Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Shandong Airlines Co., Ltd.
2016 Semi-Annual Financial Report
I. Audit report
The semi-annual financial report has not been audited
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated Balance Sheet
Prepared by Shandong Airlines Co., Ltd
2016-06-30
In RMB
Item Closing balance Opening balance
Current assets:
Monetary funds 592,355,497.98 1,415,399,630.60
Settlement provisions
Capital lent
Financial assets measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial liability
Notes receivable 50,000.00
Accounts receivable 386,655,865.82 255,782,921.88
Accounts paid in advance 178,088,718.99 154,897,777.19
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance
receivable
Interest receivable
Dividend receivable 4,381,900.00
Other receivables 302,318,701.21 280,489,032.02
Purchase restituted finance asset
Inventories 123,806,231.05 112,307,440.99
Divided into assets held for sale
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Non-current asset due within one
year
Other current assets 19,505,500.21 46,425,506.53
Total current assets 1,602,780,515.26 2,269,684,209.21
Non-current assets:
Loans and payments on behalf
Finance asset available for sales 247,796,933.86 221,122,773.92
Held-to-maturity investment
Long-term account receivable
Long-term equity investment
Investment property
Fixed assets 7,352,511,714.03 7,156,258,169.93
Construction in progress 2,269,982,589.58 2,062,310,572.89
Engineering material
Disposal of fixed asset
Productive biological asset
Oil and gas asset
Intangible assets 112,828,438.85 115,405,609.56
Expense on Research and
Development
Goodwill
Long-term expenses to be
464,660,852.34 446,508,148.36
apportioned
Deferred income tax asset 617,666,294.89 453,818,799.19
Other non-current asset 8,892,890.28 23,794,314.90
Total non-current asset 11,074,339,713.83 10,479,218,388.75
Total assets 12,677,120,229.09 12,748,902,597.96
Current liabilities:
Short-term loans
Loan from central bank
Absorbing deposit and interbank
deposit
Capital borrowed
Financial liability measured by fair
value and with variation reckoned into 7,297,084.84 3,370,447.62
current gains/losses
Derivative financial liability
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Notes payable 25,299,479.50
Accounts payable 1,389,285,725.83 1,128,629,695.55
Accounts received in advance 358,607,337.77 432,216,409.37
Selling financial asset of
repurchase
Commission charge and
commission payable
Wage payable 375,563,867.20 455,788,600.48
Taxes payable 210,356,564.84 105,147,871.19
Interest payable 3,968,905.21 3,638,536.32
Dividend payable 100,011,940.00 11,940.00
Other accounts payable 395,190,653.97 355,629,762.77
Reinsurance payables
Insurance contract reserve
Security trading of agency
Security sales of agency
Divided into liability held for sale
Non-current liabilities due within 1
1,573,599,717.72 1,487,011,320.66
year
Other current liabilities
Total current liabilities 4,413,881,797.38 3,996,744,063.46
Non-current liabilities:
Long-term loans 1,981,001,979.08 2,887,701,872.70
Bonds payable
Including: preferred stock
Perpetual capital
securities
Long-term account payable 2,576,884,332.00 2,366,241,176.93
Long-term wages payable 81,725,074.95 84,214,087.72
Special accounts payable
Projected liabilities
Deferred income 15,057,524.04 15,795,524.10
Deferred income tax liabilities 39,861,208.47 33,192,668.48
Other non-current liabilities
Total non-current liabilities 4,694,530,118.54 5,387,145,329.93
Total liabilities 9,108,411,915.92 9,383,889,393.39
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Owner’s equity:
Share capital 400,000,000.00 400,000,000.00
Other equity instrument
Including: preferred stock
Perpetual capital
securities
Capital public reserve 75,410,363.70 75,410,363.70
Less: Inventory shares
Other comprehensive income 113,560,625.39 93,555,005.44
Reasonable reserve
Surplus public reserve 370,981,095.40 370,981,095.40
Provision of general risk
Retained profit 2,608,756,228.68 2,425,066,740.03
Total owner’s equity attributable to
3,568,708,313.17 3,365,013,204.57
parent company
Minority interests
Total owner’s equity 3,568,708,313.17 3,365,013,204.57
Total liabilities and owner’s equity 12,677,120,229.09 12,748,902,597.96
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
2. Balance Sheet of Parent Company
In RMB
Item Closing balance Opening balance
Current assets:
Monetary funds 574,479,218.70 1,401,853,786.39
Financial assets measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial liability
Notes receivable
Accounts receivable 380,692,511.12 251,589,118.43
Account paid in advance 176,672,285.60 153,733,245.51
Interest receivable
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Dividends receivable 4,381,900.00
Other receivables 351,946,789.16 323,753,261.30
Inventories 123,806,231.05 112,307,440.99
Divided into assets held for sale
Non-current assets maturing within
one year
Other current assets 19,505,500.21 46,425,506.53
Total current assets 1,627,102,535.84 2,294,044,259.15
Non-current assets:
Available-for-sale financial assets 247,796,933.86 221,122,773.92
Held-to-maturity investments
Long-term receivables
Long-term equity investments 106,000,685.43 106,000,685.43
Investment property
Fixed assets 7,255,746,854.15 7,055,065,593.26
Construction in progress 2,269,906,589.58 2,062,234,572.89
Project materials
Disposal of fixed assets
Productive biological assets
Oil and natural gas assets
Intangible assets 98,691,851.56 101,074,925.84
Research and development costs
Goodwill
Long-term deferred expenses 464,660,852.34 446,508,148.36
Deferred income tax assets 616,940,725.29 453,010,410.16
Other non-current assets 8,892,890.28 23,794,314.90
Total non-current assets 11,068,637,382.49 10,468,811,424.76
Total assets 12,695,739,918.33 12,762,855,683.91
Current liabilities:
Short-term borrowings
Financial liability measured by fair
value and with variation reckoned into 7,297,084.84 3,370,447.62
current gains/losses
Derivative financial liability
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Notes payable 25,299,479.50
Accounts payable 1,407,509,464.68 1,139,113,395.22
Accounts received in advance 354,605,881.77 425,229,854.14
Wage payable 372,113,752.55 449,749,937.20
Taxes payable 208,968,868.95 103,940,014.68
Interest payable 3,968,905.21 3,638,536.32
Dividend payable 100,011,940.00 11,940.00
Other accounts payable 416,191,873.27 380,180,859.11
Divided into liability held for sale
Non-current liabilities due within 1
1,573,599,717.72 1,487,011,320.66
year
Other current liabilities
Total current liabilities 4,444,267,488.99 4,017,545,784.45
Non-current liabilities:
Long-term loans 1,981,001,979.08 2,887,701,872.70
Bonds payable
Including: preferred stock
Perpetual capital
securities
Long-term account payable 2,576,884,332.00 2,366,241,176.93
Long-term wages payable 81,725,074.95 84,214,087.72
Special accounts payable
Projected liabilities
Deferred income 15,057,524.04 15,795,524.10
Deferred income tax liabilities 39,861,208.47 33,192,668.48
Other non-current liabilities
Total non-current liabilities 4,694,530,118.54 5,387,145,329.93
Total liabilities 9,138,797,607.53 9,404,691,114.38
Owners’ equity:
Share capita 400,000,000.00 400,000,000.00
Other equity instrument
Including: preferred stock
Perpetual capital
securities
Capital public reserve 86,911,168.71 86,911,168.71
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Less: Inventory shares
Other comprehensive income 113,560,625.39 93,555,005.44
Reasonable reserve
Surplus reserve 370,320,390.87 370,320,390.87
Retained profit 2,586,150,125.83 2,407,378,004.51
Total owner’s equity 3,556,942,310.80 3,358,164,569.53
Total liabilities and owner’s equity 12,695,739,918.33 12,762,855,683.91
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
3. Consolidated Profit Statement
In RMB
Item Current Period Last Period
I. Total operating income 6,309,749,290.22 5,713,724,522.71
Including: Operating income 6,309,749,290.22 5,713,724,522.71
Interest income
Insurance gained
Commission charge and commission
income
II. Total operating cost 6,040,032,215.28 5,442,451,100.06
Including: Operating cost 5,423,567,853.72 4,846,875,591.65
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 24,266,018.24 23,124,036.37
Sales expenses 329,309,482.29 364,570,137.45
Administration expenses 148,238,372.25 127,612,535.04
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Financial expenses 114,208,514.18 77,607,520.78
Losses of devaluation of asset 441,974.60 2,661,278.77
Add: Changing income of fair
-3,926,637.22 -3,117,198.69
value(Loss is listed with “-”)
Investment income (Loss is listed
-850,513.68 -20,182,489.74
with “-”)
Including: Investment income on
-24,215,803.75
affiliated company and joint venture
Exchange income (Loss is listed
with “-”)
III. Operating profit (Loss is listed with
264,939,924.04 247,973,734.22
“-”)
Add: Non-operating income 115,697,616.85 53,152,655.78
Including: Disposal gains of
38,150.95 8,162.52
non-current asset
Less: Non-operating expense 2,579,552.24 1,013,941.37
Including: Disposal loss of
1,994,829.83 933,279.17
non-current asset
IV. Total Profit (Loss is listed with “-”) 378,057,988.65 300,112,448.63
Less: Income tax expense 94,368,500.00 83,305,574.94
V. Net profit (Net loss is listed with “-”) 283,689,488.65 216,806,873.69
Net profit attributable to owner’s of
283,689,488.65 216,806,873.69
parent company
Minority shareholders’ gains and
losses
VI. Net after-tax of other comprehensive
20,005,619.95 23,431,316.08
income
Net after-tax of other comprehensive
income attributable to owners of parent 20,005,619.95 23,431,316.08
company
(I) Other comprehensive income
items which will not be reclassified
subsequently to profit of loss
1. Changes as a result of
re-measurement of net defined benefit
plan liability or asset
2. Share of the other
comprehensive income of the investee
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
accounted for using equity method which
will not be reclassified subsequently to
profit and loss
(II) Other comprehensive income
items which will be reclassified 20,005,619.95 23,431,316.08
subsequently to profit or loss
1. Share of the other
comprehensive income of the investee
accounted for using equity method which
will be reclassified subsequently to profit
or loss
2. Gains or losses arising
from changes in fair value of 20,005,619.95 23,431,316.08
available-for-sale financial assets
3. Gains or losses arising
from reclassification of held-to-maturity
investment as available-for-sale financial
assets
4. The effect hedging portion
of gains or losses arising from cash flow
hedging instruments
5. Translation differences
arising on translation of foreign currency
financial statements
6. Other
Net after-tax of other comprehensive
income attributable to minority
shareholders
VII. Total comprehensive income 303,695,108.60 240,238,189.77
Total comprehensive income
303,695,108.60 240,238,189.77
attributable to owners of parent Company
Total comprehensive income
attributable to minority shareholders
VIII. Earnings per share:
(i) Basic earnings per share 0.71 0.54
(ii) Diluted earnings per share 0.71 0.54
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
4. Profit Statement of Parent Company
In RMB
Item Current Period Last Period
I. Operating income 6,293,688,379.45 5,698,248,680.92
Less: Operating cost 5,418,293,516.30 4,838,880,868.28
Operating tax and extras 24,123,637.71 22,994,974.43
Sales expenses 329,309,482.29 364,570,137.45
Administration expenses 143,672,314.98 123,598,513.63
Financial expenses 114,199,663.35 77,632,215.06
Losses of devaluation of asset 773,252.30 2,511,372.36
Add: Changing income of fair
-3,926,637.22 -3,117,198.69
value(Loss is listed with “-”)
Investment income (Loss is
-850,513.68 -20,182,489.74
listed with “-”)
Including: Investment income
-24,215,803.75
on affiliated company and joint venture
II. Operating profit (Loss is listed
258,539,361.62 244,760,911.28
with “-”)
Add: Non-operating income 115,693,629.15 53,152,231.28
Including: Disposal gains of
non-current asset
Less: Non-operating expense 2,575,514.24 1,009,191.08
Including: Disposal loss of
1,990,791.83 932,533.05
non-current asset
III. Total Profit (Loss is listed with
371,657,476.53 296,903,951.48
“-”)
Less: Income tax expense 92,885,355.21 82,672,716.13
IV. Net profit (Net loss is listed with
278,772,121.32 214,231,235.35
“-”)
V. Net after-tax of other comprehensive
20,005,619.95 23,431,316.08
income
(I) Other comprehensive income
items which will not be reclassified
subsequently to profit of loss
1. Changes as a result of
re-measurement of net defined benefit
plan liability or asset
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
2. Share of the other
comprehensive income of the investee
accounted for using equity method
which will not be reclassified
subsequently to profit and loss
(II) Other comprehensive income
items which will be reclassified 20,005,619.95 23,431,316.08
subsequently to profit or loss
1. Share of the other
comprehensive income of the investee
accounted for using equity method
which will be reclassified subsequently
to profit or loss
2. Gains or losses arising
from changes in fair value of 20,005,619.95 23,431,316.08
available-for-sale financial assets
3. Gains or losses arising
from reclassification of held-to-maturity
investment as available-for-sale
financial assets
4. The effect hedging
portion of gains or losses arising from
cash flow hedging instruments
5. Translation differences
arising on translation of foreign
currency financial statements
6. Other
VI. Total comprehensive income 298,777,741.27 237,662,551.43
VII. Earnings per share:
(i) Basic earnings per share
(ii) Diluted earnings per share
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
5. Consolidated Cash Flow Statement
In RMB
Item Current Period Last Period
I. Cash flows arising from operating
11
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
activities:
Cash received from selling
commodities and providing labor 6,717,200,924.09 6,110,810,441.25
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 amount from
disposal financial assets that measured
by fair value and with variation
reckoned into current gains/losses
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
161,074,121.88 119,263,089.42
operating activities
Subtotal of cash inflow arising from
6,878,275,045.97 6,230,073,530.67
operating activities
Cash paid for purchasing
commodities and receiving labor 4,217,304,381.84 4,150,373,732.90
service
Net increase of customer loans and
advances
Net increase of deposits in central
bank and interbank
Cash paid for original insurance
contract compensation
12
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Cash paid for interest, commission
charge and commission
Cash paid for bonus of guarantee
slip
Cash paid to/for staff and workers 1,215,874,548.17 1,044,124,984.32
Taxes paid 341,409,771.76 169,322,459.34
Other cash paid concerning
79,190,611.98 84,669,698.40
operating activities
Subtotal of cash outflow arising from
5,853,779,313.75 5,448,490,874.96
operating activities
Net cash flows arising from operating
1,024,495,732.22 781,582,655.71
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
4,381,903.47 6,111,315.92
income
Net cash received from disposal of
fixed, intangible and other long-term 37,726,458.52
assets
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning
investing activities
Subtotal of cash inflow from investing
4,381,903.47 43,837,774.44
activities
Cash paid for purchasing fixed,
1,030,491,927.70 782,637,435.20
intangible and other long-term assets
Cash paid for investment
Net increase of mortgaged loans
Net cash received from
subsidiaries and other units obtained
Other cash paid concerning
421,533.02 1,390,588.27
investing activities
Subtotal of cash outflow from investing
1,030,913,460.72 784,028,023.47
activities
Net cash flows arising from investing -1,026,531,557.25 -740,190,249.03
13
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
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 296,000,000.00 516,161,233.20
Cash received from issuing bonds
Other cash received concerning
195,845,614.80 883,986,750.53
financing activities
Subtotal of cash inflow from financing
491,845,614.80 1,400,147,983.73
activities
Cash paid for settling debts 1,183,487,265.46 1,006,376,333.22
Cash paid for dividend and profit
56,263,754.65 111,445,222.20
distributing or interest paying
Including: Dividend and profit of
minority shareholder paid by
subsidiaries
Other cash paid concerning
85,871,334.98 79,014,450.69
financing activities
Subtotal of cash outflow from financing
1,325,622,355.09 1,196,836,006.11
activities
Net cash flows arising from financing
-833,776,740.29 203,311,977.62
activities
IV. Influence on cash and cash
equivalents due to fluctuation in 12,768,432.70 -72,933.89
exchange rate
V. Net increase of cash and cash
-823,044,132.62 244,631,450.41
equivalents
Add: Balance of cash and cash
1,415,399,630.60 460,741,336.35
equivalents at the period -begin
VI. Balance of cash and cash
592,355,497.98 705,372,786.76
equivalents at the period -end
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
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Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
6. Cash Flow Statement of Parent Company
In RMB
Item Current Period Last Period
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 6,704,250,463.84 6,080,941,093.13
services
Write-back of tax received
Other cash received concerning
161,050,542.56 119,228,556.89
operating activities
Subtotal of cash inflow arising from
6,865,301,006.40 6,200,169,650.02
operating activities
Cash paid for purchasing
commodities and receiving labor 4,216,655,959.09 4,136,326,564.75
service
Cash paid to/for staff and workers 1,204,469,134.52 1,035,799,817.49
Taxes paid 338,480,357.99 167,525,092.40
Other cash paid concerning
85,634,144.49 84,665,572.22
operating activities
Subtotal of cash outflow arising from
5,845,239,596.09 5,424,317,046.86
operating activities
Net cash flows arising from operating
1,020,061,410.31 775,852,603.16
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
4,381,903.47 6,111,315.92
income
Net cash received from disposal of
fixed, intangible and other long-term 37,726,034.02
assets
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning
investing activities
15
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Subtotal of cash inflow from investing
4,381,903.47 43,837,349.94
activities
Cash paid for purchasing fixed,
1,030,388,040.86 782,334,406.41
intangible and other long-term assets
Cash paid for investment
Net cash received from
subsidiaries and other units
Other cash paid concerning
421,533.02 1,390,588.27
investing activities
Subtotal of cash outflow from investing
1,030,809,573.88 783,724,994.68
activities
Net cash flows arising from investing
-1,026,427,670.41 -739,887,644.74
activities
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Cash received from loans 296,000,000.00 516,161,233.20
Cash received from issuing bonds
Other cash received concerning
195,845,614.80 883,986,750.53
financing activities
Subtotal of cash inflow from financing
491,845,614.80 1,400,147,983.73
activities
Cash paid for settling debts 1,183,487,265.46 1,006,376,333.22
Cash paid for dividend and profit
56,263,754.65 111,445,222.20
distributing or interest paying
Other cash paid concerning
85,871,334.98 79,014,450.69
financing activities
Subtotal of cash outflow from financing
1,325,622,355.09 1,196,836,006.11
activities
Net cash flows arising from financing
-833,776,740.29 203,311,977.62
activities
IV. Influence on cash and cash
equivalents due to fluctuation in 12,768,432.70 -72,933.89
exchange rate
V. Net increase of cash and cash
-827,374,567.69 239,204,002.15
equivalents
Add: Balance of cash and cash 1,401,853,786.39 444,628,245.82
16
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
equivalents at the period -begin
VI. Balance of cash and cash
574,479,218.70 683,832,247.97
equivalents at the period -end
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
7. Statement of Changes in Owners’ Equity (Consolidated)
This Period
In RMB
Current period
Owners’ equity attributable to parent company
Other
equity instrument
Item Less: Other Provisio Minorit Total
Perpet Reason
Share Capital Invento compre Surplus n of Retaine y owners’
ual able
capital Prefer capita reserve ry hensive reserve general d profit interests equity
red Other reserve
l shares income risk
stock
securi
ties
400,00 2,425,0 3,365,0
I. Balance at the 75,410, 93,555, 370,981
0,000. 66,740. 13,204.
end of the last year 363.70 005.44 ,095.40
00 03 57
Add:
Changes of
accounting policy
Error
correction of the
last period
Enterprise
combine under
the same control
Other
II. Balance at the 400,00 2,425,0 3,365,0
75,410, 93,555, 370,981
beginning of this 0,000. 66,740. 13,204.
