Auditor’s report
Shandong Airlines Co., Ltd.
RONGCHENG SHENZI[2020]518Z0031
RSM CHINA CPA LLP
CHINABEIJING
Contents
Number Contents Page
1 Auditor ’s report 1
2 Consolidated Statement of Financial Position 8
Consolidated Statement of Profit or Loss and Other
3 11
Comprehensive Income
4 Consolidated Statement of Cash Flows 15
5 Consolidated Statement of Changes in Owners' Equity 18
6 Statement of Financial Position of Parent Company 23
Statement of Profit or Loss and Other Comprehensive
7 26
Income of Parent Company
8 Statement of Cash Flows of Parent Company 29
Statement of Changes in Owners' Equity of Parent
9 31
Company
10 Notes to the Financial Statements 36
Independent Auditor’s Report
RONGCHENG SHENZI[2020]518Z0031
To the Board of Directors of Shandong Airlines Co., Ltd.,
I. Audit Opinion
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereafter,
Shandong Airlines or the Company), which comprise the consolidated and separate statements of
financial position as at December 31 2019, the consolidated and separate statements of
comprehensive income, the consolidated and separate statements of cash flows and the consolidated
and separate statements of changes in equity for the year then ended and the notes to the financial
statements.
In our opinion, the financial statements have been prepared in accordance with the require ments of
the Enterprises Accounting Standards of China and presented fairly, in all material respects, the
consolidated and separate financial positions of Shandong Airlines as at December 31 2019, and the
Company’s consolidated and separate results of operations and consolidated and separate cash flows
for the year then ended.
II. Basis of Forming the Audit Opinion
We conducted our audit in accordance with the Chinese Certified Public Accountant Auditing
Standards. The section “Auditors’ Responsibility for the Financial Statements” in the audit report
further describes our responsibilities in accordance with these standards. According to the Code of
Ethics for Chinese Certified Public Accountants, we are independent of the Company and fulfilled
other responsibilities of code of ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
III. Key Audit Ite ms
Key audit items are the items which we believe, based on our professional judgment, to be
significant in the audit of financial statements for the current period. Audit response to these items
has been designed and implemented in the context of auditing the financial statements as a whole
1
for the purpose of expressing an audit opinion on the financial statements; and we do not express an
opinion on each of these items individually.
1. Recognition of Passenger Service Revenue
1.1 Description
The revenue of passenger service of the Company is recognized when the service is provided. At
the balance sheet date, the amount collected by the Company for transportation service which has
been sold but not yet provided is included in the balance sheet as ticket settlement. The Company
uses complex information technology systems, through the system of automatic processing of large
amounts of data to keep track of ticket sales and transportation services provided, to confirm the
timing and the exact amount of revenue of passenger service. Due to the recognition of passenger
service revenue involving use of complex information technology system, it will lead to inaccurate
recognition of passenger service revenue or the inherent risk of the inappropriateness of the
accounting period. Therefore, we identify revenue recognition of passenger service as a key audit
item.
Please refer to Note 3.22 Revenue under Note 3 Important Accounting Principles and Accounting
Estimates. Please refer to Note 5.21 Advance from customers and Note 5.35 Operating revenues
and costs under Note 5 Notes to significant elements of the consolidated financial statements.
Please refer to Note 14.4 Operating revenues and costs under Note 14 Notes to elements of the
separate financial statements for details.
1.2 Audit Response
The relevant procedures we implemented for the recognition of passenger service revenue mainly
include:
1.2.1 We assessed the design, operation and effectiveness of the internal control related to the
company's revenue recognition and assessed the effectiveness of the design and operation of
information technology control related to the revenue system.
1.2.2 We assessed the difference between the information output from the information technology
system and the company's financial and operational data and identified the differences in the
process to track the related key labor control.
2
1.2.3 We compared the opening and closing balance of ticket settlement during the period, and
analyzed the reasonableness of amount changes.
1.2.4 We checked the relevant supporting documents of the account entries of significant amounts
or other specific risk standards.
2. Major Repair Fee for Operating Lease Aircrafts and related Engines
2.1 Description
On December 31 2019, the payable balance of operating lease aircrafts and major repair fee of the
engines (including that due within one year) amounted to 4.08 billion. According to the terms of the
lease agreement, the company shall return the aircraft in accordance with the agreed conditions
demanded at the end of the lease period. In order to ensure the agreed conditions for the return of
the aircraft, the company will make a provision for major repair to the fuselage and engine of
operating lease during the estimated overhaul period, and the overhaul expenses will be included in
the current profit and loss. Management estimates the expected overhaul cycle and overhaul cost
based on the actual maintenance cost experience of the same or similar fuselage and engine in the
past, current economic and aviation related development, and taking into account the predicted
flight hours, flight cycles, overhaul intervals and other variables. Due to the inherent uncertainty of
the prediction of the overhaul period and the future overhaul cost for different types of fuselages
and engines, there is a risk of inaccurate estimated cost. Therefore, we identify major repair fee for
operating leased aircrafts and related engines as a key audit matter.
Please refer to Note 3.26 Regular repair and substantial repair, Note 3.29.9 Aircraft operating lease
and engine overhaul expenses under Note 3 Important Accounting Principles and Accounting
Estimates. Please refer to Note 5.20 Notes payable and Accounts payable a nd Note 5.27 Long-term
payables for the details under Note 5 Notes to significant elements of the consolidated financial
statements.
2.2 Audit Response
The relevant procedures we implemented for major repair fee for operating lease aircrafts and
related engines mainly include:
2.2.1 We assessed the effectiveness of the design and operation of the key internal controls related
to the overhaul preparation for the aircraft of operating lease.
3
2.2.2 We discussed with the engineering department managers of the Company responsible for
aircraft maintenance, obtained the information of the overhaul cycle, overhaul cost and actual
maintenance cost, compared the information to that used by financial executives to calculate the
overhaul preparation.
2.2.3 We compared the assumptions adopted by the management in the previous year with the
actual situation and the assumptions of this year, and evaluated the key assumptions adopted by the
management in estimating the overhaul cycle and the future o verhaul cost, based on the terms of
operation lease agreement and the historical maintenance experience of the Company.
2.2.4 We compared the actual cost of the returned aircraft which was in overhaul previously to the
corresponding overhaul preparation, analyzed the difference to evaluate the rationality of
management accounting estimates.
IV. Other Information
The management of the Company is responsible for other information, which includes the
information contained in the Company’s 2019 annual report except for the financial statements and
our auditor report.
Our audit opinion on the financial statements does not cover other information, and we do not
express assurance opinion in any form on the other information.
In parallel to our audit of the financial statements, our responsibilities include reading other
information to assess if the information included in other information is significantly inconsistent
with the financial statements or information obtained during the audit, and if there is possible
material misstatement in other information.
Where we identify material misstatement in other information on the basis of our work, we shall
report such fact. Based on our work, we have no such matter to be reported.
V. Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management of the Company (hereafter, the management) is responsible for preparing and
presenting the financial statements in accordance with Enterprise Accounting Standards of China
and for the purpose of fair presentation and designing, implementing and maintaining internal
control necessary to the preparation of financial statements that are free from material
4
misstatements, whether due to fraud or error.
During the preparation of the financial statements, the management is responsible for assessing the
Company’s going-concern capability; disclosing matters in relation to the going-concern status; and
applying the going-concern assumption for preparation of the financial statements, unless the
management plans to liquidate the Company, terminates operation of the Company or has no other
practical alternative choice.
Those charged with governance are responsible for monitoring the Company’s financial reporting
process.
VI. Auditors’ Responsibility for the Financial Statements
Our objective is to obtain reasonable assurance as to whether the financial statements are free from
material misstatement, whether due to frauds or errors, and issue an audit report with audit opinion.
Reasonable assurance is a high- level assurance, but there is no guarantee that a material
misstatement will always be found in the audit performed in accordance with the auditing standards.
Misstatements may be caused by fraud or error. Misstatements are considered to be material if they,
individually or in aggregate, could reasonably be expected to influence the economic decisions of
users based on the financial statements.
During the performance of our audit in accordance with the auditing standards, we use professio nal
judgment and maintain professional skepticism. We also perform the following procedures:
A. Identify and assess the risks of material misstatement of the financial statements due to fraud and
error, design and implement audit procedures to address these risks, and obtain sufficient and
appropriate audit evidence as a basis for forming the audit opinion. As fraud may involve collusion,
forgery, willful omission, misrepresentation or override of internal control, the risk of not
discovering a material misstatement due to fraud is higher than the risk of failing to detect a
material misstatement resulting from a mistake.
B. Understand the internal controls related to auditing in order to design appropriate audit
procedures.
C. Evaluate the appropriateness of accounting policies adopted by the management and the
reasonableness of accounting estimates and relevant disclosures made by management.
5
D. Conclude on the appropriateness of management’s application of the going concern assumption.
Meanwhile, based on the audit evidence obtained, conclude whether there is material uncertainty
about the Company’s ability to continue as a going-concern. If we conclude that there is material
uncertainty, the auditing standards require us to draw attention of the users of t he financial
statements to the relevant disclosures in the financial statements. If the disclosure is inadequate, we
shall express a qualified opinion. Our conclusion is based on information available as of the date of
the audit report. However, future events or circumstances may cause the Company not being able to
continue as a going-concern.
E. Evaluate the overall presentation, structure and content of financial statements and evaluate
whether the financial statements present fairly the relevant transactions and events.
F. Obtain sufficient and appropriate audit evidence regarding to the Company’s financial
information of the entities or business activities in order to express audit opinion on the financial
statements. We are responsible for the guidance, supervision and execution of the group audit, and
take full responsibility for the audit opinion.
We communicate with those charged with governance on the scope and time schedule of the audit,
and significant audit findings, etc., including deficiency of internal control that we identified during
the audit which warrants attention.
6
We also provide a statement to those charged with governance regarding the fact that we comply
with the requirements of professional ethics relating to independence, and also communicate with
them about all relationships and other matters that may be reasonably deemed to affect our
independence，as well as, where applicable, the relevant precautions (if applicable).
Through the matters we communicate with those charged with governance, we identify matters that
are significant in the audit of the financial statements for the current period, which therefore become
the key audit items. We disclose these items in the audit report, unless public disclosure of such
items is prohibited by laws and regulations; in exceptional circumstances, where the benefit arising
from public disclosure of certain matters is outweighed by the negative consequence brought by
such disclosure in consideration of public interest. We do not disclose such items in the audit report.
RSM China Chinese CPA
(Special General Partnership) (Engagement Partner): Ou Changxian
Beijing, China Chinese CPA: Guo Yuefeng
26 March 2020
7
2. Consolidated Statement of Financial Position
Prepared by Shandong Airlines Co., Ltd
31 December 2019
In RM B
Item 2019-12-31 2018-12-31
Current assets:
M onetary funds 598,961,065.69 840,960,104.09
Settlement provisions
Capital lent
Tradable financial assets
Financial assets measured by fair
value and with variation reckoned into 90,488.17
current gains/losses
Derivative financial assets
Note receivable
Account receivable 456,758,290.60 413,726,456.71
Receivable financing
Accounts paid in advance 232,061,479.78 265,931,342.94
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance
receivable
Other account receivable 232,147,324.23 225,281,412.22
Including: Interest receivable
Dividend receivable
Buying back the sale of financial
assets
Inventories 109,435,256.69 105,625,519.42
Contractual assets
Assets held for sale
Non-current asset due within one
year
Other current assets 170,020,416.07 236,596,457.60
Total current assets 1,799,383,833.06 2,088,211,781.15
Non-current assets:
8
Loans and payments on behalf
Debt investment
Finance asset available for sales 310,842,965.35
Other debt investment
Held-to-maturity investment
Long-term account receivable
Long-term equity investment
Investment in other equity
874,728,633.32
instrument
Other non-current financial assets
Investment real estate
Fixed assets 7,362,687,431.80 7,770,750,794.37
Construction in progress 5,479,071,703.01 4,790,300,972.13
Productive biological asset
Oil and gas asset
Right-of-use assets
Intangible assets 113,459,129.62 115,541,881.39
Expense on Research and
Development
Goodwill 454,020.13 454,020.13
Long-term expenses to be
657,772,583.81 573,645,342.64
apportioned
Deferred income tax asset 1,105,378,651.73 914,231,343.25
Other non-current asset
Total non-current asset 15,593,552,153.42 14,475,767,319.26
Total assets 17,392,935,986.48 16,563,979,100.41
Current liabilities:
Short-term loans 300,329,083.33 580,000,000.00
Loan from central bank
Capital borrowed
Trading financial liability 126,264.75
Financial liability measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial liability
9
Note payable 402,996,891.30
Account payable 2,482,248,514.51 2,273,836,607.26
Accounts received in advance 936,873,667.96 787,371,671.33
Contractual liability
Selling financial asset of
repurchase
Absorbing deposit and interbank
deposit
Security trading of agency
Security sales of agency
Wage payable 549,061,919.97 543,294,439.81
Taxes payable 149,437,183.71 252,717,258.87
Other account payable 586,143,459.66 635,499,470.13
Including: Interest payable 10,428,894.80
Dividend payable 602,306.96 602,306.96
Commission charge and
commission payable
Reinsurance payable
Liability held for sale
Non-current liabilities due within
885,299,947.83 455,840,675.34
one year
Other current liabilities
Total current liabilities 6,292,516,933.02 5,528,560,122.74
Non-current liabilities:
Insurance contract reserve
Long-term loans 808,001,382.82 1,885,556,557.83
Bonds payable
Including: Preferred stock
Perpetual capital
securities
Lease liability
Long-term account payable 4,623,939,875.40 4,368,213,445.33
Long-term wages payable 152,746,225.21 135,224,119.11
Accrual liability
Deferred income 109,423,070.21 118,279,868.16
10
Deferred income tax liabilities 232,789,494.25 56,819,008.96
Other non-current liabilities
Total non-current liabilities 5,926,900,047.89 6,564,092,999.39
Total liabilities 12,219,416,980.91 12,092,653,122.13
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 570,487,739.92 149,300,488.94
Reasonable reserve
Surplus public reserve 538,773,444.97 503,999,977.58
Provision of general risk
Retained profit 3,588,847,456.98 3,342,615,148.06
Total owner’ s equity attributable to
5,173,519,005.57 4,471,325,978.28
parent company
M inority interests
Total owner’ s equity 5,173,519,005.57 4,471,325,978.28
Total liabilities and owner’ s equity 17,392,935,986.48 16,563,979,100.41
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
3. Consolidated Statement of Profit or Loss and Other Comprehensive Income
In RM B
Item 2019 2018
I. Total operating income 18,990,415,024.88 18,765,953,326.74
Including: Operating income 18,990,415,024.88 18,765,953,326.74
Interest income
Insurance gained
Commission charge and
commission income
11
II. Total operating cost 18,719,010,870.08 18,603,860,257.96
Including: Operating cost 17,198,527,408.30 17,168,678,072.03
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
Tax and extras 15,566,184.32 14,883,492.61
Sales expense 851,783,078.83 848,039,181.63
Administrative expense 482,684,059.23 428,763,602.19
R&D expense 22,442,549.67 20,646,996.66
Financial expense 148,007,589.73 122,848,912.84
Including: Interest
124,509,494.05 117,650,618.41
expenses
Interest income 10,691,861.94 15,278,180.93
Add: other income 107,638,847.09 221,815,360.84
Investment income (Loss is
6,293,674.12 18,025,825.93
listed with “-”)
Including: Investment income
on affiliated company and joint venture
The termination of income
recognition for financial assets measured
by amortized cost(Loss is listed with “-”)
Exchange income (Loss is
listed with “-”)
Net exposure hedging income
(Loss is listed with “-”)
12
Income from change of fair
-216,752.92 3,697,878.32
value (Loss is listed with “-”)
Loss of credit impairment
-2,937,990.94
(Loss is listed with “-”)
Losses of devaluation of asset
-4,469,223.84 -5,072,142.56
(Loss is listed with “-”)
Income from assets disposal
116,645.48 26,528,980.99
(Loss is listed with “-”)
III. Operating profit (Loss is listed with
377,829,353.79 427,088,972.30
“-”)
Add: Non-operating income 106,408,051.60 38,380,646.96
Less: Non-operating expense 3,343,238.16 3,959,082.04
IV Total profit (Loss is listed with “-”) 480,894,167.23 461,510,537.22
Less: Income tax expense 119,888,390.92 114,131,222.33
V Net profit (Net loss is listed with “-”) 361,005,776.31 347,379,314.89
(i) Classify by business continuity
1.continuous operating net profit
361,005,776.31 347,379,314.89
(net loss listed with ‘-”)
2.termination of net profit (net loss
listed with ‘-”)
(ii) Classify by ownership
1.Net profit attributable to owner’s
361,005,776.31 347,379,314.89
of parent company
2.M inority shareholders’ gains and
losses
VI. Net after-tax of other comprehensive
61,700,929.17 -29,194,350.54
income
Net after-tax of other comprehensive
income attributable to owners of parent 61,700,929.17 -29,194,350.54
company
13
(I) Other comprehensive income
items which will not be reclassified 61,700,929.17 -9,293,000.00
subsequently to profit of loss
1.Changes of the defined
-1,727,000.00 -9,293,000.00
benefit plans that re-measured
2.Other comprehensive
income under equity method that cannot
be transfer to gain/loss
3.Change of fair value of
63,427,929.17
investment in other equity instrument
4.Fair value change of
enterprise's credit risk
5. Other
(ii) Other comprehensive income
items which will be reclassified -19,901,350.54
subsequently to profit or loss
1.Other comprehensive
income under equity method that can
transfer to gain/loss
2.Change of fair value of
other debt investment
3.gain/loss of fair value
changes for available-for-sale financial -19,901,350.54
assets
4.Amount of financial assets
re-classify to other comprehensive
income
5.Gain/loss of
held-to-maturity investments that
re-classify to available-for-sale financial
asset
6.Credit impairment
provision for other debt investment
7.Cash flow hedging reserve
8.Translation differences
arising on translation of foreign currency
financial statements
9.Other
14
Net after-tax of other comprehensive
income attributable to minority
shareholders
VII. Total comprehensive income 422,706,705.48 318,184,964.35
Total comprehensive income
422,706,705.48 318,184,964.35
attributable to owners of parent Company
Total comprehensive income
attributable to minority shareholders
VIII. Earnings per share:
(i) Basic earnings per share 0.9 0.87
(ii) Diluted earnings per share 0.9 0.87
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
4. Consolidated Statement of Cash Flows
In RM B
Item 2019 2018
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 20,647,602,531.11 20,807,163,753.99
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
Cash received from interest,
commission charge and commission
Net increase of capital borrowed
15
Net increase of returned business
capital
Net cash received by agents in sale
and purchase of securities
Write-back of tax received 136,223,181.63 160,585,071.09
Other cash received concerning
226,860,833.30 451,507,473.74
operating activities
Subtotal of cash inflow arising from
21,010,686,546.04 21,419,256,298.82
operating activities
Cash paid for purchasing
commodities and receiving labor 13,974,802,792.98 14,782,948,436.20
service
Net increase of customer loans and
advances
Net increase of deposits in central
bank and interbank
Cash paid for original insurance
contract compensation
Net increase of capital lent
Cash paid for interest, commission
charge and commission
Cash paid for bonus of guarantee
slip
Cash paid to/for staff and workers 3,214,582,261.75 3,127,969,349.97
Taxes paid 830,166,097.48 721,075,563.94
Other cash paid concerning
361,323,141.45 337,245,429.23
operating activities
Subtotal of cash outflow arising from
18,380,874,293.66 18,969,238,779.34
operating activities
Net cash flows arising from operating
2,629,812,252.38 2,450,017,519.48
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
6,284,357.21 17,934,220.07
income
16
Net cash received from disposal of
fixed, intangible and other long-term 6,084,030.35 59,270,834.82
assets
Net cash received from disposal of
subsidiaries and other units
Other cash received concerning
9,316.91 91,605.86
investing activities
Subtotal of cash inflow from investing
12,377,704.47 77,296,660.75
activities
Cash paid for purchasing fixed,
1,909,607,697.75 4,196,183,599.83
intangible and other long-term assets
Cash paid for investment
Net increase of mortgaged loans
Net cash received from
110,832.50 490,295.22
subsidiaries and other units obtained
Other cash paid concerning
investing activities
Subtotal of cash outflow from investing
1,909,718,530.25 4,196,673,895.05
activities
Net cash flows arising from investing
-1,897,340,825.78 -4,119,377,234.30
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 890,000,000.00 1,784,385,239.67
Other cash received concerning
495,464,436.83 1,543,271,788.39
financing activities
Subtotal of cash inflow from financing
1,385,464,436.83 3,327,657,028.06
activities
Cash paid for settling debts 1,824,791,031.88 965,762,682.37
Cash paid for dividend and profit
173,707,282.61 171,267,798.35
distributing or interest paying
17
Including: Dividend and profit of
minority shareholder paid by
subsidiaries
Other cash paid concerning
367,299,836.44 273,646,123.68
financing activities
Subtotal of cash outflow from financing
2,365,798,150.93 1,410,676,604.40
activities
Net cash flows arising from financing
-980,333,714.10 1,916,980,423.66
activities
IV Influence on cash and cash
equivalents due to fluctuation in 5,863,249.10 49,654,474.95
exchange rate
V Net increase of cash and cash
-241,999,038.40 297,275,183.79
equivalents
Add: Balance of cash and cash
840,860,104.09 543,584,920.30
equivalents at the period -begin
VI. Balance of cash and cash
598,861,065.69 840,860,104.09
equivalents at the period -end
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
5. Consolidated State ment of Changes in Owne rs' Equity
This Period
In RM B
2019
Owners’ equity attributable to the parent Company
Other
equity instrument Other
M inori Total
Item Perpe Less: compr Provisi
Share Reaso Surplu Retain ty owners
tual Capital Invent ehensi on of Subtot
capita Prefe nable s ed Other interes ’
capit reserve ory ve genera al
l rred Other reserve reserve profit ts equity
al shares incom l risk
stock
secur e
ities
I. Balance at the 400,0 75,410 149,30 503,99 3,342, 4,471, 4,471,
end of the last 00,00 ,363.7 0,488. 9,977. 615,14 325,97 325,97
year 0.00 0 94 58 8.06 8.28 8.28
Add: 359,48 359,48 359,48
Changes of
6,321. 6,321. 6,321.
