
Total 14,163,176.50 14,394,514.79
13.5.2 Income from long-term equity investments measured at cost
Investee Current year Prior year
China Travelsky Technology Co., Ltd. 1,735,051.50 1,565,460.00
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Investee Current year Prior year
Sichuan Airlines 14,325,586.06 13,730,000.00
Jinan International Airport Co., Ltd. 712,063.65 951,906.84
Total 16,772,701.21 16,247,366.84
13.6 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 397,067,863.95 582,287,775.57
Add: Loss on asset impairment 70,348,934.03 194,946,539.59
Depreciation of fixed assets, oil and gas assets, bioogical assets held for
780,197,846.67 720,279,551.90
production
Amortisation of intangible assets 1,849,103.36 1,399,694.64
Amortisation of deferred charges 52,123,842.15 45,593,508.02
Loss on non-current assets disposal (gain presented by "-" prefix) -71,758,688.71 -53,988.17
Loss on scrap of fixed assets (gain presented by "-" prefix) 2,758,941.77 6,905,518.55
Loss on fair value changes (gain presented by "-" prefix) -6,901,881.12 5,053,262.49
Fianncial costs (gain presented by "-" prefix) 148,244,330.64 238,341,003.26
Investment loss (gain presented by "-" prefix) -14,163,176.50 -14,394,514.79
Decrease of deferred tax assets (increase presented by "-" prefix) 11,761,387.65 -220,886,871.11
Increase of deferred tax liabilities (increase presented by "-" prefix) 0.00 0.00
Decrease of inventories (increase presented by "-" prefix) 8,972,490.54 9,195,192.86
Decrease of operating receivables (increase presented by "-" prefix) -120,338,644.44 -86,813,804.28
Increase of operating payables (decrease presented by "-" prefix) 123,929,491.48 212,075,973.25
Others 0.00 0.00
Net cash flows generated from operating activities 1,384,091,841.47 1,693,928,841.78
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 0.00
③ Movement of cash and cash equivalents:
Cash C/f 421,826,370.62 143,212,750.59
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Less: Cash B/f 143,212,750.59 235,921,301.34
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 278,613,620.03 -92,708,550.75
Note 14 Supplementary information
14.1 Non-recurring profit and loss
Category Current year Prior year
Gains from disposals of non-current assets after expending impairment
68,990,941.57 -6,848,192.53
provisions
Exceeded-authority approved, non-official approved or accidental tax
0.00 0.00
repayment and relief
Government grants recognised through profit or loss for the current reporting
period, excluding grants which are closely related to the Company’s operating
22,465,841.77 52,137,058.47
activities and of which the quota or approval is eligible for automatic renewal in
accordance with relevant regulations
Financial resource usage fees charged on non-financial institution recognised
0.00 0.00
through profit or loss for the current reporting period
Gains arising from bargain purchase in business combination and investments
0.00 0.00
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 entity
0.00 0.00
during the period from the start of the period to the acquisition date
Gains or losses arising from contingent events unconnected with the
0.00 0.00
Company’s daily operating activities
164
SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Category Current year Prior year
Fair value changes of tradable financial assets and tradable financial liabilities
held and gains or losses arising from disposals of tradable financial assets, tradable
4,292,356.41 -6,906,114.54
financial liabilities and available-for-sale financial assets, excluding hedging contracts
relevant to the Company’s daily operating activities
Reversal of impairment provision for accounts receivables eligible for individual
7,500,000.00 0.00
impairment assessment
Gains or losses arising from consigned borrowings 0.00 0.00
Fair value changes of property investments subsequently measured at fair
0.00 0.00
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 165,501,423.87 94,505,753.93
Other gains or losses satisfying the definition of extraordinary gains or losses 67,342,734.17 0.00
Subtotal 336,093,297.79 132,888,505.33
Less: Impact of income tax 84,861,804.44 33,224,210.01
Less: Impact on non-controlling interest 0.00 0.00
Total 251,231,493.35 99,664,295.32
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).
14.2 Rate of return on net assets and earnings per share
Weighted average rate Earnings per share (CNY/share)
Profit catetory
of RONA Basic EPS Diluted EPS
Net profit attributable to ordinary shareholders 15.08% 0.97 0.97
Recurring profit or loss attributable to ordinary shareholders 5.34% 0.34 0.34
Notes: Computation of basic earnings per share and diluted earnings per share Note 7.46.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
14.3 Significant change of major element of the consolidated financial statements
14.3.1 Elements of the consolidated statement of financial position
① Monetary funds amounting to 444,522,271.21 as at the reporting date: 186.02% increase from
last year mainly resulted from other cash receipts relating to financing activities.