363.70 005.44 ,095.40
year 00 03 57
III. Increase/
Decrease in this 20,005, 183,689 203,695
year (Decrease is 619.95 ,488.65 ,108.60
listed with “-”)
(i) Total 20,005, 283,689 303,695
comprehensive 619.95 ,488.65 ,108.60
17
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
income
(ii) Owners’
devoted and
decreased capital
1.Common shares
invested by
shareholders
2. Capital invested
by holders of other
equity instruments
3. Amount
reckoned into
owners equity with
share-based
payment
4. Other
-100,00 -100,00
(III) Profit
0,000.0 0,000.0
distribution
0 0
1. Withdrawal of
surplus reserves
2. Withdrawal of
general risk
provisions
3. Distribution for -100,00 -100,00
owners (or 0,000.0 0,000.0
shareholders) 0 0
4. Other
(IV) Carrying
forward internal
owners’ equity
1. Capital reserves
conversed to
capital (share
capital)
2. Surplus reserves
conversed to
capital (share
capital)
3. Remedying loss
with surplus
reserve
4. Other
(V) Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
18
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
report period
(VI)Others
IV. Balance at the 400,00 2,608,7 3,568,7
75,410, 113,560 370,981
end of the report 0,000. 56,228. 08,313.
363.70 ,625.39 ,095.40
period 00 68 17
Last Period
In RMB
Last Period
Owners’ equity attributable to the parent Company
Other
equity instrument Minorit
Item Less: Other Provisio Total
Perpet Reason y
Share
ual Capital Invento compre Surplus n of Retaine interest owners’
able equity
capital Prefer capita reserve ry hensive reserve general d profit s
red Other reserve
l shares income risk
stock
securi
ties
400,00 2,025,5 2,878,1
I. Balance at the 75,410, 58,923, 318,250
0,000. 35,984. 20,380.
end of the last year 363.70 174.26 ,857.40
00 99 35
Add:
Changes of
accounting policy
Error
correction of the
last period
Enterprise
combine under the
same control
Other
II. Balance at the 400,00 2,025,5 2,878,1
75,410, 58,923, 318,250
beginning of this 0,000. 35,984. 20,380.
363.70 174.26 ,857.40
year 00 99 35
III. Increase/
Decrease in this 34,631, 52,730, 399,530 486,892
year (Decrease is 831.18 238.00 ,755.04 ,824.22
listed with “-”)
(i) Total 34,631, 532,260 566,892
comprehensive
831.18 ,993.04 ,824.22
income
(ii) Owners’
devoted and
19
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
decreased capital
1.Common shares
invested by
shareholders
2. Capital invested
by holders of other
equity instruments
3. Amount
reckoned into
owners equity with
share-based
payment
4 Other
-132,73
(III) Profit 52,730, -80,000,
0,238.0
distribution 238.00 000.00
0
1. Withdrawal of 52,730, -52,730,
surplus reserves 238.00 238.00
2. Withdrawal of
general risk
provisions
3. Distribution for -80,000, -80,000,
owners (or
000.00 000.00
shareholders)
4. Other
(IV) Carrying
forward internal
owners’ equity
1. Capital reserves
conversed to
capital (share
capital)
2. Surplus reserves
conversed to
capital (share
capital)
3. Remedying loss
with surplus
reserve
4. Other
(V) Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
20
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
(VI)Others
IV. Balance at the 400,00 75,410, 93,555, 370,981
2,425,0 3,365,0
end of the report 0,000. 66,740. 13,204.
363.70 005.44 ,095.40
period 00 03 57
Legal Representative: Sun Xiujiang 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)
This Period
In RMB
Current Period
Other
equity instrument
Other Total
Item Perpetu Less:
Share Capital comprehe Reasonab Surplus Retaine
Inventory owners’
capital Preferre al reserve nsive le reserve reserve d profit
capital Other shares equity
d stock income
securiti
es
2,407,3
I. Balance at the 400,000, 86,911,16 93,555,00 370,320,3 3,358,164
78,004.
end of the last year 000.00 8.71 5.44 90.87 ,569.53
51
Add: Changes
of accounting
policy
Error
correction of the
last period
Other
II. Balance at the 400,000, 2,407,3
86,911,16 93,555,00 370,320,3 3,358,164
beginning of this 78,004.
000.00 8.71 5.44 90.87 ,569.53
year 51
III. Increase/
Decrease in this 20,005,61 178,772 198,777,7
year (Decrease is 9.95 ,121.32 41.27
listed with “-”)
(i) Total 20,005,61 278,772 298,777,7
comprehensive
9.95 ,121.32 41.27
income
(ii) Owners’
devoted and
decreased capital
21
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
1.Common shares
invested by
shareholders
2. Capital invested
by holders of other
equity instruments
3. Amount
reckoned into
owners equity with
share-based
payment
4. Other
-100,00
(III) Profit -100,000,
0,000.0
distribution 000.00
0
1. Withdrawal of
surplus reserves
2. Distribution for -100,00
-100,000,
owners (or 0,000.0
000.00
shareholders) 0
3. Other
(IV) Carrying
forward internal
owners’ equity
1. Capital reserves
conversed to
capital (share
capital)
2. Surplus reserves
conversed to
capital (share
capital)
3. Remedying loss
with surplus
reserve
4. Other
(V) Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
(VI)Others
IV. Balance at the 400,000, 2,586,1
86,911,16 113,560,6 370,320,3 3,556,942
end of the report 50,125.
000.00 8.71 25.39 90.87 ,310.80
period 83
22
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
Last period
In RMB
Last period
Other
equity instrument
Other Total
Item Perpetu Less:
Share Capital comprehe Reasonab Surplus Retaine
Inventory owners’
capital Preferre al reserve nsive le reserve reserve d profit
capital Other shares equity
d stock income
securiti
es
2,012,8
I. Balance at the 400,000, 86,911,16 58,923,17 317,590,1 2,876,230
05,862.
end of the last year 000.00 8.71 4.26 52.87 ,358.39
55
Add: Changes
of accounting
policy
Error
correction of the
last period
Other
II. Balance at the 400,000, 2,012,8
86,911,16 58,923,17 317,590,1 2,876,230
beginning of this 05,862.
000.00 8.71 4.26 52.87 ,358.39
year 55
III. Increase/
Decrease in this 34,631,83 52,730,23 394,572 481,934,2
year (Decrease is 1.18 8.00 ,141.96 11.14
listed with “-”)
(i) Total
34,631,83 527,302 561,934,2
comprehensive
1.18 ,379.96 11.14
income
(ii) Owners’
devoted and
decreased capital
1.Common shares
invested by
shareholders
2. Capital invested
by holders of other
equity instruments
3. Amount
reckoned into
owners equity with
share-based
payment
4. Other
23
Shandong Airlines Co., Ltd.2016 Semi-Annual Financial Report
-132,73
(III) Profit 52,730,23 -80,000,0
0,238.0
distribution 8.00 00.00
0
1. Withdrawal of 52,730,23 -52,730,
surplus reserves 8.00 238.00
2. Distribution for
-80,000, -80,000,0
owners (or
000.00 00.00
shareholders)
3. Other
(IV) Carrying
forward internal
owners’ equity
1. Capital reserves
conversed to
capital (share
capital)
2. Surplus reserves
conversed to
capital (share
capital)
3. Remedying loss
with surplus
reserve
4. Other
(V) Reasonable
reserve
1. Withdrawal in
the report period
2. Usage in the
report period
(VI)Others
IV. Balance at the 400,000, 2,407,3
86,911,16 93,555,00 370,320,3 3,358,164
end of the report 78,004.
000.00 8.71 5.44 90.87 ,569.53
period 51
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Sun Jingping
24
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
As at 30th June 2016
(All amounts are expressed in CNY unless otherwise stated)
Note 1 Corporation profile
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 12 th, 2000. Immediately after the
issuance of the B shares, the capital of the Company increased to CNY 400,000,000.00.
The Agreement of Share Transfer (《股份转让协议》) signed by SDA Group and China National Aviation Holding Company
(hereafter, China Aviation Group) on February 28th, 2004 authorised the transfer of 91,200,000 shares of the Company, equal to
22.8% shareholding, from SDA Group to China Aviation Group. Immediately after the share transfer, SDA Group’s shareholding in
the Company was 42.00%. In November 2004, the Board of Directors of the Company, in accordance with the approval
(GuoZiChanQuan[2004]No.956 (国资产权[2004]956 号： 关于中国航空集团公司将受让山东航空股份有限公司国有股
的合同实施转让有关问题的批复》)) issued by the State-owned Assets Supervision and Administration Commission of the
State Council, authorised China Aviation Group to transfer the state-owned corporate shares received from SDA Group to Air China
Co., Ltd. (hereafter, Air China). As so provided in GuoZiChanQuan[2004]No.956, the rights and obligation attributable to China
Aviation Group as specified in the Agreement of Share Transfer shall be afforded by Air China. The change of share ownership was
registered at the China Securities Depository and Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on
25
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
December 3rd, 2004; And, 91,200,000 shares of the Company then became held by Air China.
Legal representative of the Company: SUN, Xiujiang
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746 – East 2nd Ring Road, Jinan, Shandong
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 3 rd, 2018); 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.
No change of scope of consolidation from last year.
The Company operates in the industry of transportation.
Note 2 Basis for preparation of the financial statements
The financial statements of company have been prepared on basis of going concern in conformity with Chinese Accounting
Standards for Business Enterprises and the Accounting Systems for Business Enterprises issued by the Ministry of Finance of
People’s Republic of China (Ministry of Finance issued order No.33, the Ministry of Finance revised order No.76) on15 February
2006, and revised Accounting Standards (order 41 of the Ministry of Finance) and Compilation Rules for Information Disclosure by
Companies Offering Securities to the Public No.15 – General Provisions on Financial Reports (2014 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. Held-for-sale non-current assets are measured at the lower of its book value at its
classification date and fair value minus expected disposal costs. 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 recognized and measured in accordance with the regulations in the Chinese
Accounting Standards for Business Enterprises and they give a true and fair view of the financial position, business result and cash
flow of the Company as at 30 June 2016. In addition, the financial statements of the company comply, in all material respects, with
the revised disclosing requirements for financial statements and the Compilation Rules for Information Disclosure by Companies
26
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Offering Securities to the Public No.15—General Provisions on Financial Reports (2014 Revision) issued by China Securities
Regulatory Commission (CSRC) in 2014.
Note 4 Important Accounting Principles and Accounting Estimates
The Company and subsidiaries are principally engaged in air transportation. The Company and subsidiaries in accordance
with the actual production and management features, according to the relevant provisions of Accounting Standards, to make a
number of specific accounting policies and accounting estimates for other transactions and events of revenue recognition, see Note
4.21 “Revenue” for the description. For description of significant accounting judgments and estimates made by management, see
Note 4.28 “Significant accounting judgments and estimates”.
4.1 Accounting period
The accounting period of the Company is classified as interim period and annual period. Interim period refers to the reporting period
shorter than a complete annual period. The accounting period of the Company is the calendar year from January 1 to December 31.
4.2 Operating cycle
Normal business cycle is realized by the Company in cash or cash equivalents from the purchase of assets for processing until. The
company has a 12 -month operating cycle, and its assets and liabilities as liquidity criteria for the classification.
4.3 Monetary Unit
Yuan (CNY) is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate.
Therefore, the Company and its domestic subsidiaries choose CNY as their functional currency. The Company adopts CNY to
prepare its functional statements.
4.4 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.
4.4.1 Business combination involving entities under common control
A business combination involving enterprises under common control is a business combination in which all of the combining
enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not
transitory.
For a business combination involving enterprises under common control, the party that, on the combination date, obtains control of
another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination
is a party being absorbed. Combination date is the date on which the absorbing party effectively obtains control of the party being
absorbed.
The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at the
combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of consideration
27
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.4.2 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 adjusted.
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.
28
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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 a business combination not involving enterprise under common control, which achieved in stages that involves multiple
exchange transactions, according to “The notice of the Ministry of Finance on the issuance of Accounting Standards Interpretation
No. 5” (CaiKuai [2012] No. 19) and Article55 of “Accounting Standards for Business Enterprises No.33 - Consolidated Financial
Statements” on the “package deal” criterion (see Note 4.5.2), to judge the multiple exchange transations whether they are
the"package deal". If it belong to the “package deal” in reference to the preceding paragraphs of this section and the Notes
described in 4.13 “long-term investment” accounting treatment, if it does not belong to the “package deal” to distinguish the
individual financial statements and the consolidated financial statements related to the accounting treatment:
In the individual financial statements, the total value of the book valueoftheacquiree's equity investment before the acquisition date
and the cost of new investment at the acquisition date, as the initial cost of the investment, the acquiree's equity investment before
the acquisition date involved in other comprehensive income, in the disposal of the investment will be in other comprehensive
income associated with the use of infrastructure and the acquiree directly related to the disposal of assets or liabilities of the same
accounting treatment (that is, except in accordance with the equity method of accounting in the defined benefit plan acquiree is
remeasured net changes in net assets or liabilities other than in the corresponding share of the lead, and the rest into the current
investment income).
In the combination financial statements, the equity interest in the acquiree previously held before the acquisition date re-assessed at
the fair value at the acquisition date, with any difference between its fair value and its carrying amount is recorded as investment
income.The previously-held equity interest in the acquiree involved in other comprehensive income and other comprehensive
income associated with the purchase of the foundation should be used party directly related to the disposal of assets or liabilities of
the same accounting treatment (that is, except in accordance with the equity method of accounting in the acquiree is remeasured
defined benefit plans other than changes in net liabilities or net assets due to a corresponding share of the rest of the acquisition
date into current investment income).
4.5 Preparation of the consolidated financial statements
4.5.1 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.
Once the change in the relevant facts and circumstances leading to the definition of the relevant elements involved in the control of
the change, the company will be re-evaluated.
4.5.2 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
29
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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 and a party being absorbed in a merger by absorption 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 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’/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. Other comprehensive income related to the
former subsidiary's equity investment, using the foundation and the acquiree directly related to the disposal of the same assets or
liabilities are accounted when the control is lost(ie, in addition to the former subsidiary is remeasured at the net defined benefit plan
or changes in net assets and liabilities resulting from, the rest are transferred to the current investment income). The retained
30
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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 4.13 Long-term equity investments and Note 4.9 Financial instruments for details.
The company through multiple transactions step deal with disposal of the subsidiary's equity investment until the loss of control,
need to distinguish between equity until the disposal of a subsidiary's loss of control over whether the transaction is package deal.
Terms of the transaction disposition of equity investment in a subsidiary, subject to the following conditions and the economic impact
of one or more of cases, usually indicates that several transactions should be accounted for as a package deal:①these
transactions are considered simultaneously, or in the case of mutual influence made, ②these transactions as a whole in order to
achieve a complete business results; ③the occurrence of a transaction depends on occurs at least one other transaction; ④a
transaction look alone is not economical, but when considered together with other transaction is economical. If they does not belong
to the package deal, each of them separately, as the case of a transaction in accordance with “without losing control over the
disposal of a subsidiary part of a long-term equity investments“ (see Note 4.10.2, 4)) and “due to the disposal of certain equity
investments or other reasons lost control of a subsidiary of the original” (see previous paragraph) principles applicable accounting
treatment. Until the disposal of the equity investment loss of control of a subsidiary of the transactions belonging to the package
deal, the transaction will be used as a disposal of a subsidiary and the loss of control of the transaction. However, before losing
control of the price of each disposal entitled to share in the net assets of the subsidiary 's investment corresponding to the difference
between the disposal, recognized in the consolidated financial statements as other comprehensive income, loss of control over the
transferred together with the loss of control or loss in the period.