accounting
81 81 81
policy
18
Error
correction of the
last period
Enterprise
combine under
the same
control
Other
II. Balance at 400,0 75,410 508,78 503,99 3,342, 4,830, 4,830,
the beginning of 00,00 ,363.7 6,810. 9,977. 615,14 812,30 812,30
this year 0.00 0 75 58 8.06 0.09 0.09
III. Increase/
Decrease in this 61,700 34,773 246,23 342,70 342,70
year (Decrease ,929.1 ,467.3 2,308. 6,705. 6,705.
is listed with 7 9 92 48 48
“-”)
(i) Total 61,700 361,00 422,70 422,70
comprehensive ,929.1 5,776. 6,705. 6,705.
income 7 31 48 48
(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
34,773 -114,7 -80,00 -80,00
(III) Profit
,467.3 73,467 0,000. 0,000.
distribution
9 .39 00 00
1. Withdrawal 34,773 -34,77
of surplus ,467.3 3,467.
reserves 9 39
2. Withdrawal
of general risk
provisions
19
3. Distribution -80,00 -80,00 -80,00
for owners (or 0,000. 0,000. 0,000.
shareholders) 00 00 00
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．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensive
income
6. Other
(V) Reasonable
reserve
1. Withdrawal
in the report
period
2. Usage in the
report period
(VI)Others
IV Balance at 400,0 75,410 570,48 538,77 3,588, 5,173, 5,173,
the end of the 00,00 ,363.7 7,739. 3,444. 847,45 519,00 519,00
report period 0.00 0 92 97 6.98 5.57 5.57
Last Period
In RM B
2018
Item
Owners’ equity attributable to the parent Company M inorit Total
20
Other y owners’
equity instrument Other interest equity
Perp Less: compr Provisi s
Share Reaso Surplu Retain
etual Capital Invent ehensi on of Subtot
capita Prefe nable s ed Other
capit reserve ory ve genera al
l rred Other reserve reserve profit
al shares incom l risk
stock
secur e
ities
I. Balance at 400,0 75,410 178,49 471,45 3,127, 4,253, 4,253,1
the end of the 00,00 ,363.7 4,839. 7,259. 778,55 141,01 41,013.
last year 0.00 0 48 99 0.76 3.93 93
Add:
Changes of
accounting
policy
Error
correction of
the last period
Enterprise
combine
under the
same control
Other
II. Balance at 400,0 75,410 178,49 471,45 3,127, 4,253, 4,253,1
the beginning 00,00 ,363.7 4,839. 7,259. 778,55 141,01 41,013.
of this year 0.00 0 48 99 0.76 3.93 93
III. Increase/
Decrease in this -29,19 32,542 214,83 218,18
218,184
year (Decrease 4,350. ,717.5 6,597. 4,964.
,964.35
is listed with 54 9 30 35
“-”)
(i) Total -29,19 347,37 318,18
318,184
comprehensive 4,350. 9,314. 4,964.
,964.35
income 54 89 35
(ii) Owners’
devoted and
decreased
capital
1.Common
shares invested
by shareholders
2. Capital
invested by
holders of other
equity
instruments
21
3. Amount
reckoned into
owners equity
with
share-based
payment
4. Other
32,542 -132,5 -100,0 -100,00
(III) Profit
,717.5 42,717 00,000 0,000.0
distribution
9 .59 .00 0
1. Withdrawal 32,542 -32,54
of surplus ,717.5 2,717.
reserves 9 59
2. Withdrawal
of general risk
provisions
3. Distribution -100,0 -100,0 -100,00
for owners (or 00,000 00,000 0,000.0
shareholders) .00 .00 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．Carry-over
retained
earnings
from the
defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensive
income
22
6. Other
(V) Reasonable
reserve
1. Withdrawal
in the report
period
2. Usage in the
report period
(VI)Others
IV Balance at 400,0 75,410 149,30 503,99 3,342, 4,471, 4,471,3
the end of the 00,00 ,363.7 0,488. 9,977. 615,14 325,97 25,978.
report period 0.00 0 94 58 8.06 8.28 28
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
6. Statement of Financial Position of Parent Company
In RM B
Item 2019-12-31 2018-12-31
Current assets:
M onetary funds 563,534,831.81 804,583,812.57
Trading financial assets
Financial assets measured by fair
value and with variation reckoned into 90,488.17
current gains/losses
Derivative financial assets
Note receivable
Account receivable 456,602,459.51 412,570,738.01
Receivable financing
Accounts paid in advance 231,804,126.69 263,658,892.86
Other account receivable 237,966,773.59 239,078,612.04
Including: Interest receivable
Dividend receivable
Inventories 108,006,448.04 104,444,823.98
Contractual assets
Assets held for sale
23
Non-current assets maturing within
one year
Other current assets 169,612,615.24 236,057,827.36
Total current assets 1,767,527,254.88 2,060,485,194.99
Non-current assets:
Debt investment
Available-for-sale financial assets 310,842,965.35
Other debt investment
Held-to-maturity investments
Long-term receivables
Long-term equity investments 144,101,285.43 144,101,285.43
Investment in other equity
874,728,633.32
instrument
Other non-current financial assets
Investment real estate
Fixed assets 7,265,719,146.41 7,667,474,888.84
Construction in progress 5,479,071,703.01 4,790,300,972.13
Productive biological assets
Oil and natural gas assets
Right-of-use assets
Intangible assets 100,681,207.47 102,375,769.20
Research and development costs
Goodwill
Long-term deferred expenses 657,569,167.99 572,919,885.06
Deferred income tax assets 1,104,641,386.20 913,510,618.39
Other non-current assets
Total non-current assets 15,626,512,529.83 14,501,526,384.40
Total assets 17,394,039,784.71 16,562,011,579.39
Current liabilities
Short-term borrowings 300,329,083.33 580,000,000.00
Trading financial liability 126,264.75
Financial liability measured by fair
value and with variation reckoned into
current gains/losses
Derivative financial liability
24
Notes payable 402,996,891.30
Account payable 2,494,426,631.18 2,292,392,127.26
Accounts received in advance 935,722,229.11 785,082,130.23
Contractual liability
Wage payable 539,824,147.52 532,617,252.72
Taxes payable 147,060,509.11 248,981,430.52
Other accounts payable 649,376,495.57 680,079,759.56
Including: Interest payable 10,428,894.80
Dividend payable 11,940.00 11,940.00
Liability held for sale
Non-current liabilities due within
885,299,947.83 455,840,675.34
one year
Other current liabilities
Total current liabilities 6,355,162,199.70 5,574,993,375.63
Non-current liabilities:
Long-term loans 808,001,382.82 1,885,556,557.83
Bonds payable
Including: preferred stock
Perpetual capital
securities
Lease liability
Long-term account payable 4,623,939,875.40 4,368,213,445.33
Long term employee compensation
152,746,225.21 135,224,119.11
payable
Accrued liabilities
Deferred income 109,423,070.21 118,279,868.16
Deferred income tax liabilities 231,746,231.52 55,645,338.38
Other non-current liabilities
Total non-current liabilities 5,925,856,785.16 6,562,919,328.81
Total liabilities 12,281,018,984.86 12,137,912,704.44
Owners’ equity:
Share capital 400,000,000.00 400,000,000.00
Other equity instrument
Including: preferred stock
25
Perpetual capital
securities
Capital public reserve 86,911,168.71 86,911,168.71
Less: Inventory shares
Other comprehensive income 570,487,739.92 149,300,488.94
Special reserve
Surplus reserve 538,112,740.44 503,339,273.05
Retained profit 3,517,509,150.78 3,284,547,944.25
Total owner’s equity 5,113,020,799.85 4,424,098,874.95
Total liabilities and owner’s equity 17,394,039,784.71 16,562,011,579.39
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
7. Statement of Profit or Loss and Other Comprehensive Income of Parent Company
In RM B
Item 2019 2018
I. Operating income 18,962,765,329.89 18,735,517,367.52
Less: Operating cost 17,211,456,987.80 17,189,929,884.10
Taxes and surcharge 13,484,089.20 12,175,296.39
Sales expenses 848,969,881.93 844,010,110.57
Administration expenses 464,015,327.87 411,885,097.58
R&D expenses 22,442,549.67 20,646,996.66
Financial expenses 148,076,246.70 122,918,574.63
Including: interest
124,509,494.05 117,650,618.41
expenses
Interest income 10,579,287.12 15,170,575.64
Add: other income 107,576,270.88 221,139,549.48
Investment income (Loss is
6,293,674.12 18,025,825.93
listed with “-”)
Including: Investment income
on affiliated Company and joint venture
26
The termination of
income recognition for financial assets
measured by amortized cost (Loss is
listed with “-”)
Net exposure hedging income
(Loss is listed with “-”)
Changing income of fair
-216,752.92 3,697,878.32
value (Loss is listed with “-”)
Loss of credit impairment
-2,871,828.27
(Loss is listed with “-”)
Losses of devaluation of asset
-4,469,223.84 -5,166,365.82
(Loss is listed with “-”)
Income on disposal of assets
116,645.48 26,528,980.99
(Loss is listed with “-”)
II. Operating profit (Loss is listed with
360,749,032.17 398,177,276.49
“-”)
Add: Non-operating income 106,239,635.93 38,140,601.14
Less: Non-operating expense 3,300,015.44 3,959,082.04
III. Total Profit (Loss is listed with “-”) 463,688,652.66 432,358,795.59
Less: Income tax 115,953,978.74 106,931,619.66
IV Net profit (Net loss is listed with
347,734,673.92 325,427,175.93
“-”)
(i)continuous operating net profit
347,734,673.92 325,427,175.93
(net loss listed with ‘-”)
(ii) termination of net profit (net
loss listed with ‘-”)
V Net after-tax of other comprehensive
61,700,929.17 -29,194,350.54
income
(I) Other comprehensive income
items which will not be reclassified 61,700,929.17 -9,293,000.00
subsequently to profit of loss
1.Changes of the defined
-1,727,000.00 -9,293,000.00
benefit plans that re-measured
27
2.Other comprehensive
income under equity method that cannot
be transfer to gain/loss
3.Change of fair value of
63,427,929.17
investment in other equity instrument
4.Fair value change of
enterprise's credit risk
5. Other
(II) Other comprehensive income
items which will be reclassified -19,901,350.54
subsequently to profit or loss
1.Other comprehensive
income under equity method that can
transfer to gain/loss
2.Change of fair value of
other debt investment
3.gain/loss of fair value
changes for available-for-sale financial -19,901,350.54
assets
4.Amount of financial
assets re-classify to other
comprehensive income
5.Gain/loss of
held-to-maturity investments that
re-classify to available-for-sale financial
asset
6.Credit impairment
provision for other debt investment
7.Cash flow hedging
reserve
8.Translation differences
arising on translation of foreign
currency financial statements
9.Other
VI. Total comprehensive income 409,435,603.09 296,232,825.39
VII. Earnings per share:
(i) Basic earnings per share
(ii) Diluted earnings per share
28
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
8. Statement of Cash Flows of Parent Company
In RM B
Item 2019 2018
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 20,604,455,339.52 20,757,159,181.82
services
Write-back of tax received 136,223,181.63 160,585,071.09
Other cash received concerning
220,791,697.95 465,154,723.66
operating activities
Subtotal of cash inflow arising from
20,961,470,219.10 21,382,898,976.57
operating activities
Cash paid for purchasing
commodities and receiving labor 14,033,321,787.89 14,869,671,425.31
service
Cash paid to/for staff and workers 3,160,139,543.10 3,081,272,484.34
Taxes paid 814,335,271.26 701,248,455.48
Other cash paid concerning
324,257,252.74 306,064,682.62
operating activities
Subtotal of cash outflow arising from
18,332,053,854.99 18,958,257,047.75
operating activities
Net cash flows arising from operating
2,629,416,364.11 2,424,641,928.82
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
6,284,357.21 17,934,220.07
income
Net cash received from disposal of
fixed, intangible and other long-term 6,084,030.35 59,270,834.82
assets
Net cash received from disposal of
subsidiaries and other units
29
Other cash received concerning
18,633.82 91,605.86
investing activities
Subtotal of cash inflow from investing
12,387,021.38 77,296,660.75
activities
Cash paid for purchasing fixed,
1,908,271,068.75 4,179,715,750.42
intangible and other long-term assets
Cash paid for investment
Net cash received from
110,832.50 490,295.22
subsidiaries and other units obtained
Other cash paid concerning
investing activities
Subtotal of cash outflow from investing
1,908,381,901.25 4,180,206,045.64
activities
Net cash flows arising from investing
-1,895,994,879.87 -4,102,909,384.89
activities
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Cash received from loans 890,000,000.00 1,784,385,239.67
Other cash received concerning
495,464,436.83 1,543,271,788.39
financing activities
Subtotal of cash inflow from financing
1,385,464,436.83 3,327,657,028.06
activities
Cash paid for settling debts 1,824,791,031.88 965,762,682.37
Cash paid for dividend and profit
173,707,282.61 171,267,798.35
distributing or interest paying
Other cash paid concerning
367,299,836.44 273,646,123.68
financing activities
Subtotal of cash outflow from financing
2,365,798,150.93 1,410,676,604.40
activities
Net cash flows arising from financing
-980,333,714.10 1,916,980,423.66
activities
IV Influence on cash and cash
equivalents due to fluctuation in 5,863,249.10 49,654,474.95
exchange rate
V Net increase of cash and cash
-241,048,980.76 288,367,442.54
equivalents
30
Add: Balance of cash and cash
804,583,812.57 516,216,370.03
equivalents at the period -begin
VI. Balance of cash and cash
563,534,831.81 804,583,812.57
equivalents at the period -end
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
9. Statement of Changes in Owners' Equity of Parent Company
This Period
In RM B
2019
Other equity instrument
Perpet Other
Item Capital Less: Reasona Total
Share Preferr ual compreh Surplus Retaine
public Inventor ble Other owners’
capital ed capital Other ensive reserve d profit
reserve y shares reserve equity
stock securiti income
es
I. Balance at the 400,00 3,284,5
86,911,1 149,300, 503,339, 4,424,098,
end of the last 0,000.0 47,944.
68.71 488.94 273.05 874.95
year 0 25
Add:
Changes of 359,486, 359,486,3
accounting 321.81 21.81
policy
Error
correction of the
last period
Other
II. Balance at the 400,00 3,284,5
86,911,1 508,786, 503,339, 4,783,585,
beginning of this 0,000.0 47,944.
68.71 810.75 273.05 196.76
year 0 25
III. Increase/ 232,96
Decrease in this 61,700,9 34,773,4 329,435,6
1,206.5
year (Decrease is 29.17 67.39 03.09
3
listed with “-”)
(i) Total 347,73
61,700,9 409,435,6
comprehensive 4,673.9
29.17 03.09
income 2
(ii) Owners’
devoted and
decreased capital
1.Common
shares invested
by shareholders
31
2. Capital
invested by
holders of other
equity
instruments
3. Amount
reckoned into
owners equity
with share-based
payment
4. Other
-114,77
(III) Profit 34,773,4 -80,000,00
3,467.3
distribution 67.39 0.00
9
1. Withdrawal of 34,773,4 -34,773
surplus reserves 67.39 ,467.39
2. Distribution
-80,000 -80,000,00
for owners (or
,000.00 0.00
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．Carry-over
retained earnings
from the defined
benefit plans
5．Carry-over
retained earnings
from other
comprehensive
income
6. Other
(V) Reasonable
reserve
32
1. Withdrawal in
the report period
2. Usage in the
report period
(VI)Others
IV Balance at 400,00 3,517,5
86,911,1 570,487, 538,112, 5,113,020,
the end of the 0,000.0 09,150.
68.71 739.92 740.44 799.85
report period 0 78
Last period
In RM B
2018
Other equity
instrument
Other
Item Perpet Capital Less: Total
Share compre Reasonab Surplus Retained
Preferr ual public Inventor Other owners’
capital hensive le reserve reserve profit
ed capital Other reserve y shares equity
income
stock securit
ies
I. Balance at the 400,00
86,911,1 178,494 470,796 3,091,663 4,227,866,0
end of the last 0,000.
68.71 ,839.48 ,555.46 ,485.91 49.56
year 00
Add:
Changes of
accounting
policy
Error
correction of
the last period
Other
II. Balance at 400,00 86,911,1 178,494 470,796 3,091,663 4,227,866,0
the beginning 0,000.
68.71 ,839.48 ,555.46 ,485.91 49.56
of this year 00
III. Increase/
Decrease in this
-29,194, 32,542, 192,884,4 196,232,82
year (Decrease
350.54 717.59 58.34 5.39
is listed with
“-”)
(i) Total
-29,194, 325,427,1 296,232,82
comprehensive
350.54 75.93 5.39
income
(ii) Owners’
devoted and
decreased
capital
33
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
(III) Profit 32,542, -132,542, -100,000,00
distribution 717.59 717.59 0.00
1. Withdrawal
32,542, -32,542,7
of surplus
717.59 17.59
reserves
2. Distribution
-100,000, -100,000,00
for owners (or
000.00 0.00
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．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensive
income
34
6. Other
(V) Reasonable
reserve
1. Withdrawal
in the report
period
2. Usage in the
report period
(VI)Others
IV Balance at 400,00
86,911,1 149,300 503,339 3,284,547 4,424,098,8
the end of the 0,000.
68.71 ,488.94 ,273.05 ,944.25 74.95
report period 00
Legal Representative: Sun Xiujiang Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
35
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
for the Year Ended 31 December 2019
(All amounts are expressed in CNY unless otherwise stated)
Note 1 BAS IC INFORMATION ABOUT THE COMPANY
1.1 Corporation Information
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 29 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 25 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 26 1999. Luyin Investment Group acquired 199,000 domestic corporate shares (国内法人股), with CNY
1.00 at par, by cash investment of CNY 200,000.00 on November 26 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 28 2000 upon the
approval (ZhengJianFaXingZi[2000]No.116 (证监发行字[2000]116 号)) granted by the China Securities Regulatory
Commission on August 22 2000; and, the Company was listed on the Shenzhen Stock Exchange on September 12 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 28 2004 authorized 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, authorized China Aviation Group to transfer the state-owned corporate
shares received from SDA Group to Air China Co., Ltd. (hereafter, Air China). As so provided in
GuoZiChanQuan[2004]No.956, the rights and obligation attributable to China Aviation Group as specified in the
Agreement of Share Transfer shall be afforded by Air China. The change of share ownership was registered at the China
Securities Depository and Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on December 3
2004; And, 91,200,000 shares of the Company then became held by Air China.
36
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 main operating activities of the Company include: 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; inter-airline agenting, and principal
operation related ground services; sales of airborne material and equipment, grocery, food, health food, art work, souvenir,
etc.; retailing of tobacco products (limited to Qingdao Red-Crowned Crane Hotel); lease of airborne material and
equipment; venue rental, private house rental, business services, hotel accommodation agents and ticket agents; 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 , license requirements, which are
restricted to obtain permission before the operation)(the project that subjects to the approval in accordance with the law,
can carry out business activities only after the approval of the relevant departments to carry out business activities).
The Company and the subsidiaries mainly operate in the industry of air transportation.
Financial Statement Approval Reporting Date: The financial statements were approved for publication by the board of
directors of the Company on 26 M arch 2020.
1.2 S cope and Changes of Consolidation
The scope of consolidation includes 4 subsidiaries in total. There is no change in the scope of consolidation compared to
last financial year. For details of the subsidiaries, please refer to Note 7 INTEREST IN OTHER ENTITIES.
Note 2 BAS IS OF PREPARATION OF THE FINANCIAL S TATEMENTS
2.1 Basis forPreparation
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
M inistry of Finance of People’s Republic of China (M inistry of Finance issued order No.33, the M inistry of Finance
revised order No.76) on February 15 2006, and revised Accounting Standards (order 42 of the M inistry 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.
2.2 Going Concern
The Company has assessed its ability to continually operate for the next twelve months from the end of the reporting
period, and no matters that may result in doubt on its ability as a going concern were noted. Therefore, it is reasonable for
the Company to prepare financial statements on the going concern basis.