② Accounts receivables amounting to 250,524,757.67 as at the reporting date: 34.63% increase
from last year mainly resulted from incrase of wet lease receivables as from Air China
③ Prepayments amounting to 88,182,040.98 as at the reporting date: 54.90% increase from last year mainly
resulted from increase of prepaid aircraft lease rental due to increased number of leased aircrafts.
④ Goodwill amounting to 0.00 as at the reporting date 100.00% decrease from last year mainly resulted from
recognition of goodwill impairment.
⑤ Short-term borrowings amounting to 434,137,220.00 as at the reporting date: 35.09% increase from last
year mainly resulted from short-term borrowings obtained in the current year were yet to expire as at the
reporting date.
⑥ Financial liabilities held for trading amounting to 296,902.47 as at the reporting date: 95.88% decrease
from last year mainly resulted from changes of fair value of interest rate swaps held.
⑦ Advances from customers amounting to 343,468,052.97 as at the reporting date: 59.67% increase from
last year mainly resulted from increase of air ticket sold in advance.
⑧ Taxes and fees payable amounting to 110,064,437.61 as at the reporting date: 52.08% decrease from last
year mainly resulted from decrease in enterprise income tax due to the payment of prior year income tax
liability and decrease of taxable profit in the current year.
⑨ Non-current liabilities due within one year amounting to 533,150,658.42 as at the reporting date: 35.81%
increase from last year mainly resulted from increase of long-term borrowings due in next year.
⑩ Other non-current liabilities amounting to 25,367,524.34 as at the reporting date: 86.37% decrease from
last year mainly resulted from dispose of accumulated reward points
14.3.2 Elements of the consolidated statement comprehensive income
① Business tax and surcharges amounting to 238,665,537.66 for the period: 34.30% decrease from
last year mainly resulted from business-tax-to-value-added-tax conversion as from August 2013.
② Financial costs amounting to 142,819,611.58 for the period: 41.35% decrease from last year mainly
resulted from increased gain from exchange difference due to CNY's appreciation against USD.
③ Loss on asset impairment amounting to 82,359,203.47 for the period: 57.53% decrease from last year
mainly resulted from reversal of allowance for bad debts and decrease in impairment provisions for fixed
assets.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
④ Changes in the fair value of derivatives amounting to 6,901,881.12 for the period (2012 comparative:
-5,053,262.49) mainly resulted from changes of fair value of interest rate swaps held
⑤ Non-operating income amounting to 270,407,969.61 for the period: 83.72% increase from last year mainly
resulted from gain on disposal of fixed assets and increase in receipts of air route subsidy.
1 Non-operating expenses amounting to 13,449,762.40 for the period: 81.93% increase from last year
mainly resulted from loss on disposal of fixed assets.
14.3.3 Elements of the statement of cash flows
① Other cash receipts relating to operating activities amounting to 298,723,497.82 for the period: 115.89%
increase from last year mainly resulted from increase in receipts of air route subsidy and current accounts.
② Cash received from investment income amounting to 2,447,115.15 for the period: 84.94% decrease from
last year mainly resulted from the pending accounts dividend receivable from Sichuan Airlines.
③ The net cash receipt from disposal of fixed assets, intangible assets and other long-term assets amounting
to 174,681,542.77 for the period: 2,110.57 times increase from last year mainly resulted from increase in
receipts of aircraft assets disposal.
④ Other cash payments relating to investing activities amounting to 2,609,524.71 for the period: 40.84%
increase from last year mainly resulted from decrease in Income from holding of financial assets held for
trading
⑤ Cash received from issuing bonds amounting to 0.00 for the period 100.00% decrease from last year
mainly resulted from no bond issue in the current year.
⑥ Other cash receipts relating to financing activities amounting to 903,064,822.94 for the period 119.89 times
increase from last year mainly resulted from receipt of consideration for disposed purchase rights on aircraft
which became acquired under operating lease.
⑦ The cash payments relating to debt redemption amounting to 1,664,222,540.40 for the period
33.83% increase from last year mainly resulted from the increased amount of debt repayment.
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SHANDONG AIRLINES CO., LTD. ANNUAL REPORT 2013
Section XI. Documents available for Reference
1. Financial statements carrying the personal signatures and seals of Chairman of the Board, Chief Accountant and
Person in Charge of Accounting Department;
2. Original of Auditors’ Report carrying the seals of Certified Public Accountants as well as personal signatures
and seals of certified public accountants;
3. Originals of all documents and notices publicly disclosed on newspapers designated by CSRC in the report
period in 2013;
4. The Company will offer above documents for reference timely provided that CSRC or Stock Exchange
demands or shareholders requires according to the regulations and Articles of Association.
Board of Directors of
Shandong Airlines Co., Ltd.
20 March 2014
168