4.6 Joint arrangement
A joint arrangement is an arrangement of which two or more partieshave joint control.A joint arrangement is either a joint operation
or a joint venture, depending of the rights and obligation of the Company in the joint arrangement. A joint operation is a joint
arrangement whereby the Company has rights to the assets, andobligations for the liabilities, relating to the arrangement. A joint
venture is a joint arrangement whereby the Company has rights to the net assets of thearrangement.
The Company accounts for joint ventures using the equity method, see Note 4.13.2.2 for details.
The company, a joint operator, recognises in relation to its interest in a jointoperation:(a)its assets, including its share of any assets
held jointly;(b)its liabilities, including its share of any liabilities incurred jointly;(c)its revenue from the sale of its share of the output
arising from thejoint operation;(d)its share of the revenue from the sale of the output by the jointoperation; and (e)its expenses,
including its share of any expenses incurred jointly.
When the Company enters into a transaction with a joint operation in which it is ajoint operator, such as a sale or contribution of
assets, the Company, prior to disposal of the assets to a third party by the joint operation,recognises gains and losses resulting from
such a transaction onlyto the extent of the other parties's interests in the joint operation.When there is evidence of a reduction in the
net realisablevalue of the assets to be sold or contributed to the joint operation, or of animpairment loss of those assets which is in
line with provision stipulated by CAS 8, those losses arerecognised fully by the Company.When there is evidence of a reduction in
31
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
the net realisablevalue of the assets to be purchased or of an impairment loss of those assets, the Company shall recognise its
share of those losses.
4.7 Cash equivalent
Cash and cash equivalents of the Company include cash on hand, ready usable deposits and investments having short holding
term (normally will be due within three months from the day of purchase), with strong liquidity and easy to be exchanged into certain
amount of cash that can be measured reliably and have low risks of change.
4.8 Foreign exchange
4.8.1 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.
4.8.2 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 ①those
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, ②hedging 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, ③
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.
4.8.3 The translation of financial statement in foreign currency
When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary
item constituting a net investment in a foreign operation, exchange difference arising from changes in exchange
rates are recognized as “exchange differences arising on translation of financial statements denominated in
foreign currencies” in owner’s equity, and in profit or loss for the period upon disposal of the foreign operation.
The Group translates the financial statements of its foreign operations into CNY by following rules. Assets
and liabilities in the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date;
all equity items except for retained earnings are translated at the spot exchange rates at the dates on which such
32
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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
At the disposal of all of the company's ownership interest in a foreign operation, or due to the disposal of part of
the equity investment or other reasons, the loss of control over a foreign operation, the project owner's equity in
the balance sheet listed under the relevant overseas operations attributable to statements of the parent company
's shareholders' equity of foreign currency translation differences, all transferred to the disposal of the income
statement.
At the disposal of part of the equity investment or other causes lower hold percentage overseas business
interests, but does not lose control over a foreign operation, and disposal of the foreign operation section related
to foreign currency translation differences attributable to minority interests, is not transferred to the income
statement. At the disposal of a foreign operation as part of the equity joint venture or joint ventures, foreign
currency financial statements of the foreign operation and the associated translation difference in proportion to
dispose of the foreign operation into the disposal of the income statement.
4.9 Financial instruments
4.9.1 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
33
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the
same, discounted cash flow analysis and option pricing models.
The Company measures initially and subsequently the fair value of an interest rate swap at the value of a
competitor’s interest rate swap quoted by a recognised financial institution as at the Company’s balance sheet
date in accordance with the principle of consistency.
4.9.2 Classification, recognition and measurement of financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.
On initial recognition, the Company’s financial assets are classified into one of the four categories, including
financial assets at fair value though profit or loss, held-to maturity investments, loans and receivables and
available-for-trade financial assets. A financial asset is recognized initially at fair value. In the case of financial
assets at fair value through profit or loss, relevant transaction costs are immediately charged to the profit and
loss of the current period; transaction costs relating to financial assets of other categories are included in the
amount initially recognized.
1) Financial assets at fair value through profit or loss:
Including financial assets held-for-trade and financial assets designated at fair value through profit or loss.
Financial asset held-for-trade is the financial asset that meets one of the following conditions:
A. the financial asset is acquired for the purpose of selling it in a short term;
B. the financial asset is a part of a portfolio of identifiable financial instruments that are collectively managed, and
there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of
short-term profits;
C. the financial asset is a derivative, except for a derivative that is designated and effective hedging instrument,
or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted
equity instrument (without a quoted price from an active market) whose fair value cannot be reliably measured.
For such kind of financial assets, fair values are adopted for subsequent measurement.
Financial asset is designated on initial recognition as at fair value through profit or loss only when it meets one of
the following conditions:
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.
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
2) Investment held-to maturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturity that an entity has the positive intention and ability to hold to maturity. Such kind of financial assets are
subsequently measured at amortized cost using the effective interest method. Gains or losses arising from
derecognition, impairment or amortization are recognized in profit or loss for the current period.
Effective interest rate is the rate that exactly discounted estimated future cash flows through the expected life of
the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability.
When calculating the effective interest rate, the Company shall estimate future cash flow considering all
contractual terms of the financial asset or financial liability without considering future credit losses, and also
consider all fees paid or received between the parties to the contract giving rise to the financial asset and
financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or
discounts, etc.
3) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed determinable payment that are not quoted in
an active market. Financial assets classified as loans and receivables by the Company include note receivables,
account receivables, interest receivable dividends receivable and other receivables.
Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gain or
loss arising from derecognition, impairment or amortization is recognized in profit or loss.
4) Financial assets available-for-trade
Financial assets available-for-trade include non-derivative financial assets that are designated on initial
recognition as available for trade, and financial assets that are not classified as financial assets at fair value
through profit or loss, loans and receivables or investment held-to-maturity.
Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from
changes in the fair value are recognized as other comprehensive income and included in the capital reserve,
except that impairment losses and exchange differences related to amortized cost of monetary financial assets
denominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at
which time the gains or losses are released and recognized in profit or loss.
Interests obtained and dividends declared by the investee during the period in which the financial assets
available-for-trade are held, are recognized in investment gains.
4.9.3 Impairment of financial assets
The Group assesses at the balance sheet date the carrying amount of every financial asset except for the
financial assets that measured by the fair value. If there is objective evidence indicating a financial asset may be
impaired, a provision is provided for the impairment.
35
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
1) Impairment on held-to maturity investment, loans and receivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present
value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate
the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition
of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after
impairment loss reversed shall not exceed the amortized cost of the financial assets without provisions of
impairment loss on the reserving date.
2) Impairment loss on available-for-trade financial assets
Where the fair value of the equity instrument investment drops significantly or not contemporarily according to the
integrated relevant factors, an available-for-trade financial asset is impaired.
When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair value
that had been recognized in capital reserve shall be removed and recognized in profit or loss. The amount of the
cumulative loss that is removed shall be difference between the acquisition cost with deduction of recoverable
amount less amortized cost, current fair value and any impairment loss on that financial asset previously
recognized in profit or loss.
If, after an impairment loss has been recognized, there is objective evidence that the value of the financial asset
is recovered, and it is objectively related to an event occurring after the impairment loss was recognized, the
initial impairment loss can be reversed and the reserved impairment loss on available-for-trade equity instrument
is recorded in the profit or loss, the reserved impairment loss on available-for-trade debt instrument is recorded in
the current profit or loss.
The equity instrument where there is no quoted price in an active market, and whose fair value cannot be reliably
measured, or impairment loss on a derivative asset that is linked to and must be settled by delivery of such an
unquoted equity instrument shall not be reversed.
4.9.4 Recognition and measurement of financial assets transfer
The Group derecognizes a financial asset when one of the following conditions is met:
1) the rights to receive cash flows from the asset have expired;
2) the enterprise has transferred its rights to receive cash flows from the asset to a third party under a
pass-through arrangement; or
3) the enterprise has transferred its rights to receive cash flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset, or (b) has neither transferred norretained 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.
36
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.9.5 Classification and measurement of financial liabilities
The Group’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through
profit or loss and other financial liabilities. For financial liabilities at fair value through profit or loss, relevant
transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating
to other financial liabilities are included in the initial recognition amounts.
1) Financial liabilities measured by the fair value and the changes recorded in profit or loss
The classification by which financial liabilities held-for-trade and financial liabilities designed at the initial
recognition to be measured by the fair value follows the same criteria as the classification by which financial
assets held-for-trade and financial assets designed at the initial recognition to be measured by the fair value and
their changes are recorded in the current profit or loss.
For the financial liabilities measured by the fair value and changes recorded in the profit or loss, fair values are
adopted for subsequent measurement. All the gains or losses on the change of fair value and the expenses on
dividends or interests related to these financial liabilities are recognized in profit or loss for the current period.
2) Other financial liabilities
Derivative financial liabilities that linked with equity instruments, which do not have a quoted price in an active
market and their fair value cannot be measured reliably, is subsequently measured by cost Other financial
liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses
arising from derecognition or amortization is 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.
4.9.6 Derecognition of financial liabilities
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
The Group derecognizes a financial liability (or part of it) when the underlying present obligation (or part of it) is
discharged or cancelled or has expired. An agreement between the Company (an existing borrower) and existing
lender to replace original financial liability with a new financial liability with substantially different terms is
accounted for as an extinguishment of the original financial liability and the recognition of a new liability.
When the Company derecognizes a financial liability or a part of it, it recognizes the difference between the
carrying amount of the financial liability (or part of the financial liability) derecognized the consideration paid
(including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.
4.9.7 Derivatives and embedded derivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are
entered into and are substantially re-measured at fair value. The resulting gain and loss is recognized in profit or loss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset
or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics
and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a
separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is
unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates
the entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss.
4.9.8 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.
4.9.9 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’ equity. All types of distribution (excluding stock dividends) made by the Company to
holders of equity instruments are deducted from shareholders’ equity. The Group does not recognize any
changes in the fair value of equity instruments.
4.10 Receivables
The receivables by the Company include account receivables, and other receivables.
4.10.1 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:
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.10.2 Method for bad debts provision
1) Provisions of bad debts in account receivables that is individually significant.
Individual receivables equal to or higher than 5% of total receivables are classified as receivables of individual significance.
For an account receivable that is individually significant, the asset is individually assessed for impairment, the impairment loss is
recognized at the difference between the present value of future cash flow less the carrying amount, and provision is made
accordingly.
2) Provisions of bad debts in account receivables that individually insignificant items with similar credit risk characteristics that have
significant risk:
A.Evidence of credit risk characteristics
Whether the financial asset is individually significant or not individually significant, it is included in a group of financial assets with
similar credit risk characteristics and collectively assessed for impairment. Such credit risk reflects the repayment of all due amount
under the contract, and is related to the estimation of future cash flow expected to be derived from the assets.
Evidence of portfolios:
Item Basis
Receivables not individually assessed for impairment are categorised on the basis
of credit risk. Provision for bad debts for each category of receivables is
Categorisation by nature of receivables recognised at 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
period 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
39
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Percentage of carrying amount for Percentage of carrying amount for
Category recognition of allowance for bad debt recognition of allowance for bad debt
applicable to accounts receivable applicable to other receivables
Categorisation by nature of receivables 5% 5%
3) Provisions of bad debts that is individually insignificant.
For the account receivables not individually significant, the Company assesses the account receivables individually for impairment
when are of following characteristics: if there is objective evidence indicating the impairment, the impairment loss is recognized at
the difference between the present value of future cash flow less the carrying amount, and provision is made accordingly. For
examples: receivables of individual insignificance bears differing credit risk characteristics to other receivables of individual
insignificance account receivables with related parties; account receivables under litigations or arbitrations, or account receivables
with obvious indication that debtor cannot fulfill the obligation of repayment.
4.10.3 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.
4.11 Inventories
4.11.1 Classification of inventory
The Company’s inventory mainly include air materials and low-value consumables.。
4.11.2 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.
4.11.3 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.
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written
down below cost no longer exist so that the net realizable value of inventories is higher than their cost, the original provision for
decline in value is reversed and the reversal is included in profit or loss for the period.
4.11.4 The perpetual inventory system is maintained for stock system.
4.11.5 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.
4.12 Held-for-sale assets
A non-current asset is classified as held-for-sale if all of the following conditions are satisfied:
a. the asset is immediately sellable at its current condition per usual sales term applicable to the type of assets to which it belongs;
b. the Company's has completed official decision to dispose the asset;
c. the Company has entered into irrevokable sales contract with the purchaser; and
d. the sales will be completed within one year.
Amortization or depreciation of the held-for-sale asset ceases at the time of classification. The asset is measured at the lower of its
book value and its classification date fair value minus disposal costs upon classification. Held-for-sale non-current assets include
individual assets and disposal groups. If a disposal group satisfy the conditions of the asset group defined by CAS 8 - Asset
Impairment and includes goodwill arising from business combination allocated in accordance with CAS 8 or the disposal group is an
operation with an asset group, the disposal group include goodwill arising from business combination.
Individual non-current assets held for sale and assets of disposal groups held for sale are collectively presented on the
(consolidated) statement of financial position as a line item of current assets. Liabilities of disposal groups held for sale are
collectively presented on the (consolidated) statement of financial position as a line item of current liabilities.
A held-for-sale asset or held-for-sale disposal group is reclassified from held-for-sale when the conditions for classification of the
asset (disposal group) as held-for-sale are no longer satisfied and is measured at the lower of its classification date book value
minus cumulative depreciation, amortization and impairment as if it has not been reclassified as held-for-sale and it recoverable
amount as of the date on which the conditions for classification of the asset (disposal group) as held-for-sale are no longer satisfied.
4.13 Long-term equity investments
Long-term equity investments referred to in this section refer to the Company invested entity has control, joint control or significant
influence over the long-term equity investments. The Company invested does not have control, joint control or significant influence
over the long-term equity investments as financial assets available for sale or at fair value and the changes included financial assets
through profit or loss, which refer to the accounting policies in Note 4. 9 “financial Instruments”.
Joint control is the Company control over an arrangement in accordance with the relevant stipulations are common, related activities
and the arrangement must be after sharing control participants agreed to the decision-making. Significant influence is the Company
s financial and operating policies of the entity has the right to participate in decision-making, but can not control or with other parties
41
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
joint control over those policies.
4.13.1 Determination of Investment cost
The cost of a long-term equity investment acquired through business combination under common control is measured at the
acquirer's share of the combination date book value of the acquiree's net equity in the ultimate controller's consolidated financial
statements. The difference between the cost and book value of cash paid, non-monetary assets transferred and liabilities assumed
is adjusted to capital reserves, and to retained earnings if capital reserves is insufficient. If the consideration is transferred by way of
issuing equity instruments, the face value of the equity instruments issued is recognised in share capital and the difference between
the cost of the face value of the equity instruments issued is adjusted to capital reserves, and to retained earnings if capital reserves
is insufficient.
The cost of a long-term equity investment acquired through business combination not under common control is the fair value of the
assets transferred, liabilities incurred or assumed and equity instruments issued.
All expenses incurred directly associated with the acquisition by the acquirer, including expenditure of audit, legal services, valuation
and consultancy and other administrative expenses, are recognised in profit or loss for the period during which the acquisition
occurs.
Long-term equity investments acquired not through business combination are measured at cost on initial recognition. Depending on
the way of acquisition, the cost of acquisition can be the total cash paid, the fair value of equity instrument issued, the contract price,
the fair value or book value of the assets given away in the case of non-monetary asset exchange, or the fair value of the relevant
long-term equity investments. The cost of acquisition of a long-term equity investment acquired not through business combination
also includes all directly associated expenses, applicable taxes and fees, and other necessary expenses.
4.13.2 Subsequent Measurement
To be invested joint control ( except constitute common operator ) or long-term equity investments significant influence are
accounted for using the equity method. In addition, the Company's financial statements using the cost method of accounting for
long-term equity can exercise control 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.
The carrying amount of an long-term equity investment measured using the equity method is adjusted by the Company's share of
the investee's net profit and other comprehensive income, which is recognised as investment income and other comprehensive
42
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
income respectively. The carrying amount of an long-term equity investment measured using the equity method is reduced by profit
distribution or cash dividends announced by the investee. The carrying amount of an long-term equity investment measured using
the equity method is also adjusted by the investee's equity movement other than net profit, other comprehensive income and profit
distribution, which is adjusted to capital reserves. The net profit of the investee is adjusted by the fair value of the investee's
identifiable assets as at acquistion. The financial statements and hence the net profit and other comprehensive income of an
investee which does not adopt accounting policies or accounting period uniform with the Company is adjusted by the Company's
accounting policies and accounting period. The Company's share of unrealised profit or loss arising from related party transactions
between the Company and an associate or joint venture is deducted from investment income. Unrealised loss arising from related
party transactions between the Company and an associate or joint venture which is associated with asset impairment is not
adjusted. Where assets transferred to an associate or joint venture which form part of the Company's investment in the investee but
which does not enable the Company obtain control over the investee, the cost of the additional investment acquired is measured at
the fair value of assets transferred and the difference between the cost of the additional investment and the book value of the assets
transferred is recognised in profit or loss. Where assets transferred to an associate or joint venture form an operation, the difference
between the consideration received and the book value of the assets transferred in recognised in profit or loss. Where assets
transferred from an associate or joint venture form an operation, the transaction is accounted for in accordance with CAS 20 -
Business Combination, any gain or loss is reocgnised in profit or loss.
The Company's share of an investee's net loss is limited by the sum of the book value of the long-term equity investment and other
net long-term investments in the investees. Where the Company has obligation to share additional net loss of the investee, the
estimated share of loss recognised as accrued liabilities and investment loss. Where the Company has unrecognised share of loss
of the investee when the investee generates net profit, the Company's unrecognised share of loss is reduced by the Company's
share of net profit and when the Company's unrecognised share or loss is eliminated in full, the Company's share of net profit, if any,
is recognised as investment income.