Note 3 S IGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ES TIMATES
The Company and subsidiaries are principally engaged in air transportation. The Company and subsidiaries formulate a
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number of specific accounting policies and accounting estimates for the revenue recognition and other transactions in
accordance with the actual features of production and management, and the relevant provisions of the Accounting
Standards. See Note 3.22 “Revenue” for the description. For description of significant accounting judgments and estimates
made by management, see Note 3.29 “Significant accounting judgements and estimates”.The business not mentioned is
carried out in accordance with the relevant accounting policies in Enterprise Accounting Standards.
3.1 S tatement of Compliance with The Accounting Standards for Business Enterprises
The financial statements of the Company are recognized and measured in accordance with the regulations in the Chinese
Accounting Standards for Business Enterprises and they give a true and fair view of the financial position, business result
and cash flow of the Company as of 31 December 2019. 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 Offering Securities to the Public No.15—General Provisions on Financial Reports
(2014 Revision) issued by China Securities Regulatory Commission (CSRC) in 2014.
3.2 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.
3.3 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.
3.4 Functional Currency
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.
3.5 Accounting Treatment of Business Combinations Under and Not Under Common Control
3.5.1 Business Combinations Under Common Control
A business combination involving enterprises under common control is a business combination in which all of the
combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that
control is not transitory.
For a business combination involving enterprises under common control, the party that, on the combination date, obtains
control of another enterprise participating in the combination is the absorbing party, while that other enterprise
participating in the combination is a party being absorbed. Combination date is the date on which the absorbing party
effectively obtains control of the party being absorbed.
The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at
the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of
consideration paid for the combination (or the total face value of shares issued) is adjusted to the capital premium (or share
premium) in the capital reserve. If the 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.
3.5.2 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
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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 asset s,
the difference shall be accounted for according to the following requir ements: (i) the acquirer shall reassess the
measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities and measurement of
the cost of combination; (ii) if after that reassessment, the cost of combination is still less than the acquirer’s interest in the
fair values of the acquiree’s identifiable net assets, the acquirer shall recognize the remaining difference immediately in
profit or loss for the current period.
Where the temporary difference obtained by the acquirer was not recognized due to inconformity with the conditions
applied for recognition of deferred income tax, if, within the 12 months after acquisition, additional information can prove
the existence of related information at acquisition date and the expected economic benefits on the acquisition date arose
from deductible temporary difference by the acquiree can be achieved, relevant income tax assets can be recognized, and
goodwill offset. If the goodwill is not sufficient, the difference shall be recognized as profit of the current period.
Apart from above, the differences shall be taken into profit or loss of the current period if the recognition of deferred
income tax assets is related to the combination.
For a business combination not involving enterprise under common control, which achieved in stages that involves
multiple exchange transactions, according to “The notice of the M inistry of Finance on the issuance of Accounting
Standards Interpretation No. 5” (CaiKuai [2012] No. 19) and Article 51 of “Accounting Standards for Business Enterprises
No.33 - Consolidated Financial Statements” on the “package deal” criterion (see Note 3.6.2), to judge the multiple
transactions whether they are the "package deal". If it belongs to the “package deal” in reference to the preceding
paragraphs of this section and the Notes 3.14 “Long-term equity investments” 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 value of the acquiree'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 t han 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 acqu isition 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
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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).
3.5.3 Treatment of Business Combination Related Costs
The intermediary costs such as audit, legal services and valuation consulting and other related management costs that are
directly attributable to the business combination shall be charged in profit or loss in the period in which they are incurred.
The costs to issue equity or debt securities for the consideration of business combination shall be recorded as a part of the
value of the respect equity or debt securities upon initial recognition.
3.6Method of Preparing the Consolidated Financial S tatements
3.6.1 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 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.
3.6.2 M ethod of Preparing the Consolidated Financial Statements
The subsidiary of the Company is included in the consolidated financial statements from the date when the control over the
net assets and business decisions of the subsidiary is effectively obtained, and excluded from the date when the control
ceases.
For a subsidiary disposed of by the Company, the operating results and cash flows before the date of disposal (the date
when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as
appropriate. For a subsidiary disposed during the period, no adjustment is made to the opening balance of the consolidated
financial statements.
For a subsidiary acquired through a business combination not under common control, the operating results and cash flows
from the acquisition (the date when the control is obtained) are included in the consolidated income statement and
consolidated statement of cash flows, as appropriated; no adjustment is made to the opening balance and comparative
figures in the consolidated financial statements.
Where a subsidiary 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.
M inority 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
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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 allocat ed
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 ar e
transferred to the current investment income). The retained interest is subsequently measured according to the rules
stipulated in the - “Chinese Accounting Standards for Business Enterprises No.2 - Long-term equity investment” or
“Chinese Accounting Standards for Business Enterprises No.22 - Determination and measurement of financial
instruments”. See Note 3.14 “Long-term equity investments” and Note 3.10 “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:① these transactions are considered simultaneously, or in the case of mutual influence
made, ② these transactions as a whole in order to achieve a complete business results; ③ the occurrence of a transaction
depends on occurs at least one other transaction; ④ a 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 3.14)) 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.
3.7 Classification of Joint Arrangements and Accounting for Joint Operation
A joint arrangement is an arrangement of which two or more parties have joint cont rol. 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, and obligations for the liabilities, relating to
the arrangement. A joint venture is a joint arrangement whereby the Company has rights to the net assets of the
arrangement.
The Company accounts for joint ventures using the equity method, see Note 3.14 for details.
The Company, a joint operator, recognizes in relation to its interest in a joint operation:(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 s ale of
its share of the output arising from the joint operation;(d)its share of the revenue from the sale of the output by the joint
operation; 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 a joint 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, recognizes gains
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and losses resulting from such a transaction only to the extent of the other parties' interests in the joint operation. When
there is evidence of a reduction in the net realizable value of the assets to be sold or contributed to the joint operation, or of
an impairment loss of those assets which is in line with provision stipulated by CAS 8, those losses are recognized fully by
the Company. When there is evidence of a reduction in the net realizable value of the assets to be purchased or of an
impairment loss of those assets, the Company shall recognize its share of those losses.
3.8 Cash and Cash Equivalents
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.
3.9 Foreign Currency Transactions and Translation of Foreign Currency Financial S tatements
3.9.1 Determination of the Exchange Rate for Foreign Currency 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.
3.9.2 Translation of M onetary Items Denominated in Foreign Currency on the Balance Sheet Date
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, ③available-for-trade is recorded into profit or loss except for amortized cost.
In the preparation of consolidated financial statements involving overseas operations, if there is a monetary item in foreign
currency which essentially constitutes a net investment in overseas operation, the exchange difference arising from
exchange rate fluctuation will be included in other comprehensive income. When disposal of overseas operations, it will
be transferred to the current profit or loss.
Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate
prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetary
foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date when the fair
values are determined. The exchange difference thus resulted are recognized in profit or loss for the current period or as
capital reserve.
3.9.3 Translation of Foreign Currency Financial Statements
When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary item
constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are
recognized as “exchange differences arising on translation of financial statements denominated in foreign currencies” in
owner’s equity, and in profit or loss for the period upon disposal of the foreign operation.
The Group translates the financial statements of its foreign operations into CNY by following rules. Assets and liabilities
in the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; all equity items except for
retained earnings are translated at the spot exchange rates at the dates on which such items occur; income and expenses in
income statement are translated at the spot exchange rates at the date of transaction; the opening retained earnings is the
closing retained earnings of the last period after translation; the closing balance of retained earnings is calculates and
presented in the basis of each translated income statements and profit distribution item; the difference arising between the
assets and liabilities and shareholders’ equity shall be booked as translation difference of foreign currency statements, and
shall be presented as a separate component of equity in the balance sheet. On a loss of control over Group’s oversea
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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.
3.10 Financial Instruments
Effective at 1 January 2019
Financial instrument is any contract which gives rise to both a financial asset of one entity and a financial liability or equity
instrument of another entity.
3.10.1 Recognition and Derecognition of Financial Instrument
A financial asset or a financial liability should be recognized in the statement of financial position when, and only when, an
entity becomes party to the contractual provisions of the instrument.
A financial asset can only be derecognized when meets one of the following conditions:
①The rights to the contractual cash flows from a financial asset expire.
②The financial asset has been transferred and meets one of the following derecognition conditions.
Financial liabilities (or part thereof) are derecognized only when the liability is extin guished—i.e., when the obligation
specified in the contract is discharged or cancelled or expires. An exchange of the Company (borrower) and lender of debt
instruments that carry significantly different terms or a substantial modification of the terms of an existing liability are both
accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. If t he
contract terms of the original financial liability (or part of it) are changed substantially by the Company,the original
financial liability shall be derecognizedand a new financial liability shall be recognized in accordance with the revised
terms.
Purchase or sale of financial assets in a regular-way shall be recognized and derecognized using trade date accounting. A
regular-way purchase or sale of financial assets is a transaction under a contract whose terms require delivery of the asset
within the time frame established generally by regulations or convention in the market place concerned. Trade date is the
date at which the entity commits itself to purchase or sell an asset.
3.10.2 Classification and Measurement of Financial Assets
Based on both the business model for managing the financial asset and the contractual cash flow characteristics of the
financial asset,the Company classified its financial assets into: financial assets measured at amortized cost; financial assets
measured at fair value through other comprehensive income (FVTOCI); financial assets measured at fair value through
profit or loss (FVTPL).
Financial assets shall be measured at initial recognition at fair value. For financial assets measured at FVTPL, transaction
43
costs are recognized in current profit or loss. For financial assets not measured at FVTPL, transaction costs should be
included in the initial measurement. Notes receivable or accounts receivable that arise from sales of goods or rendering of
services are initially measured at the transaction price defined in the accounting standard of revenue where the transaction
does not include a significant financing component.
Subsequent measurement of financial assets will be based on their categories:
① Financial asset at amortized cost
The financial asset at amortized cost category of classification applies when both the follow ing conditions are met: the
financial asset is held within the business model whose objective is to hold financial assets in order to collect contractual
cash flows, and the contractual term of the financial asset gives rise on specified dates to cash flow s that are solely
payment of principal and interest on the principal amount outstanding. These financial assets are subsequently measured at
amortized cost by adopting the effective interest rate method. Any gain or loss arising from derecognition accordin g to the
amortization under effective interest rate method or impairment are recognized in current profit or loss.
② Financial asset at fair value through other comprehensive income (FVTOCI)
The financial asset at FVTOCI category of classification applies when both the following conditions are met: the financial
asset is held within the business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets, and the contractual term of the financial asset gives rise on specified dates to cash flows that are solely
payment of principle and interest on the principal amount outstanding. All changes in fair value are recognized in other
comprehensive income except for gain or loss arising from impairment or exchange differences, which should be
recognized in current profit or loss. At derecognition, cumulative gain or loss previously recognized under OCI is
reclassified to current profit or loss. However, interest income calculated based on the effective interest rate is included in
current profit or loss.
The Company make an irrevocable decision to designate part of non-trading equity instrument investments as measured at
FVTOCI. All changes in fair value are recognized in other comprehensive income except for dividend income recognized
in current profit or loss. At derecognition, cumulative gain or loss are reclassified to retained earnings.
③ Financial asset at fair value through profit or loss (FVTPL)
Financial asset except for above mentioned financial asset at amortized cost or financial asset at fair value through other
comprehensive income (FVTOCI), should be classified as financial asset at fair value through profit or loss (FVTPL).
These financial assets should be subsequently measured at fair value. All the changes in fair value are included in current
profit or loss.
3.10.3 Classification and Measurement of Financial Liabilities
At initial recognition, financial liabilities are classified as financial liabilities measured at fair value through profit o r loss
(FVTPL) and other financial liabilities. For financial liabilities measured at FVTPL, related transaction costs are directly
included in the current profit and loss, and transaction costs related to other financial liabilities are included in their initial
recognition amounts.
Subsequent measurement of financial assets will be based on the classification:
① Financial liabilities at fair value through profit or loss (FVTPL)
Held-for-trading financial liabilities (including derivatives that are financial liabilities) and financial liabilities designated
at FVTPL are classified as financial liabilities at FVTP. After initial recognition, any gain or loss (including interest
expense) are recognized in current profit or loss except for those hedge accounting is applied. For financial liability that is
designated as at FVTPL, changes in the fair value of the financial liability that is attributable to changes in the own credit
risk of the issuer shall be presented in other comprehensive income. At derecognition, cumulative gain or loss previously
recognized under OCI is reclassified to retained earnings.
②Other financial liabilities
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Other financial liabilities are classified as financial liabilities measured at amortized cost and subsequently measured at
amortized cost, except for the transfer of financial assets that do not meet the conditions for derecognition or continuing
involvement in the transferred financial assets, financial liabilities and financial guarantee contracts. Gains or losses arising
from derecognition or amortization are included in the current profit and loss.
3.10.4 Impairment of Financial Instrument
The Company shall recognize aloss allowance for financial assets measured at amortized cost, debt instrument investments
measured at FVTOCI and lease receivable, mainly including notes receivable, accounts receivable, other receivables, debt
investments, other debt instrument investments, long-term receivables. In addition, provision for impairment and credit
losses for contract assets and some financial guarantee contracts are recognized in accordance with the accounting policies
described in this section.
① Method for recognition of provision for impairment
On the basis of expected credit losses, the Company accrues provision for impairment for the above items in accordance
with its applicable expected credit loss measurement method (general method or simplified method) and recognizes credit
impairment losses.
Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract
and all the cash flows that the Company expects to receive (ie all cash shortfalls), discounted at the original effective
interest rate or credit- adjusted effective interest rate for purchased or originated credit -impaired financial assets. For
purchased or originated credit-impaired financial assets, the Company has discounted these assets at the credit -adjusted
effective interest rate.
The general approach of measuring expected credit losses is that,at each reporting date, the Company shall access whether
the credit risks for financial assets (including contract assets and other applicable items, the same below) have significant ly
increased since initial recognition.The Company shall measure the loss allowance at an amount equal to the lifetime
expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. The
company shall measure the loss allowance at an amount equal to 12-month expected credit losses if the credit risk on a
financial instrument has not increased significantly since initial recognition. The Company shall consider all reasonable
and supportable information, including that which is forward-looking during the assessment of expected credit losses.
For the financial instrument with a credit risk at the reporting date, the Company shall measure the loss allowance at an
amount equal to 12-month expected credit loss based on whether the credit risk on that financial instrument has increased
significantly since first initial recognition.
② Criteria for judging whether credit risk has increased significantly since initial recognition
If the risk of default of a financial asset occurring over the expected life as at the reporting date has increased significantly
comparing with the risk of a default of the financial asset as at the date of initial recognition, the credit risk of that financial
asset has increased significantly. The Company shall use changes in the risk of a default occurring over the next 12 months
to determine whether credit risk has increased significantly since initial recognition except for specific circumstances.
③ The determination of groups for assessment of expected credit risk on a group basis
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The Company shall individually assess credit risk for financial assets with significantly different credit risks, such as:
amounts due from related parties; receivables that are in dispute with the other party or involve litigation or arbitration;
receivables with obvious indications that the debtor is likely to be unable to fulfill its repayment obligation.
The Company shall divide financial assets into different groupsbased on common risk characteristics and evaluate the
credit risk on a group basis, except for financial assets that are individually assessed for credit risk.
④ Accounting treatment for financial asset impairment
At the reporting date, the Company shall calculate the expected credit losses for each financial asset. If the expected credit
loss is greater that the carrying amount of current impairment reserve, the difference shall be recognized as an impairment
loss; if if is less than the carrying amount of current impairment reserve, the difference shall be recognized as an
impairment gain.
⑤ Method for determining credit losses of each financial assets
a. Notes receivable
The Company shall measure the credit loss for notes receivable at an amount equal to the lifetime expected credit losses.
Based on the credit risk characteristics of notes receivable, it is divided into different groups:
Item Characteristics of the group
Banker’s acceptable bill Acceptor who is a bank with less credit risk
b. Accounts receivable and contract assets
For accounts receivable and contract assets without the existence of a significant financing component, the Company shall
measure the loss allowance at the amount equal to the lifetime expected credit losses.
For accounts receivable, contract assets and lease receivable with the existence of a significant financing component, the
Company chooses to always measure its losses allowance at the amount equal to the lifetime expected credit losses.
Except for accounts receivable and contract assets which are individually assessed for credit risk, accounts receivable and
contract assets shall be divided into different groups based on its credit risk characteristics:
Item Characteristics of the group
Amounts due from the clearing center The receivables are due from the clearingcenter.
Amounts due from the aviation association The receivables are due from the aviation association.
The receivables are business operating receivables due from related
Amounts due from related parties parties.
The receivables are business operating receivables which are not
Other receivables
included in the above categories.
c. Other receivables
Based on whether the credit risk of other receivables has increased significantly since initial recognition, the Company
measure the loss allowance at the amount equal to the next 12 month or the lifetime expected loss. Except for other
receivables which are individually assessed for credit risk, other receivables shall be divided into different groups based on
its credit risk characteristics:
Item Characteristics of the group
Deposits receivable The receivables are deposits receivablein daily activities.
The receivables are receivables due from related parties in daily
Amounts due from related parties
activities.
Other receivables The receivables are other receivables in daily activities.
d. Debt investment
Debt investment mainly accounts for bond investments measured at amortized cost.Based on whether its credit risk has
increased significantly since initial recognition, the Company uses the amount equivalent to expected credit losses within
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the next 12 months or the entire duration to measure impairment losses of debt investment.
e. Other debt investment
Other debt investments mainly include bond investments in bonds measured at fair value through other comprehensive
income (FVTOCI). Based on whether its credit risk has increased significantly since initial recognition, the Company uses
the amount equivalent to expected credit losses within the next 12 months or the entire duration to measure impairment
losses of other debt investment.
f. Long-term receivables (Except for accounts receivable and lease receivables that contain significant financing
components)
Based on whether its credit risk has increased significantly since initial recognition, the Company uses the amount
equivalent to expected credit losses within the next 12 months or the entire duration to measure impairment losses of
long-term receivables.
3.10.5 Transfer of Financial Assets
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 nor retained substantially all the risks and rewards of th e
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 ass et is
recognized according to the extent it exists as financial asset, and correspondent liability is recognized. The extent of
existence refers the level of risk by the financial asset changes the enterprise is facing.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, (a). the carrying amount of t he
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.
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 as set
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.
3.10.6 Offsetting Financial Assets and Financial Liabilities
Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However,
a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the
following conditions are satisfied:
- The Company currently has a legally enforceable right to set off the recognized amounts.
- The Company intends either to settle on a net basis, or to realise the financial asset and settle the financial liability
simultaneously.
3.10.7 Determination of the Fair Value of Financial Assets and Financial Liabilities
For the method of determining the fair value of financial assets and financial liabilities, please refer to Note 3.11
3.11 Fair Value Measurement
47
Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The Company determines fair value of the related assets and liabilities based on market value in the principal market, or in
the absence of a principal market, in the most advantageous market price for the related asset or liability. The Company
uses the assumptions that market participants would use when pricing the asset or liability to measure fair value of an asset
or a liability, assuming that market participants act in their economic best interest.
The principal market is the market in which transactions for an asset or liability take place with the greatest volume and
frequency. The most advantageous market is the market which maximizes the valu e that could be received from selling the
asset and minimizes the value which is needed to be paid in order to transfer a liability, considering the effect of transport
costs and transaction costs both.
If the active market of the financial asset or financial liability exists, the Company shall measure the fair value using the
quoted price in the active market. If the active market of the financial instrument is not available, the Company shall
measure the fair value using valuation techniques.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the ass et
in its highest and best use.
① Valuation techniques
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available. The valuation techniques used mainly refer to the prices used in recent market transactions between participants
who are familiar with the situation and wiling to trade, and refer to the current fair values of other financial instruments,
discounted cash flow method, and option pricing models that are substantially the same. The Company shall use valuation
techniques consistent with one or more of those approaches to measure fair value. If multiple valuation techniques are used
to measure fair value, the results shall be evaluated considering the reasonableness of the range of values indicated by
those results. A fair value measurement is the point within that range that is most representative of fair value in the
circumstances.
When using the valuation technique, the Company shall give the priority to relevant observable inputs. The unobservable
inputs can only be used when relevant observable inputs is not available or practically would not be obtained. Observable
inputs refer to the information which is available from market and reflects the assumptions that market participants would
use when pricing the asset or liability. Unobservable Inputs refer to the information which is not available from market and
it has to be developed using the best information available in the circumstances from the assumptions that market
participants would use when pricing the asset or liability.
② Fair value hierarchy
To Company establishes a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to
measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs and second to the Level 2 inputs
and the lowest priority to Level 3 inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable
inputs for the asset or liability.
3.12 Inventory
3.12.1 Classification of Inventory
The Company’s inventories mainly includes air materials and low-value consumables.
3.12.2 M easurement M ethod of Cost of Inventories Sold or Used
Inventories are initially carried at the actual cost. The actual cost of inventories transferred out is assigned by using
weighted average method.
3.12.3 Inventory System
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The perpetual inventory system is adopted. The inventories should be counted at least once a year, and surplus or losses of
inventory stocktaking shall be included in current profit and loss.