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 as of Jan 1 2007, 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
43
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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 4.5.2 applies. For disposal of long-term equity investments in any situation other than the
fore-mentioned situation, the difference between the book value of the investment disposed and the consideration received is
recognised in profit or loss.
Where a long-term equity investment is measured by the equity method both before and after part disposal of the investment,
cumulative other comprehensive income relevant to the investment recognised prior to the acquistion is treated in the same manner
that the investee disposes the relevant assets or liabilities proportionate to the disposal. The investee's equity movement other than
net profit, other comprehensive income and profit distribution is reocgnised in profit or loss proportionate to the disposal.
Where a long-term equity investment is measured at cost both before and after part disposal of the investment, cumulative other
comprehensive income relevant to the investment recognised, as a result of accounting by equity method or recognition and
measurement principles applicable to financial instruments, prior to the Company's acquisition of control over the investee is treated
in the same manner that the investee disposes the relevant assets or liabilities and recognised in profit or loss proportionate to the
disposal. The investee's equity movement other than net profit, other comprehensive income and profit distribution, as a result of
accounting by equity method, is reocgnised in profit or loss proportionate to the disposal.
Where the Company's control over an investee is lost due to partial disposal of investment in the investee and the Company
continues to have significant influence over the investee after the partial disposal, the investment in measured by the equity method
in the Company's separate financial statements; where the Company's control over an investee is lost due to partial disposal of
investment in the investee and the Company ceases to have significant influence over the investee after the partial disposal, the
investment in measured in accordance with the recognition and measurement principles applicable to financial instruments in the
Company's separate financial statements and the difference between the fair value and the book value of the remaining investment
at the date of loss of control is recognised in profit or loss. Cumulative other comprehensive income relevant to the investment
recognised, as a result of accounting by equity method or recognition and measurement principles applicable to financial
instruments, prior to the Company's acquisition of control over the investee is treated in the same manner that the investee
disposes the relevant assets or liabilities on the date of loss of control. The investee's equity movement other than net profit, other
comprehensive income and profit distribution, as a result of accounting by equity method, is reocgnised in profit or loss when control
is lost. Where the remaining investment is measured by equity method, the fore-mentioned other comprehensive income and other
equity movement are recognised in profit or loss proportionate to the disposal; Where the remaining investment is measured in
accordance with the recognition and measurement principles applicable to financial instruments, the fore-mentioned other
comprehensive income and other equity movement are recognised in profit or loss in full.
Where the Company's joint control or significant influence over an investee is lost due to partial disposal of investment in the
investee, the remaining investment in the investee is measured in accordance with the recognition and measurement principles
applicable to financial instruments, the difference between the fair value and the book value of the remaining investment at the date
of loss of joint control or significant influence is recognised in profit or loss.Cumulative other comprehensive income relevant to the
investment recognised, as a result of accounting by equity method, prior to the partial disposal is treated in the same manner that
44
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
the investee disposes the relevant assets or liabilities on the date of loss of joint control or significant influence. The investee's
equity movement other than net profit, other comprehensive income and profit distribution is reocgnised in profit or loss when joint
control or significant influence is lost.
Where the Company's control over an investee is lost through multiple disposals and the multiple disposals shall be viewed as one
single transaction, the multiple disposals is accounted for one single transaction which result in the Company's loss of control over
the investee. Each difference between the consideration received and the book value of the investment disposed is recognised in
other comprehensive income and reclassified in full to profit or loss at the time when control over the investee is lost.
4.14 Fixed assets
4.14.1 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.
4.14.2 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.
4.14.3 Measurement and recognition of fixed assets
Impairment and provisions of fixed assets are disclosed on Note 4.16.
4.14.4 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
45
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.14.5 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.
4.15 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 4.19.
4.16 Borrowing costs
Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in connection
with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings.
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized.
The amounts of other borrowing costs incurred are recognized as an expense in the period in which they are incurred. Qualifying
assets are asset (fixed assets, investment property and inventories, etc.) that necessarily take a substantial period of time for
acquisition, construction or production to get ready for their intended use or sale.
Where funds are borrowed for a specific-purpose, the amount of interest to be capitalized is the actual interest expense incurred on
that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or
any investment income on the temporary investment of those funds.
Where funds are borrowed for a general-purpose, the amount of interest to be capitalized on such borrowings is determined by
applying a weighted average interest rate to the weighted average of the excess amounts of accumulated expenditure on the asset
over and above the amounts of specific-purpose borrowings
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.17 Intangible assets
4.17.1 Intangible asset
The term “intangible asset” refers to the identifiable non-monetary assets without physical shape, possessed or controlled by
enterprises.
The intangible assets are initially measured by its cost. Expenses related to intangible assets, if the economic benefits related to
intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded
as cost of intangible assets. The expenses other than this shall be booked in the profit or loss when they occur.
Land use rights that are purchased by the Company are accounted for as intangible assets. Buildings, such as plants that are
developed and constructed by the Company, and relevant land use rights and buildings, are accounted for as intangible assets and
fixed assets, respectively. Payments for the land and buildings purchased are allocated between the land use rights and the
buildings; if they cannot be reasonably allocated, all of the land use rights and buildings are accounted for as fixed assets.
When an intangible asset with a definite useful life is available for use, its original cost less net residual value and any accumulate
impairment losses is amortized over its estimated useful life using the straight-line method . An intangible asset with an indefinite
useful life is not amortized.
For an intangible asset with a definite useful life, the Company reviews the useful life and amortization method at the end of
the period, and makes adjustment when necessary.. An additional review is also carried out for useful life of the intangible assets
with indefinite useful life. If there is evidence showing the foreseeable limit period of economic benefits generated to the enterprise
by the intangible assets, then estimate its useful life and amortize according to the policy of intangible assets with definite useful life.
4.17.2 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:
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.17.3 Impairment testing methods and recognition of impairment provision of intangible assets
Impairment and provisions of intangible assets are disclosed on Note 4.19.
4.18 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.
4.19 Impairment of long-term assets
Non-financial assets with non-current nature include fixed assets, construction in progress, intangible assets with definite useful
lives, investment properties measured by cost methods and long-term equity investment on subsidiaries, jointly operations. The
Company assesses whether there are any indicators of impairment for all non-financial assets at the balance sheet date, and
impairment test is carried out and recoverable value is estimated if such an indicator exits. Goodwill and intangible assets with
indefinite useful lives, as well as intangible assets not ready for use, are tested for impairment annually regardless of indicators of
impairment.
Impairment of loss is calculated and provisions taken by the difference if the recoverable value of the assets is lower than the book
value. The recoverable value is the higher of estimated present value of the future expected cash flows from the asset and net fair
value of the asset less disposed cost. The fair value of asset is determined by the sales agreement price within an arm’s length
transaction. In case there is no sales agreement, but there is active market of assets, the fair value can be determined by the selling
price. If there is neither sales agreement nor active market, the fair value of the asset can be estimated based on the best
information obtained.
Disposal expenses include expenses related to the legislation, taxes, transportations and the direct expense for the asset to be
ready for sale. When calculating the present value of expected future cash flows from an asset or asset Group, the management
shall estimate the expected future cash flows from the asset or asset Group and choose a suitable discount rate in order to
calculate the present value of those cash flows.
Provision for asset impairment is calculated and determined on the individual basis. If the recoverable of individual asset is hard to
48
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.20 Employee Benefits
The employee benefits of the company include short-term employee benefits, post-employment benefits, termination benefits and
other long-term employee benefits:
Short-term employee benefits includes wages, bonuses, allowances and subsidies, welfare, health insurance , maternity insurance,
work injury insurance, housing funds, labor union funds, employee education funds, non-monetary benefits and etc. Short-term
employee benefits are recognised as liabilities and profit or loss account or the costs associated with the asset during the
accounting period when employees actually provide services,. The non -monetary benefits are measured at fair value.
Post-employment benefits include defined contribution plans and defined benefit plans. Defined contribution plan which includes the
basic pension, unemployment insurance and annuities shall be recognised as cost of related assets or profit or loss. Projected unit
credit cost method (“PUC”) was used by independent actuaries engaged by the Company to determine the present value of the
defined benefit obligations with unbiased and consistent actuarial assumptions regarding population variables and financial
variables. Defined benefit obligation was presented with the present value and the related current service cost was accounted
into current profit or loss.
When the Company terminates the labor relationship with employees prior to the employment contracts, or encourages
employees to accept voluntary redundancy compensation proposals in this company, a provision shall be recognised for the
compensation arising from the termination of employment relationship with employees at the time when the Company can not
unilaterally withdraw layoff proposal termination benefits provided due to termination of employment, or the company ensures the
costs related to the payment for termination benefits related to the restructuring, which one is early to confirm employee benefits
liabilities, and recorded as profit or loss. However, if termination benefits can not be fully paid aftert welve months of the reporting
date,, the liability shall be processed in accordance with other long-term employee benefits.
Retirement plan adopts the same principles as the termination benefits . The salaries and insurance to be paid from the date when
employees stop providing services to the date of normal retirementshall be recognised in profit or loss (termination benefits) when
satisfying the requirements of a provision..
Other long-term employee benefits provided by the company to employees that is in line with defined contribution plans shall adopt
the accounting treatment in accordance with defined contribution plans, otherwise the accounting treatment of defined benefit
plans..
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
4.21 Revenue
4.21.1 Revenue from rendering of service
① The Company recognise revenue from rendering of air service for carriage of passengers when the service is rendered or
when an unused ticket expires. The sale of a ticket does not constitute revenue. An unused ticket expires on the annual anniversary
of its sale. Tickets sold but of which the service is not yet rendered are recognised in current liabilities as Advances from customers.
If service is rendered through code sharing, revenue arising from the service provision is apportioned amongst parties to the code
sharing agreement. The revenue arising from code sharing is also recognised when the service is rendered.
② The Company company recognise air cargo revenue from rendering of air service for carriage of cargo when the service is
rendered
③ Revenue arising from other air service rendering is recognised when the service rendering is completed.
4.21.2 Royalty Revenue
According to the contract or agreement, the revenue is recognized on an accrual basis.
4.21.3 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.
4.22 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.
4.22.1 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.
4.22.2 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
50
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is
recognized immediately in profit or loss for the period.
For repayment of a government grant already recognized, if there is a related deferred income, the repayment is offset against the
carrying amount of the deferred income, and any excess is recognized in profit or loss for the period. If there is no related deferred
income, the repayment is recognized immediately in profit or loss for the period.
4.23 Deferred tax assets and deferred tax liabilities
4.23.1 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.
4.23.2 Deferred income tax assets and liabilities
For temporary differences between the carrying amount of certain assets or liabilities and their tax base, or between the nil carrying
amount of those items that are not recognized as assets or liabilities and their tax base that can be determined according to tax
laws, deferred tax assets and liabilities are recognized using the balance sheet liability method.
For temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising
from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at
the time of transaction, no deferred tax asset or liability is recognized.
For taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, no
deferred income tax liability related is recognized except where the Company is able to control the timing of reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
All deferred income tax liabilities arising from taxable temporary differences except the ones mentioned above are recognized.
For temporary deductible differences associated with the initial recognition of an asset or liability arising from a transaction (not a
business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction,
no deferred tax asset is recognized.
For taxable temporary deductible differences associated with investments in subsidiaries and associates, and interests in joint
ventures, no deferred income tax asset related is recognized if it is impossible to reversal the temporary difference in the
foreseeable future, or it is not probable to obtain taxable income which can be used for the deduction of the temporary difference in
the future.
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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
4.23.3 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.
4.23.4 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.
4.24 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.
4.24.1 The Company as Lessee under operating Lease
Lease payments under an operating lease are recognized by a lessee on a straight-line basis over the lease term, and either
included in the cost of the related asset or charged to profit or loss for the current period. The contingent rents shall be recorded in
the profit or loss of the period in which they actually arise.
4.24.2 The Company as Leasor under operating Lease
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.24.3 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.
4.24.4 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.
4.25 Regular repair and substantial repair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is accounted for through profit or loss for
the period in which it is incurred. Substantial repair expenditure eligible for capitalisation is capitalised when incurred and
recognised as replacement cost of non-current assets and depreciated over a reasonable length of time. Substantial repair
expenditure of aircrafts under an operating lease incurred before the lease expiry date is amortised on the basis of air hours over
the lease period.
4.26 Changes in major accounting policies and accounting estimates
4.26.1 change of accounting policies
There is no significant change of accounting policies for the company during the reporting period.
4.26.2 change of accounting estimates
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
There is no significant change of accountingestimates for the company during the reporting period.
4.27 Correction of prior period errors
There is no significant change of previous accounting errors for the Company during the reporting period.
4.28 Significant account judgment and estimates
The Company is required to make judgments, estimates and assumptions about the carrying amounts of items in the financial
statements that cannot be measured accurately, due to the internal 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 reviewed 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:
4.28.1 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.
4.28.2 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.
4.28.3 Impairment of inventories
The Company measures inventories by the lower of cost and realizable net value according to the accounting policies in regard of
inventories and provisions for decline in value of inventories is made if the cost is higher than their net realizable value, and
obsolete and slow-movement inventories. Inventories decline in value to net realizable value is the estimated selling price in the
ordinary course of business. Net realizable value is determined on the basis of clear evidence obtained, and takes into
consideration the purposes of holding inventories and effect of post balance sheet events. The difference between the actual result
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Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.28.4 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.
4.28.5 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.
4.28.6 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.
4.28.7 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
55
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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.
4.28.8 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.
4.28.9 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.
4.28.10 Defined benefit plan
The defined benefit plan implemented and maintained by the Company includes post-employment benefits plan. The provided
welfare costs under the above defined benefit plan was calculated by expected cumulative unit credit method according to various
actuarial assumptions, and were recognized during the employee service providing period. Actuarial Assumptions include but not
limited to discount rate, mortality rate, and etc.. The discount rate is on the basis of management's review of national debt, and
mortality rate depends on the mortality rate adopted by the China life insurance industry. Supplemental information of defined
benefit plan see
Note 6.28.
Note 5 Taxation
5.1 Major taxes and tax rate
Tax Tax rate (%)
The VAT is calculated as the difference between output tax (11% of the taxable
Value Added Tax
revenue) and deductible input tax for the period.
Business Tax Business tax is calculated as 3%-5% of taxable turnover.
Enterprise income tax Income tax is calculated as 25% of taxable profits.
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.
56
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
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, f revenue arising from air transportation become VAT taxable per the Notice of Pilot
Conversion of Sales-tax-to-VAT for the Transportation Sector and Certain Contemporary Service Sectors by the
Ministry of Finance and State Administration of Taxation (Caishui[2013]37Hao).
5.2 Tax incentives
5.2.1. Zero VAT rate applies to entities and individuals within the Chinese territory that provide international transportation services,
research and development services and designing services provided to foreign entities, roundtrip transportation services between
Hongkong, Marcau,and Taiwan, as well as transportion services provided in Hongkong, Marcau, and Taiwan per the Notice of Pilot
Conversion of Sales-tax-to-VAT for the Transportation Sector and Certain Contemporary Service Sectors by the Ministry of Finance
and State Administration of Taxation (Caishui[2013]No.37)(财税[2013]37号《财政部、国家税务总局关于在全国开展交通
运输业和部分现代服务业营业税改征增值税试点税收政策的通知》)..
5.2.2. Per the Notice of Continuous Implementation of Transitional Business Tax Exemption Policy for Cross-boarder Lease
Contracts of Equipment and Machinery(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.
5.2.3.According to National Development and Reform Commission Order, banch of the company belonging to the West Region,
shall be taxed at 15% reduced rate, whose international and domestic air passenger and cargo transport projects were in accord
with《Catalogue of Encouraged Industries in the Western Region》.
Note 6 Notes to significant elements of the consolidated financial statements
Unless otherwise stated, the meaning of "B/f", "C/f", "Current period", "Prior period" in the following notes (incl. Notes to elements of
the separate financial statements) is "1st January 2016", "30th June 2016", " the date ended June 30th 2016", and " the date ended
June 30th 2015" respectively.
6.1 Monetary funds
Item C/f B/f
Cash at hand: 285,721.96 178,959.16
Bank deposit: 592,069,776.02 1,415,220,671.44
Other monetary funds:
Total 592,355,497.98 1,415,399,630.60
57
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Item C/f B/f
Including: the total amount of deposit abroad 1,756,177.14 2,232,804.96
6.2 Accounts receivables
6.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Accounts receivable of individual significance and subject
to individual impairment assessment 265,220,904.89 67.08 265,220,904.89
Accounts receivable subject to impairment assessment by
credit risk characteristics of a portfolio 119,743,068.20 30.28 5,987,153.40 5.00 113,755,914.80
Accounts receivable of individual insignificance but subject
to individual impairment assessment 10,444,954.18 2.64 2,765,908.05 26.48 7,679,046.13
Total 395,408,927.27 100.00 8,753,061.45 2.21 386,655,865.82
(Continued)
C/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Accounts receivable of individual significance and subject
to individual impairment assessment 156,501,058.00 59.44 156,501,058.00
Accounts receivable subject to impairment assessment
by credit risk characteristics of a portfolio 94,755,329.85 35.99 4,737,766.49 5.00 90,017,563.36
Accounts receivable of individual insignificance but
subject to individual impairment assessment 12,030,208.57 4.57 2,765,908.05 22.99 9,264,300.52
Total 263,286,596.42 100.00 7,503,674.54 2.85 255,782,921.88
① Accounts receivable of individual significance and subject to individual impairment assessment
Debtor C/f
58
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Allowance for Rate of
Carrying amount Reason for allowance
bad debt allowance (%)
No indication of impairment upon
BSP-CHINA
46,851,707.33 individual assessment
No indication of impairment upon
Air China
146,810,526.00 individual assessment
No indication of impairment upon
Accounting Center of China Aviation
71,558,671.56 individual assessment
Total 265,220,904.89
② Accounts receivable subject to impairment assessment by portfolio
C/f
Portfolio
Carrying amount Allowance for bad debt Rate of allowance
Portfolio by nature 119,743,068.20 5,987,153.40 5.00
Total 119,743,068.20 5,987,153.40 5.00
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
C/f
Debtor Allowance for Rate of
Carrying amount Reason for allowance
bad debt allowance (%)
China Cargo Airlines LTD. 289,194.94 Related party
No indication of impairment
BSP-TAIWAN
3,213,567.72 upon individual assessment
No indication of impairment
UATP
2,845,120.24 upon individual assessment
Non recoverable upon
Kun Peng Airlines Co., Ltd.