3.12.4 Provision for Impairment of Inventory
Inventories are stated at the lower of cost and net realizable value. The excess of cost over net realizable value of the
inventories is recognized as provision for impairment of inventory, andrecognized in current profit or loss.
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
declines in value is determined normally by the difference of the cost of individual item less its realizable value. For large
quantity and low value items of inventories, provision for decline in value is made based on categories of inventories. For
items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same
or similar end users or purposes, and cannot be practicably evaluated separately from other items in that product line
provision for decline in value is determined on an aggregate basis.
After the provision for decline in value of inventories is made, if the circumst ances 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.
3.12.5 Amortization M ethod for Low-Value Consumables
Low cost and short-lived consumable items are amortized using immediate write-off method; packaging materials are
amortized using immediate write-off method.
3.13 Assets and Disposal Groups Held forS ale
The Company classify an asset or disposal group as held for sale if its carrying amount will be recovered principally
through a sale transaction rather than through continuing use. Specific standards are as follows, which should be satisfied
at the same time: the asset is immediately sellable at its current condition according to the practice; the Company has
completed official decision to dispose the asset and has acquired firm purchasing commitments; and the sales will be
completed within one year. The disposal group refers to a group of assets that are sold as a whole or disposed of in a
transaction as a whole, and the liabilities directly related to those assets transferred in the transaction at the same time. If
the assets group or asset group combination of the disposal group share the goodwill obtained in the business combination
according to CAS 8 - Asset Impairment, and the disposal group shall include the goodwill allocated to the disposal group.
Non-current assets held for sale and disposal group, which the Company's initial measurement or remeasurement on the
date of the balance sheet divided into, if the book value is higher than the fair value deducting the sale cost, it’s book value
will be written down to the fair value deducting the sale cost , in addition the reduced amount is recognized as impairment
loss included in the current profits and losses, while accruing the provision for impairment of assets held for sale. For the
disposal group, confirmed asset impairment losses, will reduce the book value of the goodwill of a disposal group first,
then reduce the book value of the non-current assets proportionally applying to CAS 42 - Non-Current Assets Held For
Sale, the Disposal group and Discontinued Operations (hereinafter referred to as the "held for sale rule"). With the fair
value deducting the sale cost of the disposal assets held for sale increasing on the date of the balance sheet, the deducted
amount should be recovered accordingly Within the relevant scope. The recovering amount is included in the profits and
losses of the current period, and the book value is increased proportionally according to the proportion of the book value of
the non-current assets stipulated in the rules for sale in addition to the goodwill in the disposal group. The deductible book
value of goodwill and the asset impairment losses that are applied to the standards of assets for sale shall not be recovered
before they are classified as holding assets for sale.
Depreciation or amortization of non-current assets held for sale or disposal group are not raised. The interest of liabilities
and other expenses in the disposal group held for sale will continue to be confirmed.
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When the non- current assets or disposal groups no longer meet the conditions of assets held for sale categories, the
Company will no longer divide that into assets held for sale categories or will remove that from the disposal of non-
current assets held for sale, and measured by the lower amount: (1) the book value before being classified as held for sale
category, and adjusted of the depreciation, amortization or impairment according to the assumption not being classified as
held for sale. (2) recoverable amount.
3.14 Long-Term Equity Investments
Long-term equity investments refer to equity investments where an investor has control of, or significant influence over, an
investee, as well as equity investments in joint ventures. Associates of the Company are those entities over which the
Company has significant influence.
3.14.1 Determination Basis of Joint Control or S ignificant Influence Over the Investee
Joint control is the relevant agreed sharing of control over an arrangement, and the arranged relevant activity must be
decided under unanimous consent of the parties sharing control. In assessing whether the Company has joint control of an
arrangement, the Company shall assess first whether all the parties, or a group of the parties, control the arrangement.
When all the parties, or a group of the parties, considered collectively, are able to direct the activities of the arrangement,
the parties control the arrangement collectively. Then the Company shall assess whether decisions about the relevant
activities require the unanimous consent of the parties that collectively control the arrangement. If two or more groups of
the parties could control the arrangement collectively, it shall not be assessed as have joint control of the arrangement.
When assessing the joint control, the protective rights are not considered.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not
control or joint control of those policies. In determination of significant influence over an investee, the Company should
consider not only the existing voting rights directly or indirectly held but also the effect of potential voting rights held by
the Company and other entities that could be currently exercised or converted, including the effect of share warrants, share
options and convertible corporate bonds that issued by the investee and could be converted in current period.
If the Company holds, directly or indirectly 20% or more but less than 50% of the voting power of the investee, it is
presumed that the Company has significant influence of the investee, unless it can be clearly demonstrated that in such
circumstance, the Company cannot participate in the decision-making in the production and operating of the investee.
3.14.2 Determination of Initial Investment Cost
(i) For long-term equity investments generated in business combination, the initial investment cost is determined in
accordance with the following requirements:
A. For a business combination involving enterprises under common control, if the Company makes payment in cash,
transfers non-cash assets or bears liabilities as the consideration for the business combination, the share of carrying amount
of the owners’ equity of the acquiree in the consolidated financial statements of the ultimate controlling party is recognized
as the initial cost of the long-term equity investment on the combination date. The difference between the initial investment
cost and the carrying amount of cash paid, non-cash assets transferred and liabilities assumed shall be adjusted against the
capital reserve; if capital reserve is not enough to be offset, undistributed profit shall be offset in turn.
B. For a business combination involving enterprises under common control, if the Company issues equity securities as the
consideration for the business combination, the share of carrying amount of the owners’ equity of the acquiree in the
consolidated financial statements of the ultimate controlling party is recognized as the initial cost of the long-term equity
investment on the combination date. The total par value of the shares issued is recognized as the share capital. The
difference between the initial investment cost and the carrying amount of the total par value of the shares issued shall be
adjusted against the capital reserve; if capital reserve is not enough to be offset, undistributed profit shall be offset in turn.
C. For business combination not under common control, the assets paid, liabilities incurred or assumed and the fair value
of equity securities issued to obtain the control of the acquiree at the acquisition date shall be determined as the cost of the
business combination and recognized as the initial cost of the long-term equity investment. The audit, legal, valuation and
advisory fees, other intermediary fees, and other relevant general adm inistrative costs incurred for the business
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combination, shall be recognized in profit or loss as incurred.
(ii) For long-term equity investments acquired not through the business combination, the investment cost shall be
determined based on the following requirements:
A. For long-term equity investments acquired by payments in cash, the initial cost is the actually paid purchase cost,
including the expenses, taxes and other necessary expenditures directly related to the acquisition of long-term equity
investments.
B. For long-term equity investments acquired through issuance of equity securities, the initial cost is the fair value of the
issued equity securities.
C. For the long-term equity investments obtained through exchange of non-monetary assets, if the exchange has
commercial substance, and the fair values of assets traded out and traded in can be measured reliably, the initial cost of
long-term equity investment traded in with non-monetary assets are determined based on the fair values of the assets traded
out together with relevant taxes. Difference between fair value and book value of the assets traded out is recorded in
current profit or loss. If the exchange of non-monetary assets does not meet the above criterion, the book value of the
assets traded out and relevant taxes are recognized as the initial investment cost.
D. For long-term equity investment acquired through debt restructuring, the initial cost is determined based on the fair
value of the equity obtained and the difference between initial investment cost and carrying amount of debts shall be
recorded in current profit or loss.
3.14.3 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
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
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 a 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 recognized as investment income and other
comprehensive income respectively. The carrying amount of a 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 a 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 acquisition. 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 unrealized profit or loss arising from related party transactions between the Company and an associate
or joint venture is deducted from investment income. Unrealized 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
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transferred is recognized in profit or loss. Where assets transferred to an associate or joint venture form an operation, th e
difference between the consideration received and the book value of the assets transferred in recognized 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 recognized 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 recognized as accrued liabilities and investment loss. Where the Company has
unrecognized share of loss of the investee when the investee generates net profit, the Company's unrecognized share of loss
is reduced by the Company's share of net profit and when the Company's unrecognized share or loss is eliminated in full,
the Company's share of net profit, if any, is recognized as investment income.
3.14.4 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.
3.14.5 Disposal of Long-Term Equity In vestment
Where the parent company disposes long-term investment in a subsidiary without a change in control, the difference in the
net asset between the amount of disposed long-term investment and the amount of the consideration paid or received is
adjusted to the owner’s equity. If the disposal of long-term investment in a subsidiary involves loss of control over the
subsidiary, the related accounting policies in Note 3.6.2 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 recognized 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 recognized prior to the acquisition 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 recognized 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 recognized, 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 recognized 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 recognized 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 recognized in profit or loss. Cumulative other
comprehensive income relevant to the investment recognized, as a result of accounting by equity method or recognition
and measurement principles app licable 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 recognized in profit or loss when control is lost. Where the remaining investment
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is measured by equity method, the fore-mentioned other comprehensive income and other equity movement are recognized
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 recognized 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 recognized in profit or loss.Cumulative other
comprehensive income relevant to the investment recognized, as a result of accounting by equity method, prior to the
partial disposal is treated in the same manner that 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 recognized 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 recognized in other comprehensive income and reclassified in full to profit or loss at the time when control over
the investee is lost.
3.15 Fixed Assets
Fixed assets refer to the tangible assets with higher unit price held for the purpose of producing commodities, rendering
services, renting or business management with useful lives exceeding one year.
3.15.1 Recognition Criteria
Fixed assets will only be recognized at the actual cost paid when obtaining as all the following criteria are satisfied:
(i) It is probable that the economic benefits relating to the fixed assets will flow into the Company;
(ii) The costs of the fixed assets can be measured reliably.
Subsequent expenditure for fixed assets shall be recorded in cost of fixed assets, if reco gnition criteria of fixed assets are
satisfied, otherwise the expenditure shall be recorded in current profit or loss when incurred.
3.15.2 The Method for Depreciation of Each Category of Fixed Assets
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:
Expected useful life Residual rate AnnualDepreciation rate
Category
(year) (%) (%)
Houses and building 20-33 5.00 2.88-4.75
Key components and power support of
15-20 5.00 4.75-6.33
aircraft engine
Replacement parts of engine 3-7 0.00 14.29-33.33
Equipment, electronic devices and 4-10 5.00 9.5-23.75
furniture
High value rotables 15-18 0.00 5.56-6.67
Expected net residual value of fixed assets is the balance of the Company currently obtained from the disposal of the asset
less the estimated costs of disposal amount, assuming the asset is out of useful life and state the expected service life in the
end.
3.15.3 Fixed Assets Under Finance Leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or
may not eventually be transferred.
Fixed assets that are held under finance leases shall be depreciated by applying the same policy as that for the fixed assets
53
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.
3.15.4 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.
3.16 Construction inProgress
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 3.19 “Impairment of long-term assets”.
3.17 Borrowing Costs
3.17.1 Recognition Criteria and Period for Capitalization of Borrowing Costs
The Company shall capitalize the borrowing costs that are directly attributable to the acquisition, construction or
production of qualifying assets when meet the following conditions:
(i) Expenditures for the asset are being incurred;
(ii) Borrowing costs are being incurred, and;
(iii) Acquisition, construction or production activities that are necessary to prepare the assets for their intended use or s ale
are in progress.
Other borrowing cost, discounts or premiums on borrowings and exchange differences on foreign currency borrowings
shall be recognized into current profit or loss when incurred.
Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a
qualifying asset is interrupted abnormally and the interruption is for a continuous period of more than 3 months.
Capitalization of such borrowing costs ceases when the qualifying assets being acquired, constructed or produced become
ready for their intended use or sale. The expenditure incurred subsequently shall be recognized as expenses when incurred.
3.17.2 Calculation Method for Capitalization Rate and Measurement of Capitalized Amounts of Borrowing Costs
When funds are borrowed specifically for purchase, construction or manufacturing of assets eligible for capitalization, the
Company shall determine the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred
on that borrowing during the period less any interest income on bank deposit or investment income on the temporary
investment of those borrowings.
Where funds allocated for purchase, construction or manufacturing of assets eligible for capitalization are part of a general
borrowing, the eligible amounts are determined by the weighted-average of the cumulative capital expenditures in excess
of the specific borrowing multiplied by the general borrowing capitalization rate. The capitalization rate will be the
weighted average of the borrowing costs applicable to the general borrowing.
During the capitalization period, the exchange differences of foreign currency funds specifically borrowed are fully
capitalized; the exchange differences of foreign currency general borrowings are included in the current profit and loss.
3.18 Intangible Assets
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3.18.1 Intangible Assets
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.
3.18.2 The Expenditure of Research and Development
The expenditures for its internal research and development projects of the Company shall be classified into research and
development expenditures.
The research expenditures shall be recorded into the profits and losses of the current period when they are incurred.
Development expenditures in internal research and development projects shall be recognized as intangible assets where
they satisfy all of the following conditions:
①Technical feasibility of completing the intangible asset so that it will be available for use or sale;
②Intention to complete the intangible asset and use or sell it;
③How the intangible asset will generate economic benefits, including the ability to demonstrate the existence of a market
for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of t he
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 cannot be distinguished between research and development stage, shall be recorded into the profit or
loss for the current period.
3.18.3 Impairment Testing Methods and Recognition of Provision for Impairment of Intangible Asse ts
Impairment and provisions of intangible assets are disclosed on Note 3.19 “Impairment of long-term assets”.
3.19 Impairment of Long-Term Assets
Non-financial assets with non-current nature include fixed assets, construction in progress, intangible asset s with definite
useful lives, investment properties measured by cost method and long-term equity investment on subsidiaries, joint
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
55
impairment annually regardless of indicators of impairment.
Impairment of loss is calculated, and provisions taken by the difference if the recoverable value of the assets is lower than
the book value. The recoverable value is the higher of estimated present value of the future expected cash flows from the
asset and net fair value of the asset less disposed cost. The fair value of asset is determined by the sales agreement price
within an arm’s length transaction. In case there is no sales agreement, but there is active market of assets, the fair value
can be determined by the selling price. If there is neither sales agreement nor active market, the fair value of the asset can
be estimated based on the best information obtained.
Disposal expenses include expenses related to the legislation, taxes, transportations and the direct expense for the asset to
be ready for sale. When calculating the present value of expected future cash flows from an asset or asset group, the
management shall estimate the expected future cash flows from the asset or asset group and choose a suitable discount rate
in order to calculate the present value of those cash flows.
Provision for asset impairment is calculated and determined on the individual basis. If the recoverable of individual asset is
hard to estimate, the recoverable amount can be determined by the asset group where subject asset belongs. Asset group is
the smallest set of assets that can have cash flow in independently.
The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the
present value of the future expected cash flows from the asset groups or sets of asset groups to which the goodwill is
allocated. Estimating the present value requires the Company to make an estimate of the expected future cash flows from
the asset groups or sets of asset groups and also choose a suitable discount rate in order to calculate the present value of
those cash flows.
Once the loss from asset impairment is recognized, the recoverable part cannot be reserved in the subsequent periods.
3.20 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 l ine method. Such as expenses for pilots’
initial trainings, those expenses are amortized at 10 years according to their benefit period respectively.
3.21 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 include wages, bonuses, allowances and subsidies, welfare, health insurance, maternity
insurance, work injury insurance, housing funds, labor union funds, employee education funds, non-monetary benefits etc.
Short-term employee benefits are recognized 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 recognized 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 assump tions 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 recognized for the
compensation arising from the termination of employment relationship with employees at the time when the Company
cannot 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 cannot be fully
paid after twelve months of the reporting date, the liability shall be processed in accordance with other long-term employee
56
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 retirement shall be recognized 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.
3.22. Revenue
3.22.1 Revenue from Rendering of Service
①The Company recognize 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 recognized in current liabilities as
Advance 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 recognized when
the service is rendered.
② The Company recognize 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 recognized when the service rendering is completed.
3.22.2 Royalty Revenue
The revenue is recognized on an accrual basis according to the contract or agreement.
3.22.3 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.
3.23 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 specified
beneficiary, the Company performs classification in accordance with the following criteria.
① Where a grant is obtained for a sp ecified project, the grant is spitted into asset -related and revenue related portions
proportionate to the project's investment to expense ratio; the classification is reviewed on each balance sheet date and
revised if necessary.
② Where a grant is obtained for general purpose, the grant as a whole is classified as a revenue-related government grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If
a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably
determined, it is measured at a nominal amount. A government grant measured at a nominal amount is recognized
immediately in profit or loss for the period.
The Company's government subsidies are usually confirmed and measured by the actual amount when they are received.
However, for the end of the period, if there are conclusive evidence that the relevant conditions can be meet of the
financial support policy and financial support funds are expected to receive, it should be measured according to the amount
receivable. The following conditions should be meet at the same time if the subsidies are measured by the amount
receivable: (1) The amount of subsidy receivable has been confirmed by the document issued by the government
departments, or could be reasonably estimated in accordance with the relevant provisions of its own official release of
57
financial resources management approach, and the expected amount of a material uncertainty which does not exist; (2) It is
based on the financial support project and financial management measures which is released officially by the local finance
department with active publicity according to the provisions of the "Regulations on open government information". And
the management measures should be inclusive (any enterprises complying with the conditions may apply for that ), rather
than specifically for specific enterprises; (3) The relevant subsidy has a clear commitment to the allo cation period, and
guaranteed by corresponding financial budget, which can be received within the prescribed time limit with reasonable
guarantee; (4) Other relevant conditions (if any) should be met in accordance with the specific circumstances of the
company and the grant.
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 according to a systematic and reasonable method. For a government grant related to income,
if the grant is a compensation for related expenses or losses to be incurred in subsequent period, the grant is recognized as
deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a
compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the
period.
Government subsidies including both assets-related parts and income-related parts should be treated separately. If it is
difficult to separate, the government subsidies as a whole will be classified as income-related government grants.
The government subsidies related to daily activities of the Company are included in other income and gain and expenses in
accordance with the essence of economic business; if it is not related to daily activities, it will be included in non-operating
income and expense.
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
are other situations, the repayment is recognized immediately in profit or loss for the period.
3.24 Deferred Tax Assets and Deferred Tax Liabilities
3.24.1 Income Tax for the Current Period
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 t ax 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.
3.24.2 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
58
the foreseeable future, or it is not probable to obtain taxable income which can be used for the deduction of the temporary
difference in the future.
Except mentioned above, the Company recognizes other deferred income tax assets that can deduct temporary differences
to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can
be utilized.
For the deductible losses and tax credit that can be carried forward, deferred tax assets for deductible temporary differences
are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary
differences can be utilized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates ac cording to tax laws, that are
expected to apply in the period in which the asset is realized or the liability is settled.
At the balance sheet date, the Company reviews the carrying amount of deferred tax assets. If it is no longer probable that
sufficient taxable profit will be available in future periods to allow the benefits of the deferred tax assets to be used, the
Company reduces the carrying amount of deferred tax assets. The amount of such reduction is reversed when it becomes
probable that sufficient taxable profit will be available
3.24.3 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 in
other income and gain or equity and adjusted carrying value of deferred income tax goodwill arose from business
combination.
3.24.4 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.
3.25 Operating Leases and Finance Leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or
may not eventually be transferred. An operating lease is a lease other than a finance lease.
3.25.1 The Company as Lessee Under Operating Lease
Lease payments under an operating lease are recognized by a lessee on a straight -line bas is 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.
59
3.25.1 The Company as Lessor Under Operating Lease
Lease income from operating leases shall be recognized by the lessor in profit or loss on a straight -line basis over the lease
term. Initial direct cost of significance in amount shall be capitalized when incurred. If another basis is more systematic
and rational, that basis may be used. Contingent rents are credited to profit or loss in the period in which they actually
arise.
3.25.3 The Company as Lessee Under Finance 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 leas e 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.
3.25.4 In the Case of the Lessor of a FinanceLease
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 durin g 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.
3.26 Regular Repair and S ubstantial 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 capitalization is capitalized when
incurred and recognized 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 amortized on the
basis of air hours over the lease period.
3.27 Changes in Major Accounting Policies and Accounting Estimates
3.27.1 Changes in Accounting Policies
① Implementation of the“Notice of Revising and Issuing the Format of Financial Statements of General Enterprises for
2019” (Caikuai [2019] No.6)
On 30 April 2019，M inistry of Finance announced the “Notice of Revising and Issuing the Format of Financial Statements
of General Enterprises for 2019” (Caikuai [2019] No.6). On 19 September 2019, the M inistry of Finance issued “Notice of
Revising and Issuing the Format of Consolidated Financial Statements for 2019” (Caikuai [2019] No. 16), as a
complement of the announcement Caikuai [2019] No. 6, and it made corresponding adjustments to the corporate financial
statement format. The Company has prepared comparative financial statements in accordance with the requirement of
Caikuai [2019]No. 6 and andCaikuai [2019] No. 16, and changed the presentation by retrospective adjustment method.