1,849,400.00 1,849,400.00 100.00 individual assessment
Non recoverable upon
CRAirways
916,508.05 916,508.05 100.00 individual assessment
No indication of impairment
BSP-JAPAN
1,124,197.23 upon individual assessment
59
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
C/f
Debtor Allowance for Rate of
Carrying amount Reason for allowance
bad debt allowance (%)
Taikoo(Shandong)Aircraft Engineering
Related party
8,400.00
Company Limited
No indication of impairment
BSP-THAILAND
10,887.01 upon individual assessment
No indication of impairment
BSP-CAMBODIA
187,678.99 upon individual assessment
Total 10,444,954.18 2,765,908.05 26.48
6.2.2 Recognisation, recovery or reversal of allowance for bad debt
The amount of allowance for bad debts recognised during the year is CNY1,249,386.91.
6.2.3 Top five accounts receivables by debtors
The total amount of top five accounts receivables summarised by debtors as at the end of current period is CNY 307,423,979.30,
accounting for 77.75% of the total accounts receivable as at the end of current period, the total corresponding allowance for bad
debts is CNY 2,110,153.72.
6.3 Prepayments
6.3.1 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 177,357,271.50 99.59 154,068,748.52 99.46
1 to 2 years 323,954.09 0.18 337,815.97 0.22
2 to 3 years
Over 3 years 407,493.40 0.23 491,212.70 0.32
Total 178,088,718.99 100.00 154,897,777.19 100.00
6.3.2 Details of top five prepayments
The total amount of top five prepayments as at the end of current period is CNY71,780,729.37, accounting for 40.31% of the
total advance to suppliers.
6.4 Dividends receivable
6.4.1 Disclosure by item
60
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Item C/f B/f
Sichuan Airlines 4,381,900.00
Total 4,381,900.00
6.5 Other receivables
6.5.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Other receivables of individual
significance and subject to individual
impairment assessment 302,148,165.44 73.36 106,146,149.60 35.13 196,002,015.84
Other receivables subject to
impairment assessment by credit risk
characteristics of a portfolio 67,616,308.77 16.42 3,380,815.43 5.00 64,235,493.34
Other receivables of individual
insignificance but subject to individual
impairment assessment 42,081,192.03 10.22 42,081,192.03
Total 411,845,666.24 100.00 109,526,965.03 26.59 302,318,701.21
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Other receivables of individual
significance and subject to individual
impairment assessment 267,542,239.69 68.46 106,461,110.62 39.79 161,081,129.07
Other receivables subject to
impairment assessment by credit risk
characteristics of a portfolio 77,465,334.20 19.82 3,873,266.72 5.00 73,592,067.48
Other receivables of individual
insignificance but subject to individual 45,815,835.47 11.72 45,815,835.47
61
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
B/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
impairment assessment
Total 390,823,409.36 100.00 110,334,377.34 28.23 280,489,032.02
① Other receivables of individual significance and subject to individual impairment assessment
C/f
Debtor Allowance for bad Rate of
Carrying amount Reason for allowance
debt allowance (%)
Impaired collectibility
Shandong Rainbow Commercial Jet Co.,
identified upon individual
Ltd.
101,551,717.65 101,551,717.65 100.00 assessment
No indication of impairment
Debtor #1
67,353,245.60 upon individual assessment
impairment assessment by
Debtor #2
49,123,470.40 2,456,173.52 5.00 portfolio
impairment assessment by
Debtor #3
42,765,168.51 2,138,258.43 5.00 portfolio
No indication of impairment
CBD-leasing Co., Ltd.
41,354,563.28 upon individual assessment
Total 302,148,165.44 106,146,149.60 35.13
② Other receivables subject to impairment assessment by portfolio
C/f
Portfolio
Carrying amount Allowance for bad debt Rate of allowance(%)
Portfolio by nature 67,616,308.77 3,380,815.43 5.00
Total 67,616,308.77 3,380,815.43 5.00
③ Other receivables of individual insignificance but subject to individual impairment assessment
Debtor C/f
62
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Allowance for Rate of
Carrying amount Reason for allowance
bad debt allowance (%)
No indication of impairment
Debtor #1
17,300,360.00 upon individual assessment
No indication of impairment
Debtor #2
7,944,588.20 upon individual assessment
No indication of impairment
Debtor #3
1,311,700.00 upon individual assessment
No indication of impairment
Debtor #4
3,900,000.00 upon individual assessment
No indication of impairment
Debtor #5
291,291.81 upon individual assessment
No indication of impairment
Debtor #6
102,103.68 upon individual assessment
No indication of impairment
Debtor #7
4,041,653.01 upon individual assessment
No indication of impairment
Air China
6,226,204.16 upon individual assessment
Taikoo (Shandong) Aircraft Engineering No indication of impairment
Company Limited 934,254.49 upon individual assessment
No indication of impairment
Shandong XiangYu Air Technology Co., Ltd.
28,536.68 upon individual assessment
No indication of impairment
Shenzhen Airlines Co., Ltd.
500.00 upon individual assessment
Total 42,081,192.03
6.5.2 Recognisation, recovery or reversal of allowance for bad debt
The amount of allowance for bad debts recovered or reversed during the current period is CNY 807,412.31.
6.5.3 Disclosure by nature
Category C/f B/f
Deposits 143,603,555.58 107,918,479.76
63
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Others 268,242,110.66 282,904,929.60
Total 411,845,666.24 390,823,409.36
6.5.4 Top five other receivables
Allowance for bad
Debtor Nature C/f Aging %
debt
Shandong Rainbow Commercial Jet Co.,
Others Over 3 years
Ltd. 101,551,717.65 24.66 101,551,717.65
Debtor #1 Deposits 67,353,245.60 Within 1 year 16.35
Debtor #2 Others 49,123,470.40 Within 2 years 11.93 2,456,173.52
Debtor #3 Others 42,765,168.51 Within 2 years 10.38 2,138,258.43
CBD-leasing Co., Ltd. Deposits 41,354,563.28 Over 3 years 10.04
Total 302,148,165.44 73.36 106,146,149.60
6.6 Inventories
C/f
Type
Gross carrying amount Impairment allowance Net carrying amount
Consumable air equipments 120,041,137.39 120,041,137.39
Low-value consumables 2,624,798.47 2,624,798.47
Materials 1,140,295.19 1,140,295.19
Total 123,806,231.05 123,806,231.05
(Continued)
B/f
Type
Gross carrying amount Impairment allowance Net carrying amount
Consumable air equipments 108,152,915.54 108,152,915.54
Low-value consumables 3,141,642.16 3,141,642.16
Materials 1,012,883.29 1,012,883.29
Total 112,307,440.99 112,307,440.99
6.7 Other current assets
Type C/f B/f
64
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
VAT deductible 19,505,500.21 39,291,476.46
Income tax overpaid 7,134,030.07
Total 19,505,500.21 46,425,506.53
6.8 Financial assets available for sale
6.8.1 General information
C/f B/f
Category Net carrying Net carrying
Carrying amount Impairment Carrying amount Impairment
amount amount
Available for sale equity instruments
Including: measured by fair value 166,134,833.86 166,134,833.86 139,460,673.92 139,460,673.92
measured by cost 81,662,100.00 81,662,100.00 81,662,100.00 81,662,100.00
Total 247,796,933.86 247,796,933.86 221,122,773.92 221,122,773.92
6.8.2 Financial assets available for sale measured by fair value at the end of current period
Available for sale equity
Category Total
instruments
Cost of equity instruments 6,690,000.00 6,690,000.00
Fair value 166,134,833.86 166,134,833.86
Accumulated changes in the fair value recognised
into other comprehensive income 159,444,833.86 159,444,833.86
Impairment amount
6.8.3 Financial assets available for sale measured by cost at the end of current period
Carrying amounts as at 30/06/2016 Impairment Cash
Increas Decrea Increas Decrea Shareholding Dividend
Investee e in se in B/ e in se in C/ in for
B/f C/f
current current f current current f investee(%) current
period period period period period
Sichuan 35,000,000. 35,000,000.
Airlines 00 00 10.00
Jinan 46,662,100. 46,662,100.
Yaoqiang 00 00 2.53
65
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
International
Airport
81,662,100. 81,662,100.
Total
00 00
6.9 Long-term equity investments
Currency period movement (+, -)
Investment gains
and losses Other comprehensive Other
Category B/f Allowance b/f Additional Investment
recognised under income changes
investment reduction
the equity adjustment in equity
method
Associates
Shandong
Rainbow
Commercial
Jet Co., Ltd. 22,500,000.00 22,500,000.00
Total 22,500,000.00 22,500,000.00
(Continued)
Currency period movement (+, -)
Category Declared cash dividends Allowance C/f Allowance c/f
Others
or profits recognised
Investment in associates
Shandong Rainbow
Commercial Jet Co., Ltd. 22,500,000.00 22,500,000.00
Total 22,500,000.00 22,500,000.00
6.10 Fixed assets
6.10.1 General information
Houses and Aircrafts and High-value Transportation
Items Others Total
buildings engines rotables vehicles
1. Cost:
66
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Houses and Aircrafts and High-value Transportation
Items Others Total
buildings engines rotables vehicles
1.1 Balance as at 31/12/2015 358,411,470.20 10,041,861,037.02 667,498,748.25 68,916,652.12 176,777,010.04 11,313,464,917.63
1.2 Increased in current period 3,568,412.26 526,206,495.90 51,591,917.44 395,870.43 12,784,053.89 594,546,749.92
(1) Purchase 3,534,450.00 221,320,612.25 51,591,917.44 395,870.43 12,784,053.89 289,626,904.01
(2) Transferred from
construction in-progress 33,962.26 304,885,883.65 304,919,845.91
(3) Transferred from merger
and acquisitions
(4) Others
1.3 Decreased in
current period 2,675,743.34 117,878,620.81 8,479,841.67 1,665,419.32 3,089,672.29 133,789,297.43
(1) Disposal or scrap 2,675,743.34 117,878,620.81 6,503,157.62 1,665,419.32 3,089,672.29 131,812,613.38
(2) Others 1,976,684.05 1,976,684.05
1.4 Balance as at 30/06/2016 359,304,139.12 10,450,188,912.11 710,610,824.02 67,647,103.23 186,471,391.64 11,774,222,370.12
2. Accumulated Depreciation
2.1 Balance as at 31/12/2015 71,319,328.50 3,698,527,093.34 249,163,286.61 35,214,239.86 89,410,704.17 4,143,634,652.48
2.2 Increased in current period 5,839,178.73 354,852,510.40 18,518,623.44 2,616,540.03 8,896,753.62 390,723,606.22
(1) Accrual 5,839,178.73 354,852,510.40 18,518,623.44 2,616,540.03 8,896,753.62 390,723,606.22
2.3 Decreased in current period 1,088,989.54 117,878,620.81 2,692,423.66 1,560,631.50 2,251,810.62 125,472,476.13
(1) Disposal or scrap 1,088,989.54 117,878,620.81 1,494,426.28 1,560,631.50 2,251,810.62 124,274,478.75
(2) Others 1,197,997.38 1,197,997.38
2.4. Balance as at 30/06/2016 76,069,517.69 3,935,500,982.93 264,989,486.39 36,270,148.39 96,055,647.17 4,408,885,782.57
3. Impairment allowance
3.1 Balance as at 31/12/2015 13,572,095.22 13,572,095.22
3.2 Increased in current period
(1) Accrual
3.3 Decreased in current period 747,221.70 747,221.70
67
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Houses and Aircrafts and High-value Transportation
Items Others Total
buildings engines rotables vehicles
(1) Disposal or scrap 747,221.70 747,221.70
(2) Others
3.4 Balance as at 30/06/2016 12,824,873.52 12,824,873.52
4. Carrying amount
4.1 Carrying amount as at 30/06/2016 283,234,621.43 6,514,687,929.18 432,796,464.11 31,376,954.84 90,415,744.47 7,352,511,714.03
4.2 Carrying amount as at 31/12/2015 287,092,141.70 6,343,333,943.68 404,763,366.42 33,702,412.26 87,366,305.87 7,156,258,169.93
6.10.2 Fixed assets acquired under financial leases
Accumulated
Category Cost Impairment allowance Carrying amount
Depreciation
Aircrafts and engines 2,084,039,547.89 950,523,570.85 1,133,515,977.04
Total 2,084,039,547.89 950,523,570.85 1,133,515,977.04
6.10.3 Fixed assets pending ownership registration
Item Carrying amount Reason for pending
Land rented from Jinan Air Control, not eligible for
Jinan cargo arrival and departure warehouses 12,622,668.74
ownership registration
Impairment allowance of fixed assets is CNY 12,824,873.52 as at 30/06/2016, with no additional amount of allowance for fixed
assets impairment recognised during the period.
6.11 Construction in progress
6.11.1 General information
C/f B/f
Items Impairment Impairment
Carrying amount Net carrying amount Carrying amount Net carrying amount
allowance allowance
Factory building
project 141,711,704.23 141,711,704.23 126,277,951.14 126,277,951.14
Prepayment
for aircrafts 2,124,532,949.90 2,124,532,949.90 1,933,285,252.31 1,933,285,252.31
Construction of 3,737,935.45 3,737,935.45 2,747,369.44 2,747,369.44
68
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
C/f B/f
Items Impairment Impairment
Carrying amount Net carrying amount Carrying amount Net carrying amount
allowance allowance
information system
Total 2,269,982,589.58 2,269,982,589.58 2,062,310,572.89 2,062,310,572.89
6.11.2 Significant projects
Transferred to
Current period
Project Budget B/f fixed assets in Other decrease C/f
increase
current period
Administrative
office of Xiamen
branch 195,000,000.00 121,804,542.80 16,838,947.73 138,643,490.53
Prepayment for
aircrafts 15,004,922,602.00 1,933,285,252.31 681,573,672.06 304,885,883.65 185,440,090.82 2,124,532,949.90
Total 15,199,922,602.00 2,055,089,795.11 698,412,619.79 304,885,883.65 185,440,090.82 2,263,176,440.43
(Continued)
Weight Including: Capitalisation
Including:Transferred Including:Transferred
of cost to Stage of Cumulative interests rate
into leaseback into fixed assets Source of
Items date in completion interests capitalized applicable to
assets during the during the current finance
budgeted (%) capitalised during the the current
current period period
cost (%) current period period (%)
Administrative
office of
71.10 In progress Liquidity
Xiamen
branch
Loans
Prepayment Not from
14.16 2.4436-3.695
for aircrafts applicable financial
96,985,574.64 10,474,974.29 7,960,619.85 33,848,248.42 institutions
Total 96,985,574.64 10,474,974.29 7,960,619.85 33,848,248.42
Note: The cumulative amount of interests capitalized as at 31/12/2015 is 81,572,920.36, the amount of current period is
69
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
33,848,248.42, including 7,960,619.85 transferred into fixed assets and 10,474,974.29 transferred into leaseback assets during the
current period, the cumulative amount of interests capitalized as at 30/06/2016 is 96,985,574.64.
6.11.3 Recognization of impairment allowance for construction in progress
No sign of construction in progress impairment occurred as at 30/06/2016, no impairment provision shall be recognised.
6.12 Intangible assets
6.12.1 General information
Items Land rights Software Total
1. Cost:
1.1 Balance as at 31/12/2015 108,342,463.13 24,196,624.41 132,539,087.54
1.2 Increased in current period
(1) Purchase
(2) Internal R & D
(3) Increased from business combination
1.3 Decreased in current period
(1) Disposal
1.4 Balance as at 30/06/2016 108,347,341.13 24,196,624.41 132,543,965.54
2. Accumulated amortization
2.1 Balance as at 31/12/2015 11,181,225.30 5,957,130.68 17,138,355.98
2.2 Increased in current period 1,201,792.85 1,375,377.86 2,577,170.71
(1) Accrual 1,201,792.85 1,375,377.86 2,577,170.71
2.3 Decreased in current period
(1) Disposal
2.4 Balance as at 30/06/2016 12,383,018.15 7,332,508.54 19,715,526.69
3. Impairment allowance
3.1 Balance as at 31/12/2015
3.2 Increased in current period
(1) Accrual
3.3 Decreased in current period
70
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Items Land rights Software Total
(1) Disposal
3.4 Balance as at 30/06/2016
4. Carrying amount
4.1 Carrying amount as at 30/06/2016 95,964,322.98 16,864,115.87 112,828,438.85
4.2 Carrying amount as at 31/12/2015 97,166,115.83 18,239,493.73 115,405,609.56
6.12.2 Land rights with pending ownership registration
No case of land rights with pending ownership registration was identified as of 30/06/2016.