The consolidated and separate balance sheet items affected as of 31 December 2018 are as follows:
60
Influence on Consolidated Financial
31 December 2018 1 January 2019 Adjustment
Statements
Notes receivable and accounts receivable 413,726,456.71 -413,726,456.71
Accounts receivable 413,726,456.71 413,726,456.71
Notes payable and accounts payable 2,273,836,607.26 -2,273,836,607.26
Accounts payable 2,273,836,607.26 2,273,836,607.26
Influence on Financial Statements of Parent
31 December 2018 1 January 2019 Adjustment
Company
Notes receivable and accounts receivable 412,570,738.01 -412,570,738.01
Accounts receivable 412,570,738.01 412,570,738.01
Notes payable and accounts payable 2,292,392,127.26 -2,292,392,127.26
Accounts payable 2,292,392,127.26 2,292,392,127.26
② Change due to the first-year adoption of new financial instruments standards.
On M arch 3, 2017, the M inistry of Finance issued the “Chinese Accounting Standards for Business Enterprises No.22 -
Determination and measurement of financial instruments (Revised in 2017” (Accounting [2017] No. 7), "Accounting
Standards for Business Enterprises No. 23" Transfer of Financial Assets (Revised in 2017) (Accounting [2017] No. 8),
"Accounting Standards for Business Enterprises No. 24 - Hedge Accounting (Revised in 2017)" (Accounting [2017] No. 9).
On M ay 2 2017, the M inistry of Finance issued “Accounting Standards for Business Enterprises No. 37 – Financial
Instruments Presentation (Revised in 2017)” (Accounting [2017] No. 14) (the above-mentioned guidelines are collectively
referred to as the “New Financial Instruments Guidelines”), and domestic listed companies are required to implement it
from 1 January 2019.
After the resolution of the 4th meeting of the 6th Board of Directors of the Company on 21 M arch 2019, the Company will
implement the above new financial instrument guidelines from 1 January 2019.
All recognized financial assets under the new financial instrument criteria are subsequently measured at amortized cost or
fair value.
On the implementation date of the new financial instrument standard, the Company shall assess the facts and circumstances
about the business model for managing the financial asset on the implementation date and the facts and circumstances
about the contractual cash flow characteristics of the financial asset on the date of initial recognition, and classy its
financial assets intothree categories: financial assets measured at amortized cost, financial assets measured at fair value
through other comprehensive income (FVTOCI), and financial assets measured at fair value through profit or loss
(FVTPL). In case of an equity instrument investment measured at fair value t hrough other comprehensive income, when
the financial asset is derecognized, the accumulated gain or loss previously recognized in other comprehensive income is
transferred to retained earnings, rather than profit and loss.
Under the new financial instrument standard, the Company accrues provision for impairment and recognizes credit losses
for financial assets measured at amortized cost, debt instrument investments measured at FVTOCI, lease receivables,
contract assets and the financial guarantee contract based on expected credit losses.
The Company retrospective applies the new financial instrument guidelines, but in terms of classification and measurement
(including impairment) involving inconsistency between the previous comparative financial statement data and the new
financial instrument guidelines, the Company chooses not to restate. Therefore, for the cumulative impact on the first
implementation of the guideline, the Company adjusts retained earnings or other comprehensive income of the opening of
2019 and other relevant items in the financial statement. The financial statements for 2018 were not restated.
61
The main changes and effects of the Company's implementation of the new financial instrument guidelines are as follows:
On or after 1 January 2019, the Company designated part of non-trading equity investment as financial assets measured at
fair value through other comprehensive income, which disclosed as other equity instruments investment.
The Company will reclassify financial assets measured at fair value through profit or loss into financial assets held for
trading.
3.27.2 Changes of Accounting Estimates
There is no significant change of accounting estimates for the Company during the reporting period.
3.27.3Adjustments of the Financial Statements at the Beginning of the Reporting Period for the First-Year Adoption
of New Financial Instruments S tandards
Consolidated financial statements
Unit: Yuan, Currency: CNY
Items 31 December 2018 1 January 2019 Adjustment
Current assets:
M onetary funds 840,960,104.09 840,960,104.09
Deposit reservation for balance
Lending to banks and other financial
institutions
Held-for-trading financial assets N/A 90,488.17 90,488.17
Financial assets at fair value through profit or
90,488.17 N/A -90,488.17
loss
Derivative financial assets
Notes receivable
Accounts receivable 413,726,456.71 413,726,456.71
Accounts receivable financing N/A
Prepayments 265,931,342.94 265,931,342.94
Premium receivable
Reinsurance accounts receivable
Reinsurance contract reserves receivable
Other receivables 225,281,412.22 225,281,412.22
Including: Interests receivable
Dividend receivable
Financial assets purchased under agreements to
resell
Inventories 105,625,519.42 105,625,519.42
Held-for-sale assets
Non-current assets maturing within one year
Other current assets 236,596,457.60 236,596,457.60
Total current assets 2,088,211,781.15 2,088,211,781.15
62
Items 31 December 2018 1 January 2019 Adjustment
Non-current assets:
Loans and advances
Debt investments N/A
Financial assets available for sale 310,842,965.35 N/A -310,842,965.35
Other debt investments N/A
Held-to-maturity investments N/A
Long-term receivables
Long-term equity investments
Other equity instrument investment N/A 790,158,061.10 790,158,061.10
Other non-current financial assets N/A
Investment property
Fixed assets 7,770,750,794.37 7,770,750,794.37
Construction in progress 4,790,300,972.13 4,790,300,972.13
Biological assets held for production
Oil and gas assets
Intangible assets 115,541,881.39 115,541,881.39
Development expenditure
Goodwill 454,020.13 454,020.13
Deferred charges 573,645,342.64 573,645,342.64
Deferred tax assets 914,231,343.25 914,231,343.25
Other non-current assets
Total non-current assets 14,475,767,319.26 14,955,082,415.01 479,315,095.75
Total assets 16,563,979,100.41 17,043,294,196.16 479,315,095.75
Current liabilities
Short-term borrowings 580,000,000.00 580,000,000.00
Borrowing from the central bank
Deposits from customers and interbank
Borrowings from banks and other financial
institutions
Held-for-trading financial liabilities
Financial liabilities at fair value through profit
or loss
Derivative financial liabilities
Notes payable
Accounts payable 2,273,836,607.26 2,273,836,607.26
63
Items 31 December 2018 1 January 2019 Adjustment
Advance from customers 787,371,671.33 787,371,671.33
Selling of repurchased financial assets
Fees and commissions payable
Employee benefits payable 543,294,439.81 543,294,439.81
Taxes and fees payable 252,717,258.87 252,717,258.87
Other payables 635,499,470.13 635,499,470.13
Including: Interests payables 10,428,894.80 10,428,894.80
Dividend payables 602,306.96 602,306.96
Reinsurance payables
Reinsurance payables
Funds received as agent of stock exchange
Funds received as stock underwrite
Held-for-sale liabilities
Non-current liabilities due within one year 455,840,675.34 455,840,675.34
Other current liabilities
Total current liabilities 5,528,560,122.74 5,528,560,122.74
Non-current liabilities:
Long-term borrowings 1,885,556,557.83 1,885,556,557.83
Bonds payable
Including: Preference share
Perpetual capital securities
Long-term payables 4,368,213,445.33 4,368,213,445.33
Long-term employee benefits payable 135,224,119.11 135,224,119.11
Accrued liabilities
Deferred income 118,279,868.16 118,279,868.16
Deferred tax liabilities 56,819,008.96 176,647,782.90 119,828,773.94
Other non-current liabilities
Total non-current liabilities 6,564,092,999.39 6,683,921,773.33 119,828,773.94
Total liabilities 12,092,653,122.13 12,212,481,896.07 119,828,773.94
Shareholders' equity
Share capital 400,000,000.00 400,000,000.00
Other equity instruments
Including: Preference shares
Perpetual capital securities
Capital reserves 75,410,363.70 75,410,363.70
64
Items 31 December 2018 1 January 2019 Adjustment
Less: Treasury stock
Other comprehensive income 149,300,488.94 508,786,810.75 359,486,321.81
Specific reserves
Surplus reserves 503,999,977.58 503,999,977.58
General risk reserves
Retained earnings 3,342,615,148.06 3,342,615,148.06
Equity attributable to shareholders of the parent 4,471,325,978.28 4,830,812,300.09 359,486,321.81
M inority interests
Total owners’ equity 4,471,325,978.28 4,830,812,300.09 359,486,321.81
Total liabilities and owners' equity 16,563,979,100.41 17,043,294,196.16 479,315,095.75
Financial S tatements of Parent Company
Unit: Yuan Currency: CNY
Items 31 December 2018 1 January 2019 Adjustment
Current assets:
M onetary funds 804,583,812.57 804,583,812.57
Held-for-trading financial assets N/A. 90,488.17 90,488.17
Financial assets at fair value through profit or
90,488.17 N/A -90,488.17
loss
Derivative financial assets
Notes receivable
Accounts receivable 412,570,738.01 412,570,738.01
Accounts receivable financing N/A
Prepayments 263,658,892.86 263,658,892.86
Other receivables 239,078,612.04 239,078,612.04
Including: Interests receivable
Dividend receivable
Inventories 104,444,823.98 104,444,823.98
Held-for-sale assets
Non-current assets maturing within one year
Other current assets 236,057,827.36 236,057,827.36
Total current assets 2,060,485,194.99 2,060,485,194.99
Non-current assets:
Debt investments N/A
Financial assets available for sale 310,842,965.35 N/A -310,842,965.35
65
Items 31 December 2018 1 January 2019 Adjustment
Other debt investments N/A
Held-to-maturity investments N/A
Long-term receivables
Long-term equity investments 144,101,285.43 144,101,285.43
Other equity instrument investment N/A 790,158,061.10 790,158,061.10
Other non-current financial assets N/A
Investment property
Fixed assets 7,667,474,888.84 7,667,474,888.84
Construction in progress 4,790,300,972.13 4,790,300,972.13
Biological assets held for production
Oil and gas assets
Intangible assets 102,375,769.20 102,375,769.20
Development expenditure
Goodwill
Deferred charges 572,919,885.06 572,919,885.06
Deferred tax assets 913,510,618.39 913,510,618.39
Other non-current assets
Total non-current assets 14,501,526,384.40 14,980,841,480.15 479,315,095.75
Totalassets 16,562,011,579.39 17,041,326,675.14 479,315,095.75
Current liabilities:
Short-term borrowings 580,000,000.00 580,000,000.00
Held-for-trading financial liabilities
Financial liabilities at fair value through profit
or loss
Derivative financial liabilities
Notes payable
Accounts payable 2,292,392,127.26 2,292,392,127.26
Advance from customers 785,082,130.23 785,082,130.23
Employee benefits payable 532,617,252.72 532,617,252.72
Taxes and fees payable 248,981,430.52 248,981,430.52
Other payables 680,079,759.56 680,079,759.56
Including: Interests payables 10,428,894.80 10,428,894.80
Dividend payables 11,940.00 11,940.00
Held-for-sale liabilities
Non-current liabilities due within one year 455,840,675.34 455,840,675.34
66
Items 31 December 2018 1 January 2019 Adjustment
Other current liabilities
Total current liabilities 5,574,993,375.63 5,574,993,375.63
Non-current liabilities:
Long-term borrowings 1,885,556,557.83 1,885,556,557.83
Bonds payable
Including: Preference share
Perpetual capital securities
Long-term payables 4,368,213,445.33 4,368,213,445.33
Long-term employee benefits payable 135,224,119.11 135,224,119.11
Accrued liabilities
Deferred income 118,279,868.16 118,279,868.16
Deferred tax liabilities 55,645,338.38 175,474,112.32 119,828,773.94
Other non-current liabilities
Total non-current liabilities 6,562,919,328.81 6,682,748,102.75 119,828,773.94
Total liabilities 12,137,912,704.44 12,257,741,478.38 119,828,773.94
Shareholders' equity
Share capital 400,000,000.00 400,000,000.00
Other equity instruments
Including: Preference shares
Perpetual capital securities
Capital reserves 86,911,168.71 86,911,168.71
Less: Treasury stock
Other comprehensive income 149,300,488.94 508,786,810.75 359,486,321.81
Specific reserves
Surplus reserves 503,339,273.05 503,339,273.05
Retained earnings 3,284,547,944.25 3,284,547,944.25
Total owners’ equity 4,424,098,874.95 4,783,585,196.76 359,486,321.81
Total liabilities and owners' equity 16,562,011,579.39 17,041,326,675.14 479,315,095.75
3.27.4 Retrospective Restatement of Previous Comparative Data for the First Adoption of New Financial
Instruments Standards
①Comparative table of classification and measurement for financial assets before and after the adoption of new financial
instruments standards at 1 January 2019
A．Consolidated Financial Statements
31 December 2018 (before changes) 1 January 2019 (after changes)
M easurement M easurement
Items Carrying amount Items Carrying amount
category category
Financial M easured at fair 90,488.17 Held-for-tradi M easured at fair 90,488.17
67
31 December 2018 (before changes) 1 January 2019 (after changes)
M easurement M easurement
Items Carrying amount Items Carrying amount
category category
assets value through profit ng financial value through
measured at or loss assets profit or loss
fair value
through profit
or loss
M easured at fair M easured at fair
Financial
value through other Other equity value through
assets 229,180,865.35
comprehensive instrument other 790,158,061.10
available for
income investment comprehensive
sale
M easured at cost 81,662,100.00 income
B．Financial Statements of Parent Company
31 December 2018 (before changes) 1 January 2019 (after changes)
M easurement M easurement
Items Carrying amount Items Carrying amount
category category
Financial assets M easured at M easured at
measured at fair fair value Held-for-trading fair value
90,488.17 90,488.17
value through through profit financial assets through profit
profit or loss or loss or loss
M easured at
fair value M easured at
through other 229,180,865.35 Other equity fair value
Financial assets
comprehensive instrument through other 790,158,061.10
available for sale
income investment comprehensive
M easured at income
81,662,100.00
cost
②Adjustment table showing the net carrying amount of the original financial assets is adjusted to the net carrying amount
of the new financial assets in accordance with the new financial instrument guidelines at1 January 2019
A．Consolidated Financial statements
31 December 2018 1 January 2019
Category Reclassification Remeasurement
(before changes) (after changes)
Amortized cost:
Accounts receivable 413,726,456.71
Add: adjustment of implementing
the new income guidelines
Less: transfer to accounts receivable
financing
Remeasurement: impairment of
68
31 December 2018 1 January 2019
Category Reclassification Remeasurement
(before changes) (after changes)
expected credit loss
Closing balance disclosed by the
413,726,456.71
new financial instrument guidelines
Other receivables 225,281,412.22
Remeasurement: impairment of
expected credit loss
Closing balance disclosed by the
225,281,412.22
new financial instrument guidelines
M easured at fair value through
profit or loss:
Financial assets measured at fair
value through profit or loss (the 90,488.17
original guidelines)
Less: transfer to financial assets held
90,488.17
for trading
Closing balance disclosed by the
new financial instrument guidelines
Financial assets held for trading
Add: transfer from financial assets
measured at fair value through profit 90,488.17
or loss (the original guidelines)
Closing balance disclosed by the
90,488.17
new financial instrument guidelines
M easured at fair value through other
comprehensive income:
Financial assets available for sale
310,842,965.35
(the original guidelines)
Less: transfer to other investments
310,842,965.35
in equity instruments
Closing balance disclosed by the
new financial instrument guidelines
Other equity instruments investment
Add: transfer from financial assets
available for sale (the original 310,842,965.35
guidelines)
Remeasurement: measured at fair
479,315,095.75
value
Closing balance disclosed by the
790,158,061.10
new financial instrument guidelines
B．Financial statements of Parent company
31 December 2018 1 January2019
Category Reclassification Remeasurement
(before changes) (after changes)
69
31 December 2018 1 January2019
Category Reclassification Remeasurement
(before changes) (after changes)
Amortized cost:
Accounts receivable 412,570,738.01
Add: adjustment of implementing
the new income guidelines
Less: transfer to accounts receivable
financing
Remeasurement: impairment of
expected credit loss
Closing balance disclosed by the
412,570,738.01
new financial instrument guidelines
Other receivables 239,078,612.04
Remeasurement: impairment of
expected credit loss
Closing balance disclosed by the
239,078,612.04
new financial instrument guidelines
M easured at fair value through profit
or loss:
Financial assets measured at fair
value through profit or loss (the 90,488.17
original guidelines)
Less: transfer to financial assets held
90,488.17
for trading
Closing balance disclosed by the
new financial instrument guidelines
Financial assets held for trading
Add: transfer from financial assets
measured at fair value through profit 90,488.17
or loss (the original guidelines)
Closing balance disclosed by the
90,488.17
new financial instrument guidelines
M easured at fair value through other
comprehensive income:
Financial assets available for sale
310,842,965.35
(the original guidelines)
Less: transfer to other investments in
310,842,965.35
equity instruments
Closing balance disclosed by the
new financial instrument guidelines
70
31 December 2018 1 January2019
Category Reclassification Remeasurement
(before changes) (after changes)
Other investments in equity
instruments
Add: transfer from financial assets
available for sale (the original 310,842,965.35
guidelines)
Remeasurement: measured at fair
479,315,095.75
value
Closing balance disclosed by the
790,158,061.10
new financial instrument guidelines
③Adjustment table for provision for impairment of original financial assets according to new financial instruments
standards at 1 January 2019
A．Consolidated Financial Statements
31 December 2018 1 January 2019 (after
Category Reclassification Remeasurement
(before changes) changes)
Amortized cost
Provisions for impairment
23,742,916.71 23,742,916.71
of accounts receivable
Provisions for impairment
108,981,379.40 108,981,379.40
of other receivables
B．Financial statements of Parent company
31 December 2018 1 January 2019 (after
Category Reclassification Remeasurement
(before changes) changes)
Amortized cost
Provisions for impairment
20,867,525.52 20,867,525.52
of accounts receivable
Provisions for impairment
108,973,871.13 108,973,871.13
of other receivables
④The effects on retained earnings and other comprehensive income of 1 January 2019
Consolidated Consolidated Consolidated other
Category retained earnings surplus reserves comprehensive
income
31 December 2018 3,342,615,148.06 503,999,977.58 149,300,488.94
1. Reclassify financial assets available for sale into
359,486,321.81
other investments in equity instruments and
71
Consolidated Consolidated Consolidated other
Category retained earnings surplus reserves comprehensive
income
remeasure
2. Remeasurement of impairment of accounts
receivable
1 January 2019 3,342,615,148.06 503,999,977.58 508,786,810.75
3.28 Correction of Prior Period Errors
There is no significant correction of prior period errors for the Company during the reporting period.
3.29 Significant Account Judgement 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 judgements, 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 actual result derived from those uncertainties in estimates may be different from the management estimates, which 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 t hey 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 the balance sheet date, the followings are the significant areas where the Company needs to make judgement, estimates
and assumptions over the value of items in the financial statements:
3.29.1 Classification of Lease
The Company classifies leases as operating lease and finance 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.
3.29.2 Impairment of Financial Assets
The Company uses the expected credit loss model to assess the impairment of financial instruments. The application of the
expected credit loss model requires significant judgment and estimation, and all reasonable and evidenced information,
including forward-looking information, needs to be considered. In making such judgments and estimates, the Company
infers the expected chan ges in the debtor's credit risk based on historical data combined with economic policies,
macroeconomic indicators, industry risks, external market environment, technological environment, and changes in
customer circumstances.
3.29.3 Impairment of Inventories
The Company measures inventories by the lower of cost and realizable net value according to the accounting policies in
regard of inventories and provisions for decline in value of inventories is made if the cost is higher than their net realizable
value, and obsolete and slow-movement inventories. Inventories decline in value to net realizable value is the estimated
selling price in the ordinary course of business. Net realizable value is determined on the basis of clear evidence obtained
and takes into consideration the purposes of holding inventories and effect of post balance sheet events. The difference
between the actual result and the original estimates shall have impact on reverse of the carrying amount of the inventories
and their decline in value or provisions during the period of change.
72
3.29.4 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 finan cial instruments. If an equity instrument investment or
contract has a public offer, the Company does not use cost as the best estimate of its fair value.
3.29.5 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 th e
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.
3.29.6 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.
3.29.7 Deferred Tax Assets
The Company shall recognize all unused tax losses as deferred tax assets to the extent that it is probable that future taxable
profit will be available against which the unused tax losses and unused tax credits can be utilized. This requires the
management of the Company make a lot of judgments over the estimation of time period, value and tax planning strategies
when future taxable profit incurs so that the value of deferred tax assets can be determined.
3.29.8 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.
3.29.9 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
73
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.
3.29.10 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 refers to Note 5.28.
Note 4 TAXATION
4.1 Major Taxes and Tax Rate
Tax Tax rate (%)
Enterprise income tax Business tax is calculated according to the taxable income(note1)
The VAT is calculated as the difference between output tax and deductible input tax for the
period, and the tax rates are 6%, 9%, 10%, 13% or 16% (Note 2). The output tax is
Value added tax
calculated using the sales of goods and taxable services income (including transportation
and ground services revenue).
Property tax is calculated by the nature of house property and is collected by ad valorem or
Property tax
specific duties according to the tax rules.
Urban maintenance and Urban maintenance and construction tax are calculated at 7% of turnover tax.
construction tax
Education surcharge Education surcharge is calculated at 3% of turnover tax.
Local education surcharge Local education surcharge is calculated at 2% of turnover tax.