6.13 Goodwill
6.13.1 General information
Current period Current period
increase decrease
Investee B/f C/f
From business
…… Disposal ……
combination
Qingdao Feisheng 10,220,816.22 10,220,816.22
Total 10,220,816.22 10,220,816.22
6.13.2 Impairment allowance
Current period Current period
Investee B/f increase decrease C/f
Accrual …… Disposal ……
Qingdao Feisheng 10,220,816.22 10,220,816.22
Total 10,220,816.22 10,220,816.22
6.14 Deferred charges
Current period Current period
Item B/f Other decrease C/f
increase amortization
Pilot training 423,768,628.75 59,011,208.36 37,245,075.37 445,534,761.74
Decoration expenditure 18,887,498.03 109,074.37 3,518,927.42 15,477,644.98
Modification costs for aircraft 3,852,021.58 203,575.96 3,648,445.62
71
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Current period Current period
Item B/f Other decrease C/f
increase amortization
leasing
Total 446,508,148.36 59,120,282.73 40,967,578.75 464,660,852.34
6.15 Deferred tax assets and deferred tax liabilities
6.15.1 Deferred tax assets
C/f B/f
Item Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
difference difference
Allowance for bad debt 118,280,026.48 29,570,006.62 117,838,051.88 29,459,512.97
Impairment allowance for
fixed assets 12,824,873.52 3,206,218.38 13,572,095.22 3,393,023.81
Fair value movement of
financial liabilities held for
trading 7,297,084.84 1,824,271.21 3,370,447.62 842,611.91
Provisions 2,284,660,484.37 571,165,121.09 1,644,962,585.43 411,240,646.36
Employment benefits
payable 32,545,186.31 8,136,296.58 19,736,492.42 4,934,123.11
Deferred income 15,057,524.04 3,764,381.01 15,795,524.10 3,948,881.03
Total 2,470,665,179.56 617,666,294.89 1,815,275,196.67 453,818,799.19
6.15.2 Deferred tax liabilities
C/f B/f
Item Deductible temporary Deferred tax Deductible temporary Deferred tax
difference liabilities difference liabilities
Changes in fair value of
financial assets available for
sale 159,444,833.88 39,861,208.47 132,770,673.92 33,192,668.48
Total 159,444,833.88 39,861,208.47 132,770,673.92 33,192,668.48
6.16 Other non-current assets
72
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Item C/f B/f
Unrealized gains and losses of operating lease from
aircraft leaseback 8,892,890.28 23,794,314.90
Total 8,892,890.28 23,794,314.90
6.17 Financial liabilities measured by fair value with changes in fair value recognised in profit or loss
Item Fair value c/f Fair value b/f
Interest rate swaps 7,297,084.84 3,370,447.62
Total 7,297,084.84 3,370,447.62
The immature interest rate swaps held by the Company had a principal amount of USD 69,283,031.60 as at the reporting date;
bankers confirmed that the reporting date fair value of these interest rate swaps is CNY-7,297,084.84.
6.18 Notes payable
Type C/f B/f
Commercial acceptance 25,299,479.50
Total 25,299,479.50
6.19 Accounts payable
6.19.1 General information
Item C/f B/f
Aircraft maintenance costs 222,944,188.08 169,842,647.39
Fuel cost 219,118,867.57 157,915,325.68
Landing fee 265,870,451.71 312,636,408.52
Aircraft service cost 225,215,504.35 185,358,946.55
Flight catering 76,205,085.03 74,222,899.49
Computer booking fee 133,196,188.69 87,277,689.83
Lease rental 4,928,905.87 6,906,064.64
Others 241,806,534.53 134,469,713.45
Total 1,389,285,725.83 1,128,629,695.55
6.19.2 No significant account payable due for more than 1 year as at the reporting date.
6.20 Advance from customers
73
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Item C/f B/f
345,910,524.15
Ticket clearing 418,599,325.09
5,118,388.86
Advanced payment for tickets 5,221,967.36
7,578,424.76
Others 8,395,116.92
358,607,337.77
Total 432,216,409.37
6.21 Employee benefits payable
6.21.1 Disclosure by classification
Current period Current period
Item B/f C/f
increase decrease
1. Short-term employee benefits 455,788,600.48 1,055,887,152.19 1,136,111,885.47 375,563,867.20
2. Post-employment benefits 78,895,513.65 78,895,513.65
3. Termination benefits 135,451.20 135,451.20
4. Other long-term employee benefits
within one year
Total 455,788,600.48 1,134,918,117.04 1,215,142,850.32 375,563,867.20
6.21.2 Disclosure by classification of short-term employee benefits
Current period Current period
Item B/f C/f
increase decrease
1. Wages, salaries and subsidies 411,749,614.06 947,246,236.61 1,027,816,002.30 331,179,848.37
2. Employee welfare 19,444,314.02 19,444,314.02
3. Social insurance: 31,244,027.57 31,244,027.57
Including: Medical insurance 26,619,464.24 26,619,464.24
Employment injury insurance 1,944,206.78 1,944,206.78
Maternity insurance 2,680,356.55 2,680,356.55
Disabled security payments
4.Housing provident fund 22,494.00 30,530,011.52 30,532,209.52 20,296.00
5.Labour union fee and employee
education fee 19,736,492.42 13,592,562.47 2,795,332.06 30,533,722.83
6. Short-term paid absences 24,280,000.00 13,830,000.00 24,280,000.00 13,830,000.00
74
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Current period Current period
Item B/f C/f
increase decrease
7. Short-term profit-sharing plan
Total 455,788,600.48 1,055,887,152.19 1,136,111,885.47 375,563,867.20
6.21.3 Disclosure by defined contribution plan
Item B/f Current period increase Current period decrease C/f
1. Basic pension 49,923,102.34 49,923,102.34
2.Unemployment insurance 2,832,678.99 2,832,678.99
3. Annuity payment 26,139,732.32 26,139,732.32
Total 78,895,513.65 78,895,513.65
The company participated in basic pension and unemployment insurance in accordance with the regulations. Based on the
insurance program, a percentage of total wages of employees were paid to the account separately. Except for the fee paid,
enterprise annuity was deposited to annuity management institution by a percentage of monthly payment base, which was
determined by seniority pay and post salary.
6.22 Taxes and fees payable
Tax (Fee) C/f B/f
VAT 567,880.63 184,449.99
Business tax 1,315,631.25
Urban construction and maintenance tax 3,325,434.98 661,316.27
Education surcharge 1,425,889.03 473,042.24
Enterprise income tax 97,043,698.39 545,653.46
Property tax 170,078.07 170,078.07
Land tax 224,139.00 224,139.00
Personal income tax 8,343,312.36 8,767,613.18
Stamp tax 2,549,539.30 1,805,107.26
Civil aviation development fund 95,286,772.77 90,906,945.13
Others 1,419,820.31 93,895.34
Total 210,356,564.84 105,147,871.19
75
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
6.23 Interests payable
Item C/f B/f
Interest on long-term borrowings with repayment by installments 3,968,905.21 3,638,536.32
Total 3,968,905.21 3,638,536.32
6.24 Other payables
6.24.1 Disclosure by nature
Item C/f B/f
Payable for construction projects 25,534,888.94 36,254,846.11
Payable for down payments 118,515,870.76 77,019,458.72
Payables associated with aircraft purchase 11,545,299.79 9,475,078.50
Taxes deducted at source 49,898,003.00 50,487,172.46
Others 189,696,591.48 182,393,206.98
Total 395,190,653.97 355,629,762.77
6.24.2 Significant other payables due for more than 1 year
Creditor Amount Reason for pending settlement
Air China 20,000,000.00 Margin deposit to be settled upon expiry of immature wet lease
Total 20,000,000.00
6.25 Non-current liabilities due within one year
Category C/f B/f
Long-term borrowings due within one year (Note 6.26) 1,430,807,055.50 1,342,283,640.89
Long-term payables due within one year (Note 6.27) 136,479,853.54 138,796,767.49
Long-term employee benefits payable due within one
year (Note 6.28) 6,312,808.68 5,930,912.28
Total 1,573,599,717.72 1,487,011,320.66
6.26 Long-term borrowings
Category C/f B/f
Mortgage loan
Secured loans 2,068,089,191.38 2,589,468,383.99
76
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Category C/f B/f
Guaranteed loans
Credit loans 1,343,719,843.20 1,640,517,129.60
Less: Long-term borrowings due within one year (Note 6.25) 1,430,807,055.50 1,342,283,640.89
Total 1,981,001,979.08 2,887,701,872.70
Note: ① Class and amount of mortgage assets see Note 6.49 assets with imposed restriction on ownership.
② Interest rates of the above-mentioned long-term borrowings range from 1.1746%-7.6275%.
6.27 Long-term payables
Category C/f B/f
Financial lease rental payables 969,857,500.10 1,024,970,371.19
Maintenance payables for aircrafts and engines held under operating lease 1,962,685,681.04 1,644,962,585.43
Less: Financial lease rental payables due within one year (Note 6.25) 136,479,853.54 138,796,767.49
Less: Maintenance payables for aircrafts and engines held under operating lease due within one
year (Note 1) 219,178,995.60 164,895,012.20
Total 2,576,884,332.00 2,366,241,176.93
Note : Maintenance payables for aircrafts and engines held under operating lease due within one year had been included in
accounts payable.
6.28 Long-term employee benefits payable
6.28.1 General information
Item C/f B/f
Post-employment benefits-net defined benefit liability 88,037,883.63 90,145,000.00
Less: long-term staff remuneration payable due within one year (Note 6.25) 6,312,808.68 5,930,912.28
Total 81,725,074.95 84,214,087.72
6.28.2 Movements
① Defined benefit obligation
Item C/f B/f
(1) Net Defined Benefit Asset/(Liability) at End of Prior Period 90,145,000.00 75,838,000.00
(2) Defined benefit costs recognised 1,308,000.00 1,697,045.15
77
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Item C/f B/f
into current profit or loss
1. Current Service Cost
2. Past Service Cost
3. Settlement (Gain)/Loss
4. Net Interest/(Income) on Net Defined Benefit Liability/(Asset) 1,308,000.00 1,697,045.15
(3) Defined benefit costs recognised
into other comprehensive income
1. Actuarial gains/(losses)
(4) Other movements 3,415,116.37 2,954,740.30
1. Settlement payment
2. Benefits Paid Directly by Employer 3,415,116.37 2,954,740.30
(5) Net defined benefit asset/(liability) at end of current period 88,037,883.63 74,580,304.85
② Actuarial Assumptions
Item 31st December, 2015 30th June, 2016
Discount Rate 3.00% 3.00%
China Life Insurance Mortality Rate 2000-2003
Mortality Rate
(Annuity)
Cost of Living Adjustments for Retired Cadres and
0.00%
Retirees
Cost of Living Adjustments for Internal Retirees 0.00%
Cost of Living Adjustments for Dependants 0.00%
6.29 Deferred income
Current period Current period
Item B/f C/f
increase decrease
Designated subsidy for snow disaster 1,989,958.34 249,750.00 1,740,208.34
Designated subsidy for civil aviation
energy-saving program 13,805,565.76 488,250.06 13,317,315.70
Total 15,795,524.10 738,000.06 15,057,524.04
78
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Details of government grants:
the amount included in
Current period
Item B/f non-operating income for Other changes C/f
increase
current period
Designated subsidy for
snow disaster 1,989,958.34 249,750.00 1,740,208.34
Designated subsidy for civil
aviation energy-saving
program 13,805,565.76 488,250.06 13,317,315.70
Total 15,795,524.10 738,000.06 15,057,524.04
6.30 Share capital
B/f Currency period movement (+, -) C/f
Coversion
Category Share Bonus
Amount % from Others Subtotal Amount %
issue issue
reserves
1. Shares with
restriction on
disposal
1.1 State-held shares
1.2 Shares held by
259,801,000.00 64.95 259,801,000.00 64.95
state-owned entities
1.3 Shares held by
199,000.00 0.05 199,000.00 0.05
other domestic investors
Including: Held by
199,000.00 0.05 199,000.00 0.05
institutional investors
Held by
non-institutional investors
1.4 Shares held by
foreign investors
Including: Held by
79
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
B/f Currency period movement (+, -) C/f
Coversion
Category Share Bonus
Amount % from Others Subtotal Amount %
issue issue
reserves
institutional investors
Held by
non-institutional investors
Subtotal of shares with
260,000,000.00 65.00 260,000,000.00 65.00
restriction on disposal
2. Floating shares
2.1 Ordianry shares
issued in CNY
2.2 Shares issued in
domestic stock market in 140,000,000.00 35.00 140,000,000.00 35.00
foreign currency
2.3 Shares issued in
foreign market in foreign
currency
2.4 Others
Subtotal of floating shares 140,000,000.00 35.00 140,000,000.00 35.00
Total 400,000,000.00 100.00 400,000,000.00 100.00
6.31 Capital reserves
Current period Current period
Category B/f C/f
increase decrease
Share premium 67,618,282.54 67,618,282.54
Other capital reserves 7,792,081.16 7,792,081.16
Total 75,410,363.70 75,410,363.70
6.32 Other comprehensive income
80
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Total amount in current period
Less:
previously
recognised in After tax After tax
Amount for Less:
Item B/f other attributable to attributable C/f
the period Income tax
comprehensive the parent to minority
before tax expense
income company shareholders
transferred into
profit or loss
1.Other
comprehensive
income will be
reclassified into
income or loss
in the future -6,023,000.00 -6,023,000.00
Including:
remeasurement
of net assets or
net liabilities of
defined benefit
plans -6,023,000.00 -6,023,000.00
2.Other
comprehensive
income
reclassifiable to
profit or loss in
subsequent
periods 99,578,005.44 26,674,159.94 6,668,539.99 20,005,619.95 119,583,625.39
Gains and
losses from
changes in fair
value of
financial assets
available for 99,578,005.44 26,674,159.94 6,668,539.99 20,005,619.95 119,583,625.39
81
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Total amount in current period
Less:
previously
recognised in After tax After tax
Amount for Less:
Item B/f other attributable to attributable C/f
the period Income tax
comprehensive the parent to minority
before tax expense
income company shareholders
transferred into
profit or loss
sale
Total of other
comprehensive
income 93,555,005.44 26,674,159.94 6,668,539.99 20,005,619.95 113,560,625.39
6.33 Surplus reserves
Current period Current period
Category B/f C/f
increase decrease
Statutory surplus reserve 370,981,095.40 370,981,095.40
Total 370,981,095.40 370,981,095.40
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 surplus reserve from the after-tax profits after making allocations to the
statutory surplus reserve from the after-tax profits. Approved surplus reserves can be released to recover losses or for conversion
into share capital.
6.34 Retained earnings
Items Current period Prior period
Pre-adjustment balance brought forward 2,425,066,740.03 2,025,535,984.99
Total adjustment to retained earnings b/f (+, -)
Retained earnings b/f after adjustment 2,425,066,740.03 2,025,535,984.99
Add: Net profit attributable to shareholders of the parent 283,689,488.65 532,260,993.04
Other transfer
Less: Appropriation to statutory surplus reserve 52,730,238.00
82
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Items Current period Prior period
Pre-adjustment balance brought forward 2,425,066,740.03 2,025,535,984.99
Appropriation to discretionary surplus reserve
General reserve
Ordinary dividends declared 100,000,000.00 80,000,000.00
Bonus issue
Balance carrying forward 2,608,756,228.68 2,425,066,740.03
6.35 Operating revenues and costs
Current period Prior period
Category
Operating revenues Operating costs Operating revenues Operating costs
Principal business 6,174,403,762.33 5,422,888,318.50 5,633,948,135.01 4,841,814,446.76
Other business 135,345,527.89 679,535.22 79,776,387.70 5,061,144.89
Total 6,309,749,290.22 5,423,567,853.72 5,713,724,522.71 4,846,875,591.65
6.36 Business tax and surcharges
Item Current period Prior period
Business tax 4,626,340.00 3,594,770.86
Urban maintenance and construction tax 10,620,945.66 10,559,393.48
Education surcharge and others 9,018,732.58 8,969,872.03
Total 24,266,018.24 23,124,036.37
Notes: Applicable rates for business tax and surcharges see Note 5 Taxation.
6.37 Sales expenses
Category Current period Prior period
Agency fees 142,524,924.99 211,554,821.68
Employment benefits 87,674,449.74 74,660,087.43
Computer booking 48,542,318.85 41,512,226.48
Online payment 18,243,015.91 9,735,737.29
Sales expense of annual tickets 569,258.24 973,879.91
83
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Category Current period Prior period
Lease rental 5,386,640.36 4,053,634.70
Advertisement fees 5,933,117.54 4,317,594.27
Administrative office expenses 2,328,914.03 1,912,421.44
Travel expenses 2,768,481.58 2,338,180.16
System and network 1,315,330.83 1,693,216.38
BSP data processing 1,509,044.75 918,333.37
Depreiciation 804,033.70 808,685.23
Others 11,709,951.77 10,091,319.11
Total 329,309,482.29 364,570,137.45
6.38 General and administrative expenses
Category Current period Prior period
75,981,194.22 59,217,883.58
Employment benefits
10,303,991.66 6,493,395.08
Lease rental
2,073,800.42 2,521,704.40
Business entertainment costs
7,473,243.21 6,255,001.34
Depreiciation
5,486,165.66 4,297,424.30
Taxes and fees
1,722,759.24 4,536,697.24
Technology development costs
2,577,170.71 2,577,169.30
Amortisation of intangibles
5,911,247.24 5,085,027.90
Water, electricity charges
8,035,371.48 5,289,556.32
Outsourcing fee
28,673,428.41 31,338,675.58
Others
148,238,372.25 127,612,535.04
Total
6.39 Financial costs
Category Current period Prior period
Interest expenses 67,649,152.92 87,989,823.85
Less: Interest income 7,344,162.51 10,059,966.07
Exchange difference 50,594,145.29 -974,429.22
Bank charges and others 3,309,378.48 652,092.22
84
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Total 114,208,514.18 77,607,520.78
6.40 Loss on asset impairment
Category Current period Prior period
Allowance for bad debt 441,974.60 2,661,278.77
Total 441,974.60 2,661,278.77
6.41 Gain from changes in fair value
Source Current period Prior period
Interest rate swaps -3,926,637.22 -3,117,198.69
Total -3,926,637.22 -3,117,198.69
6.42 Investment income
Category Current period Prior period
Income from holding of financial assets available for sale 3.47 6,019,997.42
Income from long-term equity investment income of equity method -24,215,803.75
Income from financial assets measured by fair value with changes in
fair value recognised in profit or loss -850,517.15 -1,986,683.41
Total -850,513.68 -20,182,489.74
6.43 Non-operating income
Included in current
Category Current period Prior period period non-recurring
profit and loss
Gain on non-current asset disposals 38,150.95 8,162.52 38,150.95
Including: Gain on fixed asset disposals 38,150.95 8,162.52 38,150.95
Government grants (See details of government
grants below) 108,958,388.62 29,365,000.06 108,958,388.62
Others 6,701,077.28 23,779,493.20 6,701,077.28
Total 115,697,616.85 53,152,655.78 115,697,616.85
Details of government grants:
85
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
related to the assets/
Government assitance Current period Prior period
related to the income
Airline subsidies 86,623,850.00 15,007,000.00 related to the income
Energy-saving reward from ministry of
related to the income
finance 19,420,000.00 12,650,000.00
Designated subsidy for snow disaster 249,750.00 249,750.00 related to the assets
Designated subsidy for civil aviation
related to the assets
energy-saving program 488,250.06 488,250.06
Others 2,176,538.56 970,000.00 related to the income
Total 108,958,388.62 29,365,000.06
Note: Government grants are mainly referred to subsidy income received from government departments, which was used to support
the development of aviation business.
6.44 Non-operating expenses
Included in current period
Category Current period Prior period non-recurring profit and
loss
Loss on non-current asset disposals 1,994,829.83 933,279.17 1,994,829.83
Including: Loss on fixed asset disposals 1,994,829.83 933,279.17 1,994,829.83
Others 584,722.41 80,662.20 584,722.41
Total 2,579,552.24 1,013,941.37 2,579,552.24
6.45 Income tax expenses
6.45.1 Income tax expenses
Items Current period Prior period
Current income tax expense 258,215,995.70 148,635,855.24
Deferred tax -163,847,495.70 -65,330,280.30
Total 94,368,500.00 83,305,574.94
6.45.2 Reconciliation of account profit and income tax expenses
Items Current period
86
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Profit before tax 378,057,988.65
Income tax computed in accordance with the applicable tax rate 94,514,497.16
Income tax computed in accordance with the applicable tax rate -1,477,246.73
Impact of non-taxable income
Impact of non-deductible costs, expenses and losses 1,331,249.57
Income tax expenses 94,368,500.00
6.46 Other comprehensive income
Please see Note 6. 32 for detail.
6.47 Notes to the consolidated statement of cash flows
6.47.1 Other cash receipts relating to operating activities
Category Current period Prior period
Government grants 108,220,388.56 28,627,000.00
Interest income on bank deposit 7,344,162.51 10,059,966.07
Cash receiptes from non-operating income 6,701,077.28 23,779,493.20
Cash receiptes from operating balance 38,808,493.53 56,796,630.15
Total 161,074,121.88 119,263,089.42
6.47.2 Other cash payments relating to operating activities
Category Current period Prior period
Bank charges 3,310,024.48 652,092.22
Cash payments for non-operating expenses 584,722.41 80,662.20
Cash payments for operating balance
52,354,485.57 61,341,787.62
Cash payments for sales and general and administrative expenses 22,941,379.52 22,595,156.36
Total 79,190,611.98 84,669,698.40
6.47.3 Other cash payments relating to investing activities
Category Current period Prior period
Cash payments of settlement of interest rate swaps 421,533.02 1,390,588.27
Total 421,533.02 1,390,588.27
87
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
6.47.4 Other cash receipts relating to financing activities
Category Current period Prior period
Cash receipts for disposal of purchase rights on aircrafts
(which became acquired under operating lease instead of purchase) 195,845,614.80 883,986,750.53
Total 195,845,614.80 883,986,750.53
6.47.5 Other cash payments relating to financing activities
Category Current period Prior period
Cash payments for aircraft financial lease rental 85,871,334.98 79,014,450.69
Total 85,871,334.98 79,014,450.69
6.48 Supplementary information to the consolidated statement of cash flows
6.48.1 Supplementary information to the statement of cash flows
Items Current period Prior period
① Reconciliation of cash flows from operating activities to net profit:
Net profit 283,689,488.65 216,806,873.69
Add: Loss on asset impairment 441,974.60 2,661,278.77
Depreciation of fixed assets, oil and gas assets, biological assets held for
production 390,723,606.22 329,193,743.58
Amortisation of intangible assets 2,577,170.71 2,400,402.20
Amortisation of Long-term deferred expenditure 40,967,578.75 35,050,253.55
Loss on non-current assets disposal (gain presented by "-" prefix)
1,956,678.88 925,116.65
Loss on scrap of fixed assets (gain presented by "-" prefix)
Loss on fair value changes (gain presented by "-" prefix) 3,926,637.22 3,117,198.69
Financial costs (gain presented by "-" prefix) 131,315,878.01 91,981,542.61
Investment loss (gain presented by "-" prefix) 850,513.68 20,182,489.74
Decrease of deferred tax assets (increase presented by "-" prefix) -163,847,495.70 65,330,280.30
Increase of deferred tax liabilities (increase presented by "-" prefix)
Decrease of inventories (increase presented by "-" prefix) -11,498,790.06 5,940,983.26
Decrease of operating receivables (increase presented by "-" prefix) -176,385,529.52 -237,788,504.71
88
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Items Current period Prior period
Increase of operating payables (decrease presented by "-" prefix) 523,193,137.15 248,735,737.68
Others
-3,415,116.37 -2,954,740.30
Net cash flows generated from operating activities 1,024,495,732.22 781,582,655.71
②Significant investing and financing activities involve no cash:
Debt-to-capital conversion
Convertible loan due within one year
Fixed assets acquired under financial lease
③ Movement of cash and cash equivalents:
Cash as at 30/06/2016
592,355,497.98 705,372,786.76
Less: Cash as at 31/12/2015
1,415,399,630.60 460,741,336.35
Add: Cash equivalents as at 30/06/2016
Less: Cash equivalents as at 31/12/2015
Net increase of cash and cash equivalents -823,044,132.62 244,631,450.41
6.48.2 Composition of cash and cash equivalents
Items Current period Prior period
①Cash 592,355,497.98 705,372,786.76
Including: Cash at hand 285,721.96 255,700.14
Demand bank deposit 592,069,776.02 705,117,086.62
Demand other monetary funds
Demand deposit in the Central Bank
Deposit in peer firms
Loan to peer firms
②Cash equivalents
Including: Debt instrument matured within three months
……
89
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Items Current period Prior period
④ Cash and cash equivalents as at 30/06/2016 592,355,497.98 705,372,786.76
Including: restricted cash and cash equivalents in parent company or subsidiary
Note: Cash and cash equivalents excluding restricted cash and cash equivalents in parent company or subsidiary.
6.49 Assets with imposed restriction on ownership
Category C/f Reason of restriction
Assets pledged as security 3,726,014,732.73
Aircrafts and engines 3,726,014,732.73 Pledge as security for borrowings
Other form of restriction: 1,133,515,977.04
Aircrafts and engines 1,133,515,977.04 Assets acquired under financial lease
Total 4,859,530,709.77
6.50 Foreign currency monetary items
Original amount as at Translated amount as at
Item Foreign exchange rate
30/06/2016 30/06/2016
Monetary funds
Including: -USD
45,599,877.52 6.6312 302,381,907.81
-EUR
25.00 7.3750 184.38
-GBP
16.55 8.9212 147.65
-CAD
10.00 5.1222 51.22
-JPY
100,000.00 0.0645 6,450.00
-KRW
43,397,507.00 0.0057 247,365.79
-TWD
7,335,009.00 0.2057 1,508,811.35
Prepayments
Including: -USD 24,406,506.26 6.6312 161,844,424.31
90
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Original amount as at Translated amount as at
Item Foreign exchange rate
30/06/2016 30/06/2016
Other receivables
Including: -USD 20,759,145.12 6.6312 137,658,043.12
-EUR 95,924.69 7.3750 707,444.59
Accounts payable
Including: -USD 6,571,875.07 6.6312 43,579,417.96
-EUR 1,098.36 7.3750 8,100.41
-GBP 25,147.00 8.9212 224,341.42
Other payables
Including: -USD 20,480,083.27 6.6312 135,807,528.18
Non-current liabilities due within one year
Including: -USD 218,617,970.93 6.6312 1,449,699,488.83
Long-term borrowings
Including: -USD 396,715,925.46 6.6312 2,630,702,644.91
Long-term payables
Including: -USD 70,576,071.44 6.6312 468,004,044.93
Note 7: Change of scope of consolidation
No change of scope of consolidation from last year.
Note 8: The equity in other main entities
91
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
8.1 The equity in subsidiaries
8.1.1 The construction of the group
Place Holding proportion %
Place of Nature
Subsidiaries of Acquired method
operation of business Directly Indirectly
registration
Qingdao International Air
Logistics Centre Co., Ltd Qingdao, Qingdao, Logistics and
100.00 Acquired through investment
(hereafter, Qingdao Shandong Shandong storage
Logistics)
Qingdao Feisheng
International Aviation
Acquired through business
Training Technology Qingdao, Qingdao,
Pilot training 100.00 combination not under common
Development Co., Ltd Shandong Shandong
control
(hereafter, Qingdao
Feisheng)
8.2 The equity in associates
8.2.1 Significant associates
Holding proportion % The accounting
Place
Place of Nature treatment of
Associates of
operation of business Directly Indirectly investments in
registration
associates
Shandong Rainbow Commercial Jinan, Jinan, Aero
45.00 Equity method
Jet Co., Ltd. Shandong Shandong transportation
8.2.2 Key financial information of significant associate- Shandong Rainbow Commercial Jet Co., Ltd.
Item Jun 30th, 2016/Current period Dec 31th, 2015/ Last period
Current assets 1,831,976.16 1,832,244.32
Non-current assets 26,540.12 27,224.00
Total assets 1,858,516.28 1,859,468.32
92
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Item Jun 30th, 2016/Current period Dec 31th, 2015/ Last period
Current liabilities 167,765,813.33 167,765,813.33
Non-current liabilities
Total liabilities 167,765,813.33 167,765,813.33
Minority interests
Equity attributable to shareholders of the parent -165,907,297.05 -165,906,345.01
Pro rata share of the net assets calculated
Adjusting events
- Goodwill
-Unrealized profits from internal transaction
-Others
Book value of equity investments in associates
Fair value of publicly quoted equity investments in associates
Operating income
Net profit
-952.04 -25,265.05
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from associates during the year
8.2.3 Excess loss occurred by associates
93
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Unrecognized losses of
Cumulative unrecognized Cumulative unrecognized
Associates current period (Share of net
losses of prior period losses of current period
profit of current period)
Shandong Rainbow Commercial Jet Co., Ltd. -74,657,835.01 -428.42 -74,658,263.43
Note 9 The risk associated with financial instruments
The main financial instruments of the Company including equity investments, loans, accounts receivable, accounts payable etc.,
please see Note 6 for detail of related items. The risk associated with financial instruments, and risk management policies which the
company use to reduce these risks are described below. The management of the Company manages and supervises the risks to
ensure that the risks can be controlled within a limited range.
Sensitivity analysis techniques are adopted by the Company to analyse the impact of reaonsable and possible changes of risk
variables on the profit and loss or shareholders' equity for the current period. While risk variables seldomly change in isolation, and
the correlation among variables will have a significant effect on the ultimate impact of the change of one risk variable. Therefore, the
following content is based on the assumption that changes in each variable is independent.
9.1 The targets and policies of risks management
The target of risks management is to obtain the proper balance between the risks and benefits, to reduce the negative impact that
caused by the risk of the Company to the lowest level, and to maximize the benefits of shareholders and other equity investors.
Based on the targets of risk management, the basic strategy of the Company’s risk management is to identify and analyse the risks
which are faced by the Company, establish suitable risk tolerance baseline and proceed the risk management, and supervise a
variety of risks timely and reliably, and control the risk within a limited range.
9.1.1 Market Risk
(1) Foreign exchange risk
Foreign exchange risk refers to the risk of loss due to exchange rate fluctuations generally. The company bears the foreign
exchange risk primarily concerned with USD, and uses USD for pricing or settlement in the field of main financing business,
operating leases, financing leasing. On 30 June 2016, except the following assets or liabilities in Note 6.50 are recorded in foreign
currency, the others are recorded in CNY. Foreign exchange risk of the assets and liabilities in foreign currencies may have an
impact on the Company's performance of operation.
(2) Interest rate risk - the risk of changes in cash flow
The risk of changes in cash flows of a financial instrument due to interest rate is mainly concerned with the floating rate of bank
borrowings (see Note 6.26,6.27). The company's policy is to maintain a floating interest rate on the borrowings.
(3) Other price risk
Financial assets available for sale and financial assets held-for-trade held by the company should be measured at fair value on the
94
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
balance sheet date. For the reason that, the company bears the risk of changes in the stock market.
9.1.2. Credit Risk
As at the statement date, the maximum risk that could cause the Company’s financial losses mainly comes from default of the other
party of the contract, which includes:
The carrying amount of financial assets recognised in the Consolidated statement of financial position; for financial instruments
measured by fair value, the book value reflects its risk exposure but not the maximum risk exposure, which will vary with changes in
the fair value in the future.
In order to reduce credit risk, the Company set up a team responsible for determination of credit limits, credit approvals and other
monitoring procedures to ensure that the necessary measures be taken to recover overdue debts. In addition, the Company reviews
the recoverable amount of each individual trade debt at each balance sheet date to ensure fully provision for bad debts recognised
for the money that cannot be recovered. Therefore the Company's management believes the Company’s credit risk has been
greatly reduced.
The Company's circulating funds were deposited in banks with high credit ratings, so that the credit risk of circulating funds was low.
9.1.3 Liquidity risk
When managing liquidity risk,the Company’s management believes maintaining adequate cash and cash equivalents, and
monitoring that at same time, in order to meet the needs of operation of the Company, and to reduce the impact of fluctuations in
cash flows.The management of the Company monitors the use of bank borrowings and ensure to abide by loan agreements.
Note 10 Disclosure of the fair value
10.1 The fair value at the end of current period of assets and liabilities which are measured by fair value
The fair value at the end of current period
The first level The second level The third level
Item
measured by fair measured by fair measured by Total
value value fair value
1. Continuous measurement by fair value
1.1 financial assets available for sale 166,134,833.86 166,134,833.86
(1) Equity instruments investment 166,134,833.86 166,134,833.86
Total amount of assets continuous
measurement by fair value 166,134,833.86 166,134,833.86
2. Financial liabilities measured at fair value
with changes in fair value recognised in profit
or loss 7,297,084.84 7,297,084.84
95
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
The fair value at the end of current period
The first level The second level The third level
Item
measured by fair measured by fair measured by Total
value value fair value
Interest rate swaps 7,297,084.84 7,297,084.84
Total amount of liabilities continuous
measurement by fair value 7,297,084.84 7,297,084.84
10.2 Determined on the basis of continuous and noncontinuous first level for fair value measurement of the market of
project
Financial assets available for sale of continuous measurement by fair value is the investment in TravelSky Technology Limited,
whose fair value was determined based on the closing price for the stock market in Hong Kong Stock Exchange on balance sheet
date.
10.3 Determined on the basis of continuous and noncontinuous second level for fair value measurement of the market of
project
Fair value measurement basis of interest rate swaps which was continuously measured by fair value is quotes from counterparty
banks on the fair value of interest rate swaps.
Note 11 Related parties and related party transaction
11.1 Major investors
Shareholding in Voting right in the
Place of
Investor Nature of operation Registered capital the Company Company
registration
(%) (%)
Investment and
SDA Group Jinan management of aero 580,000,000.00 42.00 42.00
transportation
Air China Beijing Aero transportation 13,084,751,004.00 22.80 22.80
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.
11.2 Subsidiaries
See Note 8.1 for subsidiaries.
11.3 Associates
96
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
See Note 8.2 for associates.