Civil aviation development fund shall be calculated using the collection standard of the
relevant category of flight routes, maximum departure weight and flight distance adopted
Civil aviation by the civil aviation industry. According to “Interim measures for the administration of the
development Fund
administration of civil aviation development fund”《民航发展基金征收使用管理暂行办
法》.
Note 1: According to the provision of National Development and Reform Commission ([2014]15) and Announcement of
the State Administration of Taxation on the enterprise income tax on the in-depth implementation of the development
strategy of the western region of China"(《国家税务总局关于深入实施西部大开发战略有关企业所得税问题的公告》)
(State Administration of Taxation [2012]12), the Chongqing branch of the Company can get a reduced rate of 15% to pay
corporate income tax, when its international and domestic air passenger and cargo transport projects are in line with the "
Catalogue of Encouraged Industries in Western Region”(《西部地区鼓励类产业目录》). All companies in mainland China
are subject to a corporate income tax rate of 25%.
Note 2: The applicable tax rate for VAT-taxable sales or imported goods of the Company during the period from January
to M arch 2019 is 16%/10%. According to the “Announcement of the M inistry of Finance, the State Administ ration of
Taxation and the General Administration of Customs on Deepening the Policies Related to Value-Added Tax Reform”
(M inistry of Finance, State Administration of Taxation, General Administration of Customs [2019] No. 39) regulations, the
74
applicable tax rate is adjusted from 1 April 2019 to 13%/9%. At the same time, the Company as a taxpayer of production
and living service industry, from 1 April 2019 to 31 December 2021, can deduct the taxable amount according to the
current deductible input tax plus 10%.
4.2 Tax Incentives
4.2.1. 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, roundt rip
transportation services between Hongkong, M arcau, and Taiwan, as well as transportation services provided in Hongkong,
M arcau, and Taiwan per the Notice of Pilot Conversion of Sales-tax-to-VAT for the Transportation Sector and Certain
Contemporary Service Sectors by the M inistry 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》)..
4.2.2. According to the Announcement of the State Administration of Taxation on the enterpris e income tax on the
in-depth implementation of the development strategy of the western region of China"(《国家税务总局关于深入实施西部
大开发战略有关企业所得税问题的公告》) (State Administration of Taxation [2012]12), Chongqing Branch of the
Company meets the conditions for reduction and exemption in the development of the western region, could enjoy the
preferential policy of reducing enterprise income tax by 15% in 2019.
Note 5 NOTES TO THE CONSOLID ATED FIN ANCIAL S TATEMENTS
5.1 Monetary funds
Item 31 December 2019 31 December 2018
Cash at hand: 285,508.32 291,347.27
Bank deposit: 598,575,557.37 840,568,756.82
Other monetary funds 100,000.00 100,000.00
Total 598,961,065.69 840,960,104.09
Including: the total amount of deposit
8,525,480.55 2,047,660.50
abroad
Note: Among other monetary funds, CNY 100,000.00, is the deposit deposited by a subsidiary for issuing
a bank guarantee. In addition, there were no other funds in the period-end monetary funds that had
restrictions on use due to mortgages, pledges, or freezes and had potential recovery risks.
5.2 Financial assets at fair value through profit or loss
Item 31 December 2019 31 December 2018
Held-for-trading financial assets — 90,488.17
Including: Interest rate swaps — 90,488.17
75
Item 31 December 2019 31 December 2018
Total — 90,488.17
5.3 Accounts receivable
5.3.1 Disclosure by Age
Age 31 December 2019 31 December 2018
Within 1 year 437,769,605.78 426,216,349.00
1 to 2 years 35,123,064.16 9,376.87
2 to 3 years
3 to 4 years
4 to 5 years 8,057,209.85
Over 5 years 11,243,647.55 3,186,437.70
Subtotal 484,136,317.49 437,469,373.42
Less: provision for bad debt 27,378,026.89 23,742,916.71
Total 456,758,290.60 413,726,456.71
5.3.2 Disclosure by Category
①31 December 2019 (Provision using simple model)
31 December 2019
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Accounts receivable subject to
individual impairment 10,823,117.90 2.24 10,823,117.90 100.00
assessment
Accounts receivable subject to
473,313,199.59 97.76 16,554,908.99 3.50 456,758,290.60
group impairment assessment
Total 484,136,317.49 100.00 27,378,026.89 5.66 456,758,290.60
②31 December 2018 (Provision using incurred loss model)
31 December 2018
Category Book balance Provision for bad debt
Carrying
Proportion Provision ratio amount
Amount Amount
(%) (%)
Accounts receivable with
individually significant balance and
105,366,572.73 24.08 105,366,572.73
provision for bad debt recognized
individually
Accounts receivable with bad debt 258,395,976.09 59.07 12,919,798.81 5.00 245,476,177.28
provision recognized collectively
76
31 December 2018
Category Book balance Provision for bad debt
Carrying
Proportion Provision ratio amount
Amount Amount
(%) (%)
Accounts receivable with
individually significant balance and
105,366,572.73 24.08 105,366,572.73
provision for bad debt recognized
individually
by similar credit risk characteristics
Accounts receivable with
individually insignificant balance
73,706,824.60 16.85 10,823,117.90 14.68 62,883,706.70
but provision for bad debt
recognized individually
Total 437,469,373.42 100.00 23,742,916.71 5.43 413,726,456.71
Detailed explanation of provision for bad debt:
① Accounts receivable with individually significant balance and provision for bad debt recognized individuallyas of 31
December 2019
31 December 2019
Entity name Provision
Book balance Provision for bad debt Reason
ratio (%)
Impairment upon individual
Debtor #1 8,057,209.85 8,057,209.85 100.00
assessment
Kun Peng Airlines Co., Impairment upon individual
1,849,400.00 1,849,400.00 100.00
Ltd assessment
Impairment upon individual
CRAirways 916,508.05 916,508.05 100.00 assessment
Total 10,823,117.90 10,823,117.90 100.00
② Accounts receivable subject to impairment assessment by credit risk characteristics of a groupas of 31 December 2019
31 December 2019
Name Provision for bad
Book balance Provision ratio (%)
debt
Amounts due from the clearing center 42,716,664.57
Amounts due from the aviation association 93,939,923.14
Amounts due from related parties 5,558,432.20
Other receivables 331,098,179.68 16,554,908.99 5.00
Total 473,313,199.59 16,554,908.99 3.50
The Company calculate provision of bad debt according to the combination of credit risk characteristics and the expected
loss amount.
③ Accounts receivable with individually significant balance and provision for bad debt recognized individuallyas of 31
December 2018,
31 December 2018
Entity name Provision for Provision
Book balance Reason
bad debt ratio (%)
No indication of impairment
BSP-CHINA 56,778,788.70
upon individual assessment
No indication of impairment
Accounting Center of China Aviation 48,587,784.03
upon individual assessment
Total 105,366,572.73
77
④ Accounts receivable with individually insignificant balance but provision for bad debt recognized individually as of 31
December 2018
31 December 2018
Entity name Provision for Provision
Book balance Reason
bad debt ratio (%)
No indication of impairment
BSP-Other areas(notes) 47,835,858.63
upon individual assessment
No indication of impairment
Air China 8,564,966.57
upon individual assessment
Impairment upon individual
Debtor #1 8,057,209.85 8,057,209.85 100.00 assessment
No indication of impairment
UATP 5,479,498.61
upon individual assessment
Impairment upon individual
Kun Peng Airlines Co., Ltd 1,849,400.00 1,849,400.00 100.00
assessment
Impairment upon individual
CR Airways 916,508.05 916,508.05 100.00
assessment
No indication of impairment
Air China Cargo 907,509.39
upon individual assessment
No indication of impairment
Dalian Airlines 87,473.50
upon individual assessment
Taikoo (Shandong) Aircraft No indication of impairment
8,400.00
Engineering Company Limited upon individual assessment
Total 73,706,824.60 10,823,117.90 14.68
Notes: BSP-Other areas (notes) includes Tai Wan, Korea, Japan, Hong Kong, Australia, Russia, Canada, Thailand,
Germany, Cambodia, Vietnam, Singapore, Indonesia, Philippines, France etc.
⑤Accounts receivable with bad debt provisions recognized based on the balance percentage method as of 31 December
2018
31 December 2018
Name
Book balance Provision for bad debt Provision ratio (%)
Group by nature 258,395,976.09 12,919,798.81 5.00
Total 258,395,976.09 12,919,798.81 5.00
For details of recognition criteria and explanation for provision for bad debt by group, please refer to Notes 3.10.
5.3.3 Changes of Provision for Bad Debt During the Reporting Period
Changes during the reporting period
Changes of
31 December 1 January 31 December
Category accounting Recovery
2018 2019 2019
policy Provision or Write-off
reversal
Accounts
receivable subject
to individual 10,823,117.90 10,823,117.90 10,823,117.90
impairment
assessment
Accounts
receivable subject
to impairment 12,919,798.81 12,919,798.81 3,719,780.18 84,670.00 16,554,908.99
assessment by
group
Total 23,742,916.71 23,742,916.71 3,719,780.18 84,670.00 27,378,026.89
5.3.4 There were no written off to accounts receivable during the reporting period.
5.3.5 The total amount of top five accounts receivable summarized by debtors as at the end of current year is CNY
211,645,117.22, accounting for 43.72% of the total accounts receivable as at the end of current year, the total
corresponding provision for bad debt is CNY5,899,189.67.
78
5.3.6 There are no derecognition of accounts receivable due to the transfer of financial assets.
5.3.7 The Company has no assets or liabilities arising from continuing involvement in transferred accounts receivable.
5.4 Prepayments
5.4.1 Disclosure by Age
31 December 2019 31 December 2018
Age
Amount % Amount %
Within 1 year 231,299,824.20 99.67 265,432,349.34 99.81
1 to 2 years 269,211.97 0.12
2 to 3 years
Over 3 years 492,443.61 0.21 498,993.60 0.19
Total 232,061,479.78 100.00 265,931,342.94 100.00
The Company has no prepayments with an age of over 1 year and significant amounts
5.4.2 The total amount of top five prepayments as at the end of reporting period is CNY74,817,777.84, accounting for
32.24% of prepayments.
5.5 Other receivables
5.5.1 Other Receivables by Category
Items 31 December 2019 31 December 2018
Interest receivable
Dividend receivable
Other receivables 232,147,324.23 225,281,412.22
Total 232,147,324.23 225,281,412.22
5.5.2 Other Receivables
①Other receivables by age
Age 31 December 2019 31 December 2018
Within one year 205,811,193.91 210,635,683.08
1-2 years 13,480,887.91 6,798,874.26
2-3 years 5,048,559.92 1,181,295.09
3-4 years 870,414.71 4,431,621.36
4-5 years 4,254,714.36 1,996,469.92
Over 5 years 110,881,143.58 109,218,847.91
Subtotal 340,346,914.39 334,262,791.62
Less: provision for bad debt 108,199,590.16 108,981,379.40
Total 232,147,324.23 225,281,412.22
②Other receivables by nature
Nature 31 December 2019 31 December 2018
Deposits receivable 87,059,915.18 65,174,607.89
79
Nature 31 December 2019 31 December 2018
Amounts due from related parties 120,329,549.24 120,494,948.78
Other receivables 132,957,449.97 148,593,234.95
Subtotal 340,346,914.39 334,262,791.62
Less: provision for bad debt 108,199,590.16 108,981,379.40
Total 232,147,324.23 225,281,412.22
③Other receivables by bad debt provision method
A．Provision for bad debts recognized based on three stages model as of 31 December 2019 is as follows:
Provision for bad debt in thefirst stage as of 31 December 2019:
Lifetime expected
Provision for
Category Book balance credit losses rate Carrying amount Reason
bad debt
(%)
Provision for bad debt
recognized individually
Provision for bad debt
238,795,196.74 2.78 6,647,872.51 232,147,324.23
recognized collectively
No significant
Including: Deposits
87,059,915.18 increase on
87,059,915.18
receivable
credit risk
No significant
Amounts due from
18,777,831.59 18,777,831.59 increase on
related parties
credit risk
No significant
Otherreceivables 132,957,449.97 5.00 6,647,872.51 126,309,577.46 increase on
credit risk
Total 238,795,196.74 2.78 6,647,872.51 232,147,324.23
As of 31 December 2019, the Company have no interest receivable, dividends receivable and other receivables recognized
in the second Stage.
Provision for bad debt in the third stage as of 31 December 2019:
Lifetime expected credit Provision for bad Carrying
Category Book balance Reason
losses rate (%) debt amount
Provision for bad debt
101,551,717.65 100.00 101,551,717.65
recognized individually
1．Shandong Rainbow Credit
Commercial Jet Co., 101,551,717.65 100.00 101,551,717.65 impairment has
Ltd occurred
Total 101,551,717.65 100.00 101,551,717.65
B．Provision for bad debt using incurred loss model as of 31 December 2018:
31 December 2018
Book balance Provision for bad debt
Category
Proportion Provision ratio Carrying amount
Amount Amount
(%) (%)
Other receivables with
individually significant balance
249,586,501.51 74.67 106,200,587.24 42.55 143,385,914.27
and provision for bad debt
recognized individually
80
31 December 2018
Book balance Provision for bad debt
Category
Proportion Provision ratio Carrying amount
Amount Amount
(%) (%)
Other receivables with bad debt
provision recognized collectively
55,615,843.32 16.64 2,780,792.16 5.00 52,835,051.16
by similar credit risk
characteristics
Other receivables with
individually insignificant balance
29,060,446.79 8.69 29,060,446.79
but recognized provision for bad
debt individually
Total 334,262,791.62 100.00 108,981,379.40 32.60 225,281,412.22
B1．Other receivables with individually significant balance and provision for bad debt recognized
individually as of 31 December 2018
31 December 2018
Entity name Provision for bad Provision
Other receivables Reason
debt ratio (%)
Shandong Rainbow
101,551,717.65 101,551,717.65 100.00 Impairment upon individual assessment
Commercial Jet Co., Ltd.
No indication of impairment upon
Debtor #1 55,057,392.23
individual assessment
Debtor #2 33,202,261.73 1,660,113.09 5.00 Impairment assessment by group
Debtor #3 59,775,129.90 2,988,756.50 5.00 Impairment assessment by group
Total 249,586,501.51 106,200,587.24 42.55
B2. Other receivableswith bad debt provisions recognized based on the balance percentage method as of
31 December 2018
31 December 2018
Age
Other receivables Provision for bad debt Provision ratio (%)
Group by nature 55,615,843.32 2,780,792.16 5.00
Total 55,615,843.32 2,780,792.16 5.00
④Changes of provision for bad debt during the reporting period
Changes during the reporting period 31 December
Category 31 December 2018
2019
Provision Recovery or reversal Write-off
Other receivables of individual
significance and subject to 101,551,717.65 101,551,717.65
individual impairment assessment
81
Changes during the reporting period 31 December
Category 31 December 2018
Provision Recovery or reversal Write-off 2019
Other receivables subject to
impairment assessment by credit 7,429,661.75 781,789.24 6,647,872.51
risk characteristics of a group
Total 108,981,379.40 781,789.24 108,199,590.16
⑤There are no written off to other receivables during the reporting period.
⑥Top five closing balances by entity
Proportion of the
Balance at 31 balance to the total Provision for bad
Entity name Nature Age
December 2019 other receivables debt
(%)
Shandong Rainbow
Commercial Jet Co., Others 101,551,717.65 Over 5 years 29.84 101,551,717.65
Ltd.
Debtor #1 Deposits 56,331,234.29 Within 1 year 16.55
Debtor #2 Others 50,854,558.62 Within 1 year 14.94 2,542,727.93
Debtor #3 Others 22,857,234.53 Within 1 year 6.72 1,142,861.73
Shandong Air New Within 1 year
Others 10,095,530.78 2.97
M edia Co., Ltd.
Total 241,690,275.87 71.02 105,237,307.31
⑦The Company has no other receivables relating to government grants.
⑧The Company has no other receivables relating to derecognition of other receivables for transfer of
financial assets.
⑨The Company has no assets or liabilities arising from continuing involvement in transferred other
receivables.
5.6 Inventories
5.6.1 Inventories by Category
31 December 2019 31 December 2018
Items Provision
Provision for Carrying
Book balance Carrying amount Book balance for
impairment amount
impairment
Consumable air
107,636,197.57 4,227,205.99 103,408,991.58 99,169,118.33 99,169,118.33
equipment
Low-value
3,144,185.37 3,144,185.37 3,870,289.81 3,870,289.81
consumables
M aterials 2,882,079.74 2,882,079.74 2,586,111.28 2,586,111.28
Total 113,662,462.68 4,227,205.99 109,435,256.69 105,625,519.42 105,625,519.42
5.6.2 Provision for Impairment
Decrease during the reporting
Increase during the reporting period
31 December period 31 December
Items 2018 Reversal or 2019
Provision Others Others
written-down
Consumable air
4,227,205.99 4,227,205.99
equipment
Total 4,227,205.99 4,227,205.99
5.7 Other current assets
Items 31 December 2019 31 December 2018
82
Items 31 December 2019 31 December 2018
VAT deductible 170,020,416.07 236,596,457.60
Total 170,020,416.07 236,596,457.60
5.8 Financial assets available for sale
5.8.1 General Information of Financial Assets Available for Sale
31 December 2019 31 December 2018
Items Book Provision for Carrying Provision for
Book balance Carrying amount
balance impairment amount impairment
Available-for-sale equity
— — — 310,842,965.35 310,842,965.35
instruments
Including: M easured at
— — — 229,180,865.35 229,180,865.35
fair value
M easured at cost — — — 81,662,100.00 81,662,100.00
Total — — — 310,842,965.35 310,842,965.35
5.8.2 Financial Assets Available for SaleM easured at Fair Value
31 December 2018
Items
Equity instruments Total
Cost of equity instruments 6,690,000.00 6,690,000.00
Fair value 229,180,865.35 229,180,865.35
Cumulative gains /(losses) on changes in fair value recognized in
222,490,865.35 222,490,865.35
other comprehensive income
Provision for impairment
5.8.3 Financial Assets Available for SaleM easured at Cost
Book balance
Decrease during
Investees Increase during the
31 December 2017 the reporting 31 December 2018
reporting period
period
Sichuan Airlines 35,000,000.00 35,000,000.00
Jinan International Airport 46,662,100.00 46,662,100.00
Total 81,662,100.00 81,662,100.00
(Continued)
Provision for impairment
Increase Decrease Share of interest Cash dividends for
31 31
Investees during the during the in investee the year ended 31
December December
reporting reporting (%) December 2018
2017 2018
period period
Sichuan Airlines 10.00 13,907,646.29
Jinan International 1.94 726,062.28
83
Provision for impairment
Increase Decrease Share of interest Cash dividends for
31 31
Investees during the during the in investee the year ended 31
December December
reporting reporting (%) December 2018
2017 2018
period period
Airport
Total 14,633,708.57
5.9 Long-term equity investments
Changes in the current period (+, -)
Investment
31 December Other
Investees Provisionb/f gains and losses Other
2018 Additional Investment comprehensive
recognized changes
investment reduction income
underthe equity in equity
adjustment
method
Associates
Shandong
Rainbow 22,500,000.00 22,500,000.00
Commercial Jet
Co., Ltd.
Total 22,500,000.00 22,500,000.00
(Continued)
Changes in the current period (+, -)
Declared cash 31 December Provisionas at 31
Category Provision 2019 December 3019
dividends or Others
recognized
profits
Associates
Shandong Rainbow
22,500,000.00 22,500,000.00
Commercial Jet Co., Ltd.
Total 22,500,000.00 22,500,000.00
5.10 Other equity instrument investment
5.10.1 General Information of Other Equity Instrument Investment
Items 31 December 2019 31 December 2018
Non-trading equity instrument investment 874,728,633.32 —
Total 874,728,633.32 —
5.10.2 General Information of Non-Trading Equity Instrument Investment
Reasons for being Reasons for
measured at fair other
Other
Dividend comprehensive value and its comprehensive
income in Cumulative Cumulative income
Item current gain loss transferred into changes are income
period retained
earnings included in other transferred
comprehensive into retained
income earnings
TravelSky Technology Non-trading
3,509,239.50 215,575,779.77
Limited financial assets
84
Reasons for being Reasons for
measured at fair other
Other
Dividend comprehensive value and its comprehensive
income in Cumulative Cumulative income
Item current gain loss transferred into changes are income
period retained
earnings included in other transferred
comprehensive into retained
income earnings
Non-trading
Sichuan Airlines 2,352,722.11 544,155,393.47
financial assets
Jinan International Non-trading
422,395.60 26,645,360.08
Airport financial assets
Total 6,284,357.21 786,376,533.32
5.11 Fixed assets
5.11.1 Fixed Assets by Category
Items 31 December 2019 31 December 2018
Fixed assets 7,362,687,431.80 7,770,750,794.37
Disposal of fixed assets
Total 7,362,687,431.80 7,770,750,794.37
5.11.2 Fixed Assets
①General informationof fixed assets
Houses and Aircrafts and High-value Transportation
Category Others Total
buildings engines rotables vehicles
1. Cost:
1.1 Balance as at 31
571,843,775.78 11,991,421,728.96 718,099,224.08 80,330,794.46 227,422,996.75 13,589,118,520.03
December 2018
1.2 Increased in current
4,624.51 466,790,593.38 34,230,155.50 1,635,320.73 20,732,634.04 523,393,328.16
period
(1) Purchase 4,624.51 318,960,923.90 34,230,155.50 1,635,320.73 20,732,634.04 375,563,658.68
(2) Transferred from
147,829,669.48 147,829,669.48
construction-in-progress
(3) Transferred from
merger and acquisitions
(4) Others
1.3 Decreased in
202,242,130.40 22,792,702.64 3,314,250.51 9,379,277.10 237,728,360.65
current period
(1) Disposal or scrap 202,242,130.40 22,792,702.64 3,314,250.51 9,379,277.10 237,728,360.65
(2) Others
1.4 Balance as at 31
571,848,400.29 12,255,970,191.94 729,536,676.94 78,651,864.68 238,776,353.69 13,874,783,487.54
December 2019
2. Accumulated
Depreciation
2.1 Balance as at 31
113,760,776.16 5,284,241,593.74 241,303,561.80 48,642,854.82 128,424,317.82 5,816,373,104.34
December 2018
2.2 Increased in current
18,296,133.30 824,532,829.48 41,208,377.50 5,814,245.75 19,930,639.97 909,782,226.00
period
85
Houses and Aircrafts and High-value Transportation
Category Others Total
buildings engines rotables vehicles
(1) Accrual 18,296,133.30 824,532,829.48 41,208,377.50 5,814,245.75 19,930,639.97 909,782,226.00
(2) Transferred from
merger and acquisitions
2.3 Decreased in current
202,242,130.40 3,282,892.81 2,867,465.66 7,864,608.66 216,257,097.53
period
(1) Disposal or scrap 202,242,130.40 3,282,892.81 2,867,465.66 7,864,608.66 216,257,097.53
(2) Others
2.4. Balance as at 31
132,056,909.46 5,906,532,292.82 279,229,046.49 51,589,634.91 140,490,349.13 6,509,898,232.81
December 2019
3. Impairment provision
3.1 Balance as at 31
1,994,621.32 1,994,621.32
December 2018
3.2 Increased in current
242,017.85 242,017.85
period
(1) Accrual 242,017.85 242,017.85
(2) Transferred from
merger and acquisitions
3.3 Decreased in current
38,816.24 38,816.24
period
(1) Disposal or scrap 38,816.24 38,816.24
(2) Others -
3.4 Balance as at 31
2,197,822.93 2,197,822.93
December 2019
4 Carrying amount of
-
fixed assets
4.2 Carrying amount as
439,791,490.83 6,349,437,899.12 448,109,807.52 27,062,229.77 98,286,004.56 7,362,687,431.80
at 31 December 2019
4.1 Carrying amount as
458,082,999.62 6,707,180,135.22 474,801,040.96 31,687,939.64 98,998,678.93 7,770,750,794.37
at 31 December 2018
②The Company has no idle fixed assets.
③Fixed assets acquired under finance leases
Accumulated Provision for
Item Initial cost Carrying amount
depreciation impairment
Aircrafts and engines 3,664,651,610.94 1,503,728,271.61 2,160,923,339.33
Total 3,664,651,610.94 1,503,728,271.61 2,160,923,339.33
④The Company has no fixed assets leasing out under operating leases.
⑤Fixed assets without certificate of title
86
Items Carrying amount Reason
Land rented from Jinan Air Control, not eligible
Jinan cargo arrival and departure warehouses 11,463,354.79
for ownership registration
Land use rights belonging to Shandong SDA
Buildings of Jinping Food Co., Ltd. 12,083,127.94
Group, not eligible for ownership registration
5.12 Construction inprogress
5.12.1 Construction in Progress by Category
Items 31 December 2019 31 December 2018
Construction in progress 5,479,071,703.01 4,790,300,972.13
Construction material
Total 5,479,071,703.01 4,790,300,972.13
5.12.2 Construction in Progress
① General Informationof Construction in Progress
31 December 2019 31 December 2018
Items Provision for Provision for
Book balance Carrying amount Book balance Carrying amount
impairment impairment
Factory
building 643,681,520.42 643,681,520.42 337,399,330.36 337,399,330.36
project
Prepayment
for aircrafts
4,828,576,000.04 4,828,576,000.04 4,444,647,787.88 4,444,647,787.88
introduction
project
Construction
of information 2,892,214.67 2,892,214.67 1,874,609.59 1,874,609.59
system
Simulator 3,921,967.88 3,921,967.88 6,379,244.30 6,379,244.30
Total 5,479,071,703.01 5,479,071,703.01 4,790,300,972.13 4,790,300,972.13
② Changes in significant projects of construction in progress
Increase during Transfer Decrease during
31 December 31 December
Projects Budget the reporting to fixed the reporting
2018 2019
period asset period
Dining area of Jiaodong
84,478,748.00 32,219,746.74 36,173,217.42 68,392,964.16
airport
Freight area of Jiaodong
144,614,600.00 40,525,078.89 35,754,160.35 76,279,239.24
airport
M aintenance area of
361,793,762.00 126,091,135.85 85,961,285.17 212,052,421.02
Jiaodong airport
Auxiliary production office
333,439,610.00 138,563,368.88 144,802,977.55 283,366,346.43
area
Aircraft asset introduction
9,937,456,340.04 4,444,647,787.88 878,860,482.38 494,932,270.22 4,828,576,000.04
project
87
Increase during Transfer Decrease during
31 December 31 December
Projects Budget the reporting to fixed the reporting
2018 2019
period asset period
Total 10,861,783,060.04 4,782,047,118.24 1,181,552,122.87 494,932,270.22 5,468,666,970.89
(Continued)
Weight Including:Tran Including:Tr Including: Capitalisation
of cost sferred into ansferred
Stage of Cumulative interests rate
to date leaseback into fixed Source of
Items completion interests capitalized applicable to
in assets during assets during finance
capitalized during the the current
budgete the current the current
current year year
d cost year year
Dining area of Not yet Working
80.96
Jiaodong airport completed capital
Freight area of Not yet Working
52.75
Jiaodong airport completed capital
M aintenance
58.61 Not yet Working
area of Jiaodong
completed capital
airport
Auxiliary
Not yet Working
production office 84.98
completed capital
area
Loans
Aircraft asset
Not from
introduction 48.59 134,876,677.39 11,830,219.22 47,721,444.22 3.2763-4.2750
applicable financial
project
institution
Total 134,876,677.39 11,830,219.22 47,721,444.22
5.12.3 The ending balance of construction in progress increased by CNY 688,770,730.88 from the beginning of the
period, mainly due to the increase in the construction of Jiaozhou Airport in the current period.
5.13 Intangible assets
5.13.1 General Information of Intangible Assets
Items Land rights Software Total
1. Cost:
1.1 Balance as at 31 December 2018 108,347,341.13 45,805,422.86 154,152,763.99
1.2 Increased in current year 7,486,815.84 7,486,815.84
(1) Purchase
(2)Diversion of construction 7,486,815.84 7,486,815.84
(3) Increased from business combination
1.3 Decreased in current year
(1) Disposal
1.4 Balance as at 31 December 2019 108,347,341.13 53,292,238.70 161,639,579.83
2. Accumulated amortization
2.1 Balance as at 31 December 2018 18,391,975.29 20,218,907.31 38,610,882.60
2.2 Increased in current year 2,403,582.86 7,165,984.75 9,569,567.61
(1) Accrual 2,403,582.86 7,165,984.75 9,569,567.61
88
Items Land rights Software Total
2.3 Decreased in current year
(1) Disposal
2.4 Balance as at 31 December 2019 20,795,558.15 27,384,892.06 48,180,450.21
3. Impairment provision
3.1 Balance as at 31 December 2018
3.2 Increased in current year
(1) Accrual
3.3 Decreased in current year
(1) Disposal
3.4 Balance as at 31December2019
4. Carrying amount
4.1 Carrying amount as at
87,551,782.98 25,907,346.64 113,459,129.62
31December2019
4.2 Carrying amount as at 31 December
89,955,365.84 25,586,515.55 115,541,881.39
2018
5.13.2 The Company has no intangible assets arising from internal research and development project as at the end of
reporting period.
5.13.3 The Company has no land use rights without certificate of title as at the end of reporting period.
5.14 Goodwill
5.14.1 Initial Recognition of Goodwill
Increase during the Decrease during the
Investees or matters that 31 December reporting period reporting period 31 December
goodwill arising from 2018 Business 2019
Disposal
combination
Qingdao Feisheng 10,220,816.22 10,220,816.22
Shandong Jinping Food Co.,
454,020.13 454,020.13
Ltd.
Total 10,674,836.35 10,674,836.35
5.14.2 Provision for Impairment
Increase during the Decrease during the
Investees or matters that goodwill 31 December reporting period reporting period 31 December
arising from 2018 2019
Provision Disposal
Qingdao Feisheng 10,220,816.22 10,220,816.22
Total 10,220,816.22 10,220,816.22
5.15 Deferred charges
Increase during Decrease during the reporting period
31 December
Items 31 December 2018 the reporting
Amortization Other decrease 2019
period
89
Increase during Decrease during the reporting period
31 December
Items 31 December 2018 the reporting
Amortization Other decrease 2019
period
Pilot training 560,825,591.19 166,957,990.17 98,987,349.80 628,796,231.56
Decoration
5,998,919.63 363,316.12 3,078,734.01 3,283,501.74
expenditure
M odification costs
6,820,831.82 20,084,405.68 1,212,386.99 25,692,850.51
for aircraft leasing
Total 573,645,342.64 187,405,711.97 103,278,470.80 657,772,583.81
5.16 Deferred tax assets and deferred tax liabilities
5.16.1 Deferred Tax Assets Before Offsetting
31 December 2019 31 December 2018
Items Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
differences differences
Provision for bad debt 135,577,617.05 33,894,404.26 132,724,296.11 33,181,074.03
Impairment provision for
4,227,205.99 1,056,801.50
inventories
Impairment provision for
2,197,822.93 549,455.73 1,994,621.32 498,655.33
fixed assets
Fair value movement of
financial liabilities held 126,264.75 31,566.19
for trading
Provisions 4,234,796,893.54 1,058,699,223.39 3,480,184,220.23 870,046,055.05
Employment benefits
22,851,931.68 5,712,982.92 17,131,763.99 4,282,941.00
payable
Deferred income 21,736,870.97 5,434,217.74 24,890,471.35 6,222,617.84
Total 4,421,514,606.91 1,105,378,651.73 3,656,925,373.00 914,231,343.25
5.16.2 Deferred Tax Liabilities Before Offsetting
31 December 2019 31 December 2018
Items Deductible temporary Deferred tax Deductible temporary Deferred tax
differences liabilities differences liabilities
Asset evaluation increment from
Enterprise merger under the 4,173,050.93 1,043,262.73 4,694,682.30 1,173,670.58
different control
90
31 December 2019 31 December 2018
Items Deductible temporary Deferred tax Deductible temporary Deferred tax
differences liabilities differences liabilities
Changes in fair value of financial
90,488.17 22,622.04
assets held for trading
Changes in fair value of financial
222,490,865.36 55,622,716.34
assets available for sale
Changes in fair value of other
786,376,533.32 196,594,133.33
equity instruments investment
Others (Note) 140,608,392.76 35,152,098.19
Total 931,157,977.01 232,789,494.25 227,276,035.83 56,819,008.96
Note: According to Caishui [2018] No. 54, the equipment and equipment newly purchased by the Company from January 1
2018 to December 31 2020, with a unit value of less than 5 million yuan, are allowed to be included in the current profit
and loss. The cost is deducted when calculating the taxable income.
5.17 Short-term borrowings
5.17.1 Disclosure of Short-Term Borrowings by Category
Items 31 December 2019 31 December 2018
Credit loan 300,329,083.33 580,000,000.00
Total 300,329,083.33 580,000,000.00
5.17.2 The Company has no overdue short-term borrowings.
5.18 Held-for-trading financial liabilities
31 December Increase during the Decrease during the
Items 31 December 2019
2018 reporting period reporting period
Financial liabilities designated at
— 126,264.75 126,264.75
fair value through profit or loss
Including: Interest rate swaps — 126,264.75 126,264.75
Total — 126,264.75 126,264.75
5.19 Notes payable
Category 31 December 2019 31 December 2018
8,500,000.00
Bank acceptance bills
394,496,891.30
Commercial acceptance bills
402,996,891.30
Total
The Company has no notes payable matured but not yet paid as at the reporting date.
5.20 Accounts payable
5.20.1 Accounts Payable by Nature
Items
31 December 2019 31 December 2018
689,822,992.66
Aircraft maintenance costs 560,449,992.31
253,885,753.63
Fuel cost 327,714,163.12
91
Items
31 December 2019 31 December 2018
Landing fee 465,517,353.92 446,878,244.86
Aircraft service cost 504,230,134.03 570,352,031.53
Flight catering 91,996,252.04 109,165,990.89
Computer booking fee 261,849,848.30 135,371,372.00
Lease rental 7,552,869.30 5,602,184.13
207,393,310.63
Others 118,302,628.42
2,482,248,514.51
Total 2,273,836,607.26
5.20.2 Significant Accounts Payable with Age of Over One Year
Items 31 December 2019 Reason
Computer booking fee 130,084,028.82 No payment due
Total 130,084,028.82
5.21 Advance from customers
5.21.1 Details of Advance fromCustomers
Items
31 December 2019 31 December 2018
Ticket clearing 918,437,701.34 761,881,379.16
Advanced payment for tickets 4,180,237.06 4,286,573.58
Others 14,255,729.56 21,203,718.59
Total 936,873,667.96 787,371,671.33
5.21.2 The Company has no significant advance from customerswith aging of over one year as at the reporting date.
5.22 Employee benefits payable
5.22.1 Details of Employee Benefits Payable
Increase during Decrease during
31 December
Items the reporting the reporting 31 December 2019
2018
period period
1. Short-term employee benefits 543,294,439.81 2,947,782,249.76 2,942,014,769.60 549,061,919.97
2. Post-employment benefits – defined
265,241,914.25 265,241,914.25
contribution plans
3. Termination benefits 809,314.39 809,314.39
4. Other long-term employee benefits
within one year
Total 543,294,439.81 3,213,833,478.40 3,208,065,998.24 549,061,919.97
5.22.2 Short-Term Employee Benefits
Decrease during
31 December Increase during the
Items the reporting 31 December 2019
2018 reporting period
period
92
Decrease during
31 December Increase during the
Items the reporting 31 December 2019
2018 reporting period
period
1. Wages, salaries and subsidies 493,926,676.47 2,593,785,156.47 2,596,340,014.90 491,371,818.04
2. Employee welfare 23,664,538.66 23,664,538.66
3. Social insurance: 109,312,898.53 109,312,898.53
Including: M edical insurance 96,494,372.26 96,494,372.26
Employment injury insurance 3,777,634.57 3,777,634.57
M aternity insurance 9,040,891.70 9,040,891.70
4. Housing provident fund 2,544.00 107,863,177.86 107,865,721.86
5. Labour union fee and employee 17,202,010.55 78,487,370.09 72,668,386.86 23,020,993.78
education fee
6. Short-term paid absences 32,163,208.79 34,669,108.15 32,163,208.79 34,669,108.15
7. Short-term profit-sharing plan
Total 543,294,439.81 2,947,782,249.76 2,942,014,769.60 549,061,919.97
5.22.3 Defined Contribution Plans
Increase during the Decrease during the
Items 31 December 2018 31 December 2019
reporting period reporting period
Post-employment benefits:
1. Basic pension 161,804,451.39 161,804,451.39
2.Unemployment insurance 6,529,927.22 6,529,927.22
3. Annuity payment 96,907,535.64 96,907,535.64
Total 265,241,914.25 265,241,914.25
5.23 Taxes and feespayable
Items 31 December 2019 31 December 2018
VAT 1,457,921.43 1,550,891.34
Urban construction and maintenance tax 214,935.06 203,034.68
Education surcharge 151,647.82 144,777.29
Enterprise income tax 18,719,845.92 108,855,883.31
Property tax 169,094.44 207,271.63
Land tax 89,655.60 284,502.66
Personal income tax 11,458,059.11 8,016,428.72
Stamp duty 991,505.53 1,754,447.96
Civil aviation development fund 116,161,969.13 131,301,180.63
93
Others 22,549.67 398,840.65
Total 149,437,183.71 252,717,258.87
At the reporting date, the tax payable decreased by 40.87% compared with the beginning of the period,
mainly because the opening balance included the balance of Enterprise income tax payable in the third
and fourth quarters.
5.24 Other payables
5.24.1 Other Payables by Category
Items 31 December 2019 31 December 2018
Interests payable 10,428,894.80
Dividends payable 602,306.96 602,306.96
Other payables 585,541,152.70 624,468,268.37
Total 586,143,459.66 635,499,470.13
5.24.2 InterestsPayable
Items 31 December 2019 31 December 2018
Interest on long-term borrowings with repayment by installments 6,875,927.06
Accrued interest on short-term borrowings 3,552,967.74
Total 10,428,894.80
The Company has no overdue interests payable as at the reporting date.
The closing balance of interests payable decreased by 100% from the beginning of the period, mainly due to the
Company's implementation of the new financial instrument standards where the interest on financial instruments accrued
based on the actual interest rate method was reclassified to be included in the corresponding financial instrument's book
balance.
5.24.3 Dividends Payable
Items
31 December 2019 31 December 2018
602,306.96 602,306.96
Dividend on common shares
602,306.96 602,306.96
Total
The Company has no significant dividends payable over one year as at the reporting date.
5.24.4 Other Payables
①Other Payables by Nature
Items
31 December 2019 31 December 2018
Payables for construction projects 172,005,523.84 241,249,024.10
Payables for deposits 146,354,708.31 133,300,822.32
Payables associated with aircraft
3,949,505.02
purchase
Taxes deducted at source 122,250,153.03 102,180,386.82
Others 144,930,767.52 143,788,530.11
94
Items
31 December 2019 31 December 2018
Total 585,541,152.70 624,468,268.37
②The Company has no other payables with a significant amount and an age of more than one year as at
the reporting date.
5.25 Non-current liabilities due within one year
Items
31 December 2019 31 December 2018
Long-term borrowings due within one year 567,350,817.16 116,076,320.00
Long-term payables due within one year 307,786,130.67 330,554,355.34
Long-term employee benefits payable due within one year 10,163,000.00 9,210,000.00
885,299,947.83 455,840,675.34
Total
5.26 Long-term borrowings
5.26.1 Long-Term Borrowings by Category
Items 31 December 2019 31 December 2018 Range of interest rates
Secured loans 811,423,255.68 982,509,309.37 2.6163%~4.41%
Credit loans 563,928,944.30 1,019,123,568.46 3.2763%~4.275%
Subtotal 1,375,352,199.98 2,001,632,877.83
Less: Long-term borrowings due
567,350,817.16 116,076,320.00
within one year (Note 5.25)
Total 808,001,382.82 1,885,556,557.83
The closing balance of long-term borrowings decreased by 57.15% from the beginning of the period, mainly
due to the repayment of the principal of USD loans during the reporting period.
5.27 Long-term payables
5.27.1 Long-Term Payables by Category
Items 31 December 2019 31 December 2018
Long-term payables 5,639,672,919.84 5,252,508,914.78
Specific payables
Subtotal 5,639,672,919.84 5,252,508,914.78
Less: Long-term payables due within one year (Note 5.25) 1,015,733,044.44 884,295,469.45
Total 4,623,939,875.40 4,368,213,445.33
5.27.2 Long-Term Payables by Nature
Items 31 December 2019 31 December 2018
Financial lease rental payables 1,558,752,105.19 1,872,324,694.55
M aintenance payables for aircrafts and engines held under
4,080,920,814.65 3,380,184,220.23
operating lease
Subtotal 5,639,672,919.84 5,252,508,914.78
95
Items 31 December 2019 31 December 2018
Less: Financial lease rental payables due within one year 330,554,355.34
307,786,130.67
(Note 6.25)
Less: M aintenance payables for aircrafts and engines held 553,741,114.11
707,946,913.77
under operating lease due within one year (Note 1)
Total 4,623,939,875.40 4,368,213,445.33
Note 1: Maintenance payables for aircrafts and engines held under operating lease due within one year
had been included in accounts payable.