11.4 Other related parties
Other related party Relationship to the Company
Taikoo (Shandong) Aircraft Engineering Company Limited Controlled by major investors
Shandong XiangYu Air Technology Co., Ltd. Controlled by major investors
Shenzhen Airlines Co., Ltd. Controlled by major investors
Air China Cargo Co., Ltd. Controlled by major investors
China National Aviation Finance Co., Ltd. Controlled by major investors
Sichuan International Aero Engine Maintenance Co., Ltd. Controlled by major investors
Aircraft Maintenance and Engineering Corporation (Ameco Beijing) Controlled by major investors
Chengfu FuKai Aircraft Engineering Co., Ltd. Controlled by major investors
11.5 Related party transactions
11.5.1 Purchase of goods and services
Related party Transaction Current period Prior period
SDA Group Office lease rental and catering 15,513,331.65 14,718,616.46
Taikoo (Shandong) Aircraft Engineering
Aircraft maintenance
Company Limited 28,803,053.19 37,534,222.05
Shandong XiangYu Air Technology Co.,
Repairment
Ltd. 29,668,696.78 23,873,013.31
Air China Ground service 6,169,564.28 20,074,993.93
Air China Repairment 724,929.11 17,050,668.15
Air China Agency service 6,168,028.80 4,109,350.51
Air China Irregular flight expenditure 7,283,337.46 5,326,034.85
Shenzhen Airlines Co., Ltd. Training service 193,584.91
Shenzhen Airlines Co., Ltd. Agency service 382,425.92 86,603.44
Air China Cargo Co., Ltd. Ground service 1,551,773.69 1,458,186.75
Beijing Aircraft Maintenance and
Repairment
Engineering Corporation 22,363,336.17 1,088,798.04
Beijing Aircraft Maintenance and Ground service 15,553,050.00 7,165,863.42
97
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Related party Transaction Current period Prior period
Engineering Corporation
Sichuan International Aero Engine
Repairment
Maintenance Co., Ltd. 202,356,167.14 8,347,511.42
Chengfu FuKai Aircraft Engineering
Repairment
Co., Ltd. 2,636,992.53 3,714,634.73
Total 339,174,686.72 144,742,081.97
11.5.2 Sales of goods and vendering of services
Related party Transaction Current period Prior period
Air China Ground service 2,323,611.71 680,388.70
Air China Agency service 1,657,266.61 1,195,129.84
Shenzhen Airlines Co., Ltd. Agency service 162,976.46 132,937.60
Shenzhen Airlines Co., Ltd. Ground service 172,600.00 102,600.00
Total 4,316,454.78 2,111,056.14
11.5.3 Lease between related parties
The Company as leasee
Leasor Leased asset Current period Prior period
Air China Engines 197,679.64
Air China Simulators 464,500.00
Total 662,179.64
11.5.4 Remuneration to key management personel
Item Current period Prior period
Remuneration to key management personel CNY 4.5343 million CNY 4.2792 million
11.5.5 Inter-related-party borrowings
Related party Amount Start date Expiry date
China National Aviation Finance Co.,
296,000,000.00
Ltd. 2016-6-20 2026-6-20
98
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Total 296,000,000.00
11.5.6 Other related party transactions
Related party Transaction Current period Prior period
Air China Wet lease 183,404,273.00 240,049,478.38
Air China Code sharing -247,032.01 -349,966.55
Air China Frequent flyer cooperation 36,000,000.00 18,000,000.00
Air China Cargo Co., Ltd. Code sharing for cargo -2,479,852.47 -5,562,549.38
Total 216,677,388.52 252,136,962.45
11.6 Related party balances
11.6.1 Receivables
C/f B/f
Related party Allowance for bad Allowance for bad
Carrying amount Carrying amount
debt debt
Accounts receivable
Air China 146,810,526.00 64,912,116.42
Air China Cargo Co., Ltd. 289,194.94 2,994,845.77
Taikoo (Shandong) Aircraft Engineering
Company Limited 8,400.00 186,120.00
Total 147,108,120.94 68,093,082.19
Other receivables
Air China
6,226,204.16 5,067,826.76
Shenzhen Airlines Co., Ltd.
500.00 740.00
Shandong Rainbow Commercial Jet Co., Ltd.
101,551,717.65 101,551,717.65 101,551,717.65 101,551,717.65
Shandong XiangYu Air Technology Co., Ltd.
28,536.68 19,858.85
Taikoo (Shandong) Aircraft Engineering 934,254.49 854,742.74
99
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
C/f B/f
Related party Allowance for bad Allowance for bad
Carrying amount Carrying amount
debt debt
Company Limited
Total 108,741,212.98 101,551,717.65 107,494,886.00 101,551,717.65
11.6.2 Payables
Related party C/f B/f
Accounts payable
Shandong XiangYu Air Technology Co., Ltd. 6,321,089.85
Taikoo (Shandong) Aircraft Engineering Company Limited 2,394,007.12 6,848,765.73
Air China 134,977,457.56 99,480,295.38
Air China Cargo Co., Ltd. 252,668.96 259,754.60
Aircraft Maintenance and Engineering Corporation (Ameco Beijing) 6,026,083.14 7,760,074.07
Sichuan International Aero Engine Maintenance Co., Ltd. 31,226,775.59
Chengfu FuKai Aircraft Engineering Co., Ltd. 2,108,297.83 1,414,020.82
Total 152,079,604.46 146,989,686.19
Other payables
SDA Group 8,155,998.71 3,565,944.65
Air China 20,000,000.00 20,000,000.00
Shenzhen Airlines Co., Ltd. 1,850,144.00 1,850,144.00
Taikoo (Shandong) Aircraft Engineering Company Limited 245,400.00 245,400.00
Total 30,251,542.71 25,661,488.65
Note 12 Commitments
12.1 Signifcant commitments
12.1.1 Capital commitment
Item C/f B/f
Firm contracts not recognized in the financial statements
- Commitment to acquire non-current assets 17,812,944,524.44 18,228,453,171.55
100
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
-large outsourcing contract
-External investment commitments
Total 17,812,944,524.44 18,228,453,171.55
12.1.2 Operating lease
Information of irrevocable operating lease contracts as at the reporting date:
Item C/f B/f
Minimum lease rental for irrevocable operating lease contracts
Within one year from the reporting date 2,127,917,020.18 1,868,704,859.20
Within two years from the reporting date 1,969,528,168.96 1,790,568,747.56
Within three years from the reporting date 1,902,434,866.66 1,667,161,566.37
Subsequent years 10,898,163,516.64 9,900,119,169.07
Total 16,898,043,572.44 15,226,554,342.19
12.1.3 Other commitment
No other significant commitments of the Company need to be disclosed as at 30/06/2016.
Note 13 Post balance sheet date events
No Post reporting date events is subject to disclosure as at the reporting date.
Note 14 Other significant events
14.1 Pension Plan
No significant change of the annuity program occurred for current period, see note 6.21, 6.28.
Note 15 Notes to elements of the separate financial statements
15.1 Accounts receivable
15.1.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Accounts receivable of individual 265,220,904.89 68.66 265,220,904.89
101
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
C/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
significance and subject to individual
impairment assessment
Accounts receivable subject to
impairment assessment by credit risk
characteristics of a portfolio 112,332,309.67 29.08 5,616,615.48 5.00 106,715,694.19
Accounts receivable of individual
insignificance but subject to individual
impairment assessment 8,755,912.04 2.26 8,755,912.04
Total 386,309,126.60 100.00 5,616,615.48 1.45 380,692,511.12
(Continued)
B/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Accounts receivable of individual significance and
subject to individual
impairment assessment 155,464,398.00 60.75 155,464,398.00
Accounts receivable subject to
impairment assessment by credit risk
characteristics of a portfolio 86,102,003.17 33.65 4,305,100.16 5.00 81,796,903.01
Accounts receivable of individual
insignificance but subject to individual
impairment assessment 14,327,817.42 5.60 14,327,817.42
Total 255,894,218.59 100.00 4,305,100.16 1.68 251,589,118.43
① Accounts receivable of individual significance and subject to individual impairment assessment
Debtor C/f
102
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Allowance for bad Rate of
Carrying amount Reason for allowance
debt allowance (%)
No indication of impairment
46,851,707.33
BSP-CHINA upon individual assessment
No indication of impairment
146,810,526.00
Air China upon individual assessment
No indication of impairment
71,558,671.56
Accounting Center of China Aviation upon individual assessment
265,220,904.89
Total
② Accounts receivable subject to impairment assessment by portfolio
C/f
Portfolio
Carrying amount Rate of allowance (%) Allowance for bad debt
Portfolio by nature 112,332,309.67 5,616,615.48 5.00
Total 112,332,309.67 5,616,615.48 5.00
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
C/f
Debtor Allowance for Rate of
Carrying amount Reason for allowance
bad debt allowance (%)
China Cargo Airlines LTD. 289,194.94 Related party
No indication of impairment
BSP-TAIWAN
3,213,567.72 upon individual assessment
No indication of impairment
UATP
2,845,120.24 upon individual assessment
No indication of impairment
BSP-JAPAN
1,124,197.23 upon individual assessment
Taikoo Shandong Aircraft Engineering
Related party
8,400.00
Company Limited
No indication of impairment
BSP-THAILAND
10,887.01 upon individual assessment
103
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
No indication of impairment
BSP-CAMBODIA
187,678.99 upon individual assessment
Qingdao International Air Logistics Centre Co., Related party
1,076,865.91
Ltd
Total 8,755,912.04
15.1.2 Recognisation, recovery or reversal of allowance for bad debt
The amount of allowance for bad debts recognised during the year is CNY1,311,515.32.
15.1.3 Top five accounts receivables by debtors
The total amount of top five accounts receivables summarized by debtors as at the end of current period is CNY 307,423,979.30,
accounting for 79.58% of the total accounts receivable as at the end of current period, the total corresponding allowance for bad
debts is CNY2,110,153.72.
15.2 Other receivables
15.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Book value
Amount % Amount %
Other receivables of individual
significance and subject to individual
impairment assessment 347,327,070.16 75.23 106,146,149.60 30.56 241,180,920.56
Other receivables subject to subject to
impairment assessment by credit risk
characteristics of a portfolio 72,299,659.54 15.66 3,614,982.97 5.00 68,684,676.57
Other receivables of individual
insignificance but subject to individual
impairment assessment 42,081,192.03 9.11 42,081,192.03
Total 461,707,921.73 100.00 109,761,132.57 23.77 351,946,789.16
(Continued)
B/f
Category
Carrying amount Allowance for bad debt Book value
104
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Amount % Amount %
Other receivables of individual
significance and subject to individual
impairment assessment 311,471,122.15 71.76 106,461,110.62 34.18 205,010,011.53
Other receivables subject to subject to
impairment assessment by credit risk
characteristics of a portfolio 76,765,699.27 17.69 3,838,284.97 5.00 72,927,414.30
Other receivables of individual
insignificance but subject to individual
impairment assessment 45,815,835.47 10.55 45,815,835.47
Total 434,052,656.89 100.00 110,299,395.59 25.41 323,753,261.30
① Other receivables of individual significance and subject to individual impairment assessment
C/f
Rate of
Debtor Carrying Allowance for bad
allowance Reason for allowance
amount debt
(%)
Shandong Rainbow Commercial Jet Co., Impaired collectibility identified
101,551,717.65 101,551,717.65 100.00
Ltd. upon individual assessment
No indication of impairment
Debtor #1 67,353,245.60
upon individual assessment
impairment assessment by
Debtor #2 49,123,470.40 2,456,173.52 5.00
portfolio
Qingdao International Air Logistics Centre No indication of impairment
45,178,904.72
Co., Ltd upon individual assessment
impairment assessment by
Debtor #3 42,765,168.51 2,138,258.43 5.00
portfolio
No indication of impairment
CBD-leasing Co., Ltd. 41,354,563.28
upon individual assessment
Total 347,327,070.16 106,146,149.60 30.56
② Other receivables subject to impairment assessment by portfolio
Portfolio C/f
105
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Carrying amount Rate of allowance (%) Allowance for bad debt
Portfolio by nature 72,299,659.54 3,614,982.97 5.00
Total 72,299,659.54 3,614,982.97 5.00
③ Other receivables of individual insignificance but subject to individual impairment assessment
C/f
Debtor Allowance for Rate of
Carrying amount Reason for allowance
bad debt allowance (%)
No indication of impairment
Debtor #1 17,300,360.00
upon individual assessment
No indication of impairment
Debtor #2 7,944,588.20
upon individual assessment
No indication of impairment
Debtor #3 1,311,700.00
upon individual assessment
No indication of impairment
Debtor #4 3,900,000.00
upon individual assessment
No indication of impairment
Debtor #5 291,291.81
upon individual assessment
No indication of impairment
Debtor #6 102,103.68
upon individual assessment
No indication of impairment
Debtor #7 4,041,653.01
upon individual assessment
No indication of impairment
Air China 6,226,204.16
upon individual assessment
Taikoo (Shandong) Aircraft Engineering No indication of impairment
934,254.49
Company Limited upon individual assessment
No indication of impairment
Shandong XiangYu Air Technology Co., Ltd. 28,536.68
upon individual assessment
No indication of impairment
Shenzhen Airlines Co., Ltd. 500.00
upon individual assessment
Total 42,081,192.03
15.2.2 Recognisation, recovery or reversal of allowance for bad debt
The amount of allowance for bad debts recovered or reversed during the current period is CNY 538,263.02.
15.2.3 Disclosure by nature
106
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Category C/f B/f
Deposits 143,599,505.58 107,675,329.76
Others 318,108,416.15 326,377,327.13
Total 461,707,921.73 434,052,656.89
15.2.4 Top five other receivables
Allowance for bad
Debtor Nature C/f Aging %
debt
Shandong Rainbow Commercial Jet
Others Over 3 years
101,551,717.65 21.99 101,551,717.65
Co., Ltd.
Debtor #1 Deposits 67,353,245.60 Within 1 year 14.59
Debtor #2 Others 49,123,470.40 Within 2 years 10.64 2,456,173.52
Qingdao International Air Logistics
Others Within 5 years
45,178,904.72 9.79
Centre Co., Ltd
Debtor #3 Others 42,765,168.51 Within 2 years 9.26 2,138,258.43
Total 305,972,506.88 66.27 106,146,149.60
15.3 Long-term equity investments
15.3.1 Disclosure by category
C/f B/f
Item Impairment Net carrying Impairment
Carrying amount Carrying amount Net carrying amount
allowance amount allowance
Investments in
subsidiaries 106,000,685.43 106,000,685.43 106,000,685.43 106,000,685.43
Investments in
associates 22,500,000.00 22,500,000.00 22,500,000.00 22,500,000.00
Total 128,500,685.43 22,500,000.00 106,000,685.43 128,500,685.43 22,500,000.00 106,000,685.43
15.3.2 Investments in subsidiaries
107
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Current Current
Allowance Period-end
Investee B/f period period C/f
recognized allowance
increase decrease
Qingdao International
Air Logistics Centre
Co., Ltd 48,323,205.97 48,323,205.97
Qingdao Feisheng
International Aviation
Training Technology
Development Co., Ltd 57,677,479.46 57,677,479.46
Total 106,000,685.43 106,000,685.43
15.3.3 Investments in associates
Currency period movement (+, -)
Investment gains
Impairment
Investee B/f Additional Investment and losses Other comprehensive Other changes
allowance
investment reduction recognized under income adjustment in equity
the equity method
Associates
Shandong
Rainbow
Commercial
Jet Co.,
Ltd. 22,500,000.00 22,500,000.00
Total 22,500,000.00 22,500,000.00
(Continued)
Currency period movement (+, -)
Period-end
Investee Declared cash C/f
Allowance recognized Others allowance
dividends or profits
Associates
108
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Currency period movement (+, -)
Period-end
Investee Declared cash C/f
Allowance recognized Others allowance
dividends or profits
Shandong Rainbow
Commercial Jet Co., Ltd. 22,500,000.00 22,500,000.00
Total 22,500,000.00 22,500,000.00
15.4 Operating revenues and costs
Current period Prior period
Category
Operating revenues Operating costs Operating revenues Operating costs
Principal business 6,158,342,851.56 5,417,613,981.08 5,618,472,293.22 4,833,819,723.39
Other business 135,345,527.89 679,535.22 79,776,387.70 5,061,144.89
Total 6,293,688,379.45 5,418,293,516.30 5,698,248,680.92 4,838,880,868.28
15.5 Investment income
Category Current period Prior period
Income from long-term equity investments measured at cost 3.47 6,019,997.42
Income from long-term equity investment income of equity method -24,215,803.75
Income from financial assets measured by fair value with changes in
fair value recognised in profit or loss -850,517.15 -1,986,683.41
Total -850,513.68 -20,182,489.74
Note 16 Supplementary information
16.1 Non-recurring profit and loss
Category Current period Description
Gains from disposals of non-current assets after expending impairment provisions -1,956,678.88
109
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Category Current period Description
Exceeded-authority approved, non-official approved or accidental tax 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 activities and of which the
quota or approval is eligible for automatic renewal in accordance with relevant regulations 108,958,388.62
Financial resource usage fees charged on non-financial institution recognised through profit
or loss for the current reporting period
Gains arising from bargain purchase in business combination and investments in associates
and joint ventures
Non-monetary asset exchange
Consigned investment and asset management
Impairment provision resulting from force majeure, eg. natural desasters
Reorganisation
Reorganisation expenditure
Unfair transactions
Net profits or losses achieved by an acquired under-common-control entity during the period
from the start of the period to the acquisition date
Gains or losses arising from contingent events unconnected with the Company’s daily
operating activities
Fair value changes of tradable financial assets and tradable financial liabilities held and
gains or losses arising from disposals of tradable financial assets, tradable financial liabilities and -4,777,154.37
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 impairment
assessment
Gains or losses arising from consigned borrowings
Fair value changes of property investments subsequently measured at fair value
One-off adjustment of profit or loss for the current reporting period in accordance with tax
and accounting laws and regulations
Consignment income arising from consigned operations
110
Shandong Airlines Co., Ltd. Notes to the Financial Statements as at 30 June 2016
Category Current period Description
Income and expenses other than items listed above 6,116,354.87
Other gains or losses satisfying the definition of extraordinary gains or losses
Subtotal 108,340,910.24
Less: Impact of income tax 27,114,590.51
Less: Impact on non-controlling interest
Total 81,226,319.73
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).
16.2 Rate of return on net assets and earnings per share
Earnings per share (CNY/share)
Profit catetory Weighted average rate of RONA
Basic EPS Diluted EPS
Net profit attributable to ordinary shareholders 8.09 0.71 0.71
Recurring profit or loss attributable to ordinary
shareholders 5.77 0.51 0.51
111