5.28 Long-term employee benefits payable
5.28.1 General Information of Long-Term Employee Benefits Payable
Items 31 December 2019 31 December 2018
1. Post-employment benefits-net defined benefit liability 162,909,225.21 144,434,119.11
Less: long-term staff remuneration payable due within one year
10,163,000.00 9,210,000.00
(Note 5.25)
Total- 152,746,225.21 135,224,119.11
5.28.2 Changes in Defined Benefit Plans
Present value of the defined benefit obligation:
Items 2019 2018
1. Balance at the beginning of the reporting period 144,434,119.11 119,031,000.00
2. Cost recognized in current profit or loss: 26,706,000.00 24,878,000.00
2.1 Current service cost
2.2Past service cost 22,161,000.00 20,278,000.00
2.3Gains /(losses) on settlement(loss presented with "-" prefix)
2.4 Net interest 4,545,000.00 4,600,000.00
3.Cost recognized in other comprehensive income: -1,727,000.00 -9,293,000.00
3.1Actuarial gains /(losses) (loss presented with "-" prefix) -1,727,000.00 -9,293,000.00
3. Other changes: 9,957,893.90 8,767,880.89
4.1 Consideration paid in settlements
4.2 Payment of benefits 9,957,893.90 8,767,880.89
5.Balance at the end of the reporting period 162,909,225.21 144,434,119.11
5.28.3 Significant Actuarial Assumptions of Defined Benefit Plans
Items 31 December 2019 31 December 2018
Discount Rate 3.25% 3.25%
China Life Insurance M ortality Rate 2010-2013
M ortality Rate
(Annuity)
96
Items 31 December 2019 31 December 2018
Cost of Living Adjustments for Retired Cadres and Retirees 0.00%
Cost of Living Adjustments for Internal Retirees 0.00%
Cost of Living Adjustments for Dependents 0.00%
5.29 Deferred income
5.29.1 General Information of Deferred Income
Increase during Decrease during
31 December 31 December
Items the reporting the reporting Reason
2018 2019
period period
The aircraft
Unrealized gains and losses
sale-leaseback
of operating lease from 93,389,396.81 532,166.61 6,235,364.18 87,686,199.24
disposal profits
aircraft leaseback
and losses
Designated subsidy for snow Asset related
491,458.34 491,458.34
disaster subsidies
Designated subsidy for civil
Asset related
aviation energy-saving 10,876,065.40 976,500.12 9,899,565.28
subsidies
program
Designated subsidy for HUD Asset related
13,522,947.61 1,685,641.92 11,837,305.69
and repackage project subsidies
Total 118,279,868.16 532,166.61 9,388,964.56 109,423,070.21
5.29.2 Items Related to Government Grants
Increase Recognized in Recognized in
Related to
during non-operating other income
31 December Other 31 December assets/Related
Items the income during during the
2018 changes 2019 to profit or
reporting the reporting reporting
loss
period period period
Designated
Asset related
subsidy for 491,458.34 491,458.34
subsidies
snow disaster
Designated
subsidy for
Asset related
civil aviation 10,876,065.40 976,500.12 9,899,565.28
subsidies
energy-saving
program
97
Increase Recognized in Recognized in
Related to
during non-operating other income
31 December Other 31 December assets/Related
Items the income during during the
2018 changes 2019 to profit or
reporting the reporting reporting
loss
period period period
Designated
subsidy for
Asset related
HUD and 13,522,947.61 1,685,641.92 11,837,305.69
subsidies
repackage
project
Total 24,890,471.35 3,153,600.38 21,736,870.97
5.30 Share capital
Changes during the reporting period (+, -)
31 December 31 December
Bonus Capitalisation
2018 New issues Others Subtotal 2019
issues of reserves
Number of
400,000,000.00 400,000,000.00
total shares
5.31 Capital reserves
Increase during the Decrease during the
Items 31 December 2018 31 December 2019
reporting period reporting period
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
98
5.32 Other comprehensive income
Changes during the reporting period
Less: Items previously
31 December Changes of recognized in other Attributable to Attributable to
Items 1 January 2019 Amount before Less: Income 31 December 2019
2018 accounting policy comprehensive income owners of the ninority
tax tax expenses
being reclassified to Company interests
current profit or loss
1.Other
comprehensive
income that cannot -17,567,660.07 526,354,470.82 508,786,810.75 82,843,572.22 21,142,643.05 61,700,929.17 570,487,739.92
be reclassified into
profit or loss
Including:
remeasurement of
net assets or net -17,567,660.07 -17,567,660.07 -1,727,000.00 -1,727,000.00 -19,294,660.07
liabilities of defined
benefit plans
Changes in fair
value of other equity
— 526,354,470.82 526,354,470.82 84,570,572.22 21,142,643.05 63,427,929.17 589,782,399.99
instruments
investment
2.Other 166,868,149.01 -166,868,149.01
99
Changes during the reporting period
Less: Items previously
31 December Changes of recognized in other Attributable to Attributable to
Items 1 January 2019 Amount before Less: Income 31 December 2019
2018 accounting policy comprehensive income owners of the ninority
tax tax expenses
being reclassified to Company interests
current profit or loss
comprehensive
income reclassifiable
to profit or loss in
subsequent periods
Gains and losses
from changes in fair
value of financial 166,868,149.01 -166,868,149.01 — — — — — —
assets available for
sale
Total of other
comprehensive 149,300,488.94 359,486,321.81 508,786,810.75 82,843,572.22 21,142,643.05 61,700,929.17 570,487,739.92
income
100
5.33 Surplus reserves
Increase during Decrease
Changes of
31 December the reporting during the 31 December
Items accounting 1 January 2019
2018 period reporting 2019
policy
period
Statutory surplus
503,999,977.58 503,999,977.58 34,773,467.39 538,773,444.97
reserve
Total 503,999,977.58 503,999,977.58 34,773,467.39 538,773,444.97
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.
5.34 Retained earnings
Items 2019 2018
Pre-adjustment balance brought forward 3,342,615,148.06 3,127,778,550.76
Total adjustment to retained earnings b/f (+, -)
Retained earnings b/f after adjustment 3,342,615,148.06 3,127,778,550.76
Add: Net profit attributable to shareholders of the parent 361,005,776.31 347,379,314.89
Less: Appropriation to statutory surplus reserve 34,773,467.39 32,542,717.59
Appropriation to discretionary surplus reserve
General reserve
Ordinary dividends declared 80,000,000.00 100,000,000.00
Bonus issue
Closing balance as of 31 December 2019 3,588,847,456.98 3,342,615,148.06
5.35 Operating revenues and operating costs
2019 2018
Items
Operating revenues Operating costs Operating revenues Operating costs
Principal
18,305,340,983.17 17,191,495,691.30 18,119,305,689.58 17,164,835,774.69
activities
Other activities 685,074,041.71 7,031,717.00 646,647,637.16 3,842,297.34
Total 18,990,415,024.88 17,198,527,408.30 18,765,953,326.74 17,168,678,072.03
5.36 Tax and surcharges
Items 2019 2018
Urban maintenance and construction tax 3,732,107.23 3,496,473.78
101
Items 2019 2018
Education surcharge and others 11,834,077.09 11,387,018.83
Total 15,566,184.32 14,883,492.61
5.37 S ales expenses
Items 2019 2018
Agency fees 230,584,259.38 256,489,732.72
Employment benefits 243,608,478.56 236,615,107.85
Computer booking fees 203,336,534.34 185,743,434.41
Online payment fees 39,163,326.74 40,777,011.46
Lease rental 21,060,731.55 19,057,258.96
Advertisement fees 23,977,435.60 21,112,359.55
Administrative office expenses 3,438,623.62 5,575,312.93
Travel expenses 6,781,596.05 5,361,277.56
System and network fees 31,644,027.06 21,858,013.97
BSP data processing fees 12,391,871.26 12,137,953.63
Depreciation 1,488,505.62 1,439,254.79
Others 34,307,689.05 41,872,463.80
Total 851,783,078.83 848,039,181.63
5.38 General and administrative expenses
Items 2019 2018
Employment benefits 278,063,116.02 244,557,871.24
Lease rental fees 26,558,484.48 21,858,369.20
Business entertainment costs 5,754,251.60 5,197,316.39
Depreciation 21,622,225.50 16,769,280.33
Administrative office expenses 11,811,000.12 9,603,957.33
Technology development costs 1,574,714.11 5,478,799.02
Amortization of intangibles 9,181,377.57 8,563,737.68
Water, electricity charges 11,740,503.56 12,593,866.47
Outsourcing fees 30,210,462.91 23,448,474.46
Others 86,167,923.36 80,691,930.07
Total 482,684,059.23 428,763,602.19
5.39 Research and development expenses
102
Items 2019 2018
Employment benefits 22,084,483.33 20,336,654.67
Others 358,066.34 310,341.99
Total 22,442,549.67 20,646,996.66
5.40 Financial costs
Items 2019 2018
Interest expenses 124,509,494.05 117,650,618.41
Less: Interest income 10,691,861.94 15,278,180.93
Net interest expenses 113,817,632.11 102,372,437.48
Foreign exchange losses 182,018,862.19 309,348,050.20
Less: Foreign exchange gains 149,848,886.61 290,647,042.20
Net foreign exchange losses 32,169,975.58 18,701,008.00
Bank charges 2,019,982.04 1,775,467.36
Total 148,007,589.73 122,848,912.84
5.41 Other income
Included in current period
Category 2019 2018
non-recurring profit and loss
1. Government grant recognized in other income 102,684,463.91 210,862,890.39 102,684,463.91
Including: Government grant related to deferred
3,153,600.38 3,161,642.04 3,153,600.38
income (related to assets)
Government grant related to deferred
income (related to income)
Government grant directly recognized in
99,530,863.53 207,701,248.35 99,530,863.53
current profit or loss (related to income)
2. Others related to daily operation activities and
4,954,383.18 10,952,470.45 4,954,383.18
recognized in other income
Including: Charges of withholding individual
4,844,126.48 10,952,470.45 4,844,126.48
income tax
Including: Input tax deduction 110,256.70 110,256.70
Total 107,638,847.09 221,815,360.84 107,638,847.09
Other income in the reporting period decreased by 51.47% compared with the previous period, mainly due to the
decrease in airline grants received in this period.
5.42 Investment income
103
Items 2019 2018
Income from financial assets measured by fair value with changes in fair value —
91,605.86
recognized in profit or loss
Income from holding of financial assets available for sale — 17,934,220.07
Investment income from held-for-trading financial assets during holding period 9,316.91 —
Dividend income from other equity instrument income during holding period 6,284,357.21 —
Total 6,293,674.12 18,025,825.93
The investment income of the reporting period decreased by 65.09% compared with the previous period, mainly due
to the decrease in Sichuan Airlines' 2018 dividends recognized in current period compared with the same period
last year.
5.43 Gains/(losses) from changes in fair values
Sources of gains on changes in fair value 2019 2018
Interest rate swaps -216,752.92 3,697,878.32
Total -216,752.92 3,697,878.32
The gains from changes in fair value in the reporting period decreased by 105.86% from the previous period, mainly
due to changes in fair value of interest rate swaps.
5.44 Impairment loss of credit
Items 2019 2018
Provision for bad debt for accounts receivable 3,719,780.18 —
Provision for bad debt for other receivables -781,789.24 —
Total 2,937,990.94 —
5.45 Impairment loss of asset
Items 2019 2018
1. Bad debt of receivables — 5,072,142.56
2. Impairment of inventories 4,227,205.99
3. Impairment of fixed assets 242,017.85
Total 4,469,223.84 5,072,142.56
5.46 Gains/(losses) from disposal of assets
Included in current
Category Current period Prior period period non-recurring
profit and loss
Gains/(losses) from disposal of fixed assets, 116,645.48 26,528,980.99 116,645.48
104
Included in current
Category Current period Prior period period non-recurring
profit and loss
construction in progress, productive biological assets
and intangible assets not classified as held for sale
Including: Fixed assets 116,645.48 26,528,980.99 116,645.48
Total 116,645.48 26,528,980.99 116,645.48
The gain from asset disposal in the reporting period decreased by 99.56% compared with the previous period, mainly
due to the disposal of two CRJ700 aircrafts in previous period.
5.47 Non-operating income
5.47.1 Details of Non-operating income
Included in current period
Category Current period Prior period
non-recurring profit and loss
Transferred income from pilot 59,386,792.51 17,924,528.30 59,386,792.51
Others 47,021,259.09 20,456,118.66 47,021,259.09
Total 106,408,051.60 38,380,646.96 106,408,051.60
5.47.2 The Company has no government grants irrelevant to daily operation activities during the reporting period.
5.47.3 During the reporting period, non-operating income increased by 177.24% compared with the previous period, mainly due
to the increase in pilot mobile funds recognized in the reporting period.
5.48 Non-operating expenses
Included in current period
Category Current period Prior period
non-recurring profit and loss
Loss on non-current asset disposals 2,183,604.73 1,341,230.64 2,181,349.73
Others 1,159,633.43 2,617,851.40 1,161,888.43
Total 3,343,238.16 3,959,082.04 3,343,238.16
5.49 Income tax expenses
5.49.1 Details of Income Tax Expenses
Items 2019 2018
Current tax expenses 276,036,631.10 245,269,061.41
Deferred tax expenses -156,148,240.18 -131,137,839.08
Total 119,888,390.92 114,131,222.33
5.49.2 Reconciliation of Accounting Profit and Income Tax Expenses
Items 2019 2018
Profit before tax 480,894,167.23 461,510,537.22
Income tax expense at the statutory /applicable tax rate 120,223,541.81 115,377,634.31
105
Items 2019 2018
Adjustments of impact from prior period income tax -6,543,317.50 -3,645,902.58
Effect of income that is exempt from taxation -1,571,089.30 -4,483,555.02
Effect of non-deductible costs, expenses or losses 7,285,612.18 7,235,098.86
Effect of previously unrecognized deductible losses recognized
493,643.73 -352,053.24
as deferred tax assets
Income tax expenses 119,888,390.92 114,131,222.33
5.50 Other comprehensive income
For details of the other comprehensive income and related tax effect, transfer to profit or loss and adjustment of other comp rehensive
income, please refer to Note 5.32 Other Comprehensive Income.
5.51 Notes to the Statement of Cash Flow
5.51.1 Other cash received relating to operating activities
Items 2019 2018
Government grants 99,530,863.53 207,701,248.35
Cash received other than government grants which is recognized
4,954,383.18 10,952,470.45
in other income
Interest income on bank deposit 10,691,861.94 15,278,180.93
Cash receipts from non-operating income 77,999,771.01 38,380,526.96
Cash receipts from current account 33,683,953.64 179,195,047.05
Total 226,860,833.30 451,507,473.74
5.51.2 Other cash payments relating to operating activities
Items 2019 2018
Bank charges 41,183,308.78 42,552,478.82
Cash payments for non-operating expenses 1,159,532.87 2,617,851.40
Cash payments for current account 32,387,504.48 25,103,983.51
Cash payments for sales and general and administrative expenses 286,592,795.32 266,971,115.50
Total 361,323,141.45 337,245,429.23
5.51.3 Other cash received relating to investing activities
Items 2019 2018
Cash receipts from settlement of interest rate swaps 9,316.91 91,605.86
Total 9,316.91 91,605.86
5.51.4 Other cash receipts relating to financing activities
Items 2019 2018
Cash receipts for aircraft transfer of sale and leaseback deals 495,464,436.83 1,543,271,788.39
106
Items 2019 2018
Total 495,464,436.83 1,543,271,788.39
5.51.5 Other cash payments relating to financing activities
Items 2019 2018
Cash payments for aircraft financial lease rental 367,299,836.44 273,646,123.68
Total 367,299,836.44 273,646,123.68
5.52 Supplementary information to the S tatement of Cash Flows
5.52.1 Supplementary Information to the Statement of Cash Flows
Supplementary information 2019 2018
1．Adjustments of net profit to cash flows from operating activities:
Net profit 361,005,776.31 347,379,314.89
Add: Provisions for impairment of assets 4,469,223.84 5,072,142.56
Impairment loss of credit 2,937,990.94 —
Depreciation of fixed assets, investment properties, oil and gas assets
909,782,226.00 822,743,730.26
and biological assets held for production
Amortization of intangible assets 9,569,567.61 8,563,737.68
Amortization of deferred charges 103,278,470.80 90,876,866.00
Loss on non-current assets disposal (gain presented by "-" prefix) -116,645.48 -26,528,980.99
Loss on scrap of fixed assets (gain presented by "-" prefix) 2,183,604.73 1,341,230.64
Loss on fair value changes (gain presented by "-" prefix) 216,752.92 -3,697,878.32
Financial costs (gain presented by "-" prefix) 138,281,693.30 142,480,807.24
Investment loss (gain presented by "-" prefix) -6,293,674.12 -18,025,825.93
Decrease of deferred tax assets (increase presented by "-" prefix) -191,147,308.48 -131,030,053.28
Increase of deferred tax liabilities (increase presented by "-" prefix) 34,999,068.30 -107,785.80
Decrease of inventories (increase presented by "-" prefix) -8,036,943.26 -21,701,333.78
Decrease of operating receivables (increase presented by "-" prefix) -72,129,006.40 226,819,428.04
Increase of operating payables (decrease presented by "-" prefix) 1,328,608,349.26 994,322,001.16
Others 12,203,106.10 11,510,119.11
Net cash flows generated from operating activities 2,629,812,252.38 2,450,017,519.48
2．Significant investing and financing activities involve no cash:
Debt-to-capital conversion
Convertible loan due within one year
Fixed assets acquired under financial lease
107
Supplementary information 2019 2018
3．M ovement of cash and cash equivalents:
Cash at the end of the reporting period 598,861,065.69 840,860,104.09
Less: Cash at the beginning of the reporting period 840,860,104.09 543,584,920.30
Add: Cash equivalents at the end of the reporting period
Less: Cash equivalents at the beginning of the reporting period
Net increase in cash and cash equivalents -241,999,038.40 297,275,183.79
5.52.2 Net Cash Payments for Acquisition of Subsidiaries
Item Amount
Cash or cash equivalents paid for business combination occurred during the reporting period
Less: Cash or cash equivalents held by the subsidiaries on the acquisition date
Add: Cash or cash equivalents paid in the reporting period for business combination occurred in
110,832.50
the prior periods
Net cash payments for acquisition of subsidiaries 110,832.50
5.52.3 Net Cash Received from Disposals of Subsidiaries
Item 31 December 2019 31 December 2018
①Cash 598,861,065.69 840,860,104.09
Including: Cash at hand 285,508.32 291,347.27
Demand bank deposit 598,575,557.37 840,568,756.82
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
③Cash and cash equivalents at the end of the reporting period 598,861,065.69 840,860,104.09
Including: restricted cash and cash equivalents in parent company
or subsidiary
5.53 Assets with Imposed Restriction on Ownership
Closing balance as of 31
Category Reason of restriction
December 2019
Assets pledged as security 1,356,738,353.65
Aircrafts and engines 1,356,638,353.65 Pledge as security for borrowings
108
Closing balance as of 31
Category Reason of restriction
December 2019
Bank deposit 100,000.00 Guarantee deposit
Other form of restriction: 2,160,923,339.33
Aircrafts and engines 2,160,923,339.33 Assets acquired under financial lease
Total 3,517,661,692.98
5.54 Foreign Currency Monetary Items
5.54.1 Foreign Currency M onetary Items
Carrying amount at Carrying amount at
Items Exchange rate
foreign currency CNY
M onetary funds
Including: -U SD 3,590,695.15 6.9762 25,049,407.51
-CAD 10.00 5.3421 53.42
-WON 124,293,082.00 0.0060 745,758.49
-TWD 25,237,915.00 0.2326 5,870,339.03
-JPY 8,899,362.00 0.0641 570,449.10
-THB 5,807,999.28 0.2328 1,352,102.23
-EUR 5,042.00 7.8155 39,405.75
Other receivables
Including: -U SD 14,369,622.12 6.9762 100,245,357.83
-GBP 3,082.00 9.1501 28,200.61
Accounts payable
Including: -U SD 13,301,877.21 6.9762 92,796,555.79
-GBP 40,298.05 7.8155 314,949.41
-JPY 2,618,255.00 0.0641 167,830.15
Other payables
Including: -U SD 679,896.00 6.9762 4,743,090.48
Non-current liabilities due within one year
Including: -U SD 18,035,624.32 6.9762 125,820,122.38
Long-term borrowings
Including: -U SD 127,194,998.50 6.9762 887,337,748.54
109
Carrying amount at Carrying amount at
Items Exchange rate
foreign currency CNY
Long-term payables
Including: -U SD 40,616,821.57 6.9762 283,351,070.64
5.55 Government Grants
5.55.1 Government Grants Related to Assets
Recognized in current profit Presented items that
Items presented in
or loss or directly as deduct recognized in current
Items Amount the Financial
of related cost profit or loss or directly
Statements
2019 2018 as deduct of related cost
Designated subsidy for
491,458.34 Deferred income 491,458.34 499,500.00 Other income
snow disaster
Designated subsidy for civil
aviation energy-saving 976,500.12 Deferred income 976,500.12 976,500.12 Other income
program
Designated subsidy for
1,685,641.92 Deferred income 1,685,641.92 1,685,641.92 Other income
HUD and repackage project
Total 3,153,600.38 3,153,600.38 3,161,642.04
5.55.2 Government grants related to income
Recognized in current profit or Presented items that
Items presented in loss or directly as deduct of related recognized in current
Items Amount the Financial cost profit or loss or directly
Statements as deduct of related
2019 2018
cost
Airline grants 86,647,196.97 Other income 86,647,196.97 185,720,387.90 Other income
Other government
12,883,666.56 Other income 12,883,666.56 21,980,860.45 Other income
grants
Total 99,530,863.53 99,530,863.53 207,701,248.35
5.55.3 The Company has no return of government grants during the reporting period.
Note 6 CHANGES IN THE S COPE OF CONSOLIDATION
The consolidation scope of the financial statements for the current year is consistent with the previous year.
Note 7 INTERES TS IN OTHER ENTITIES
7.1 Interests in S ubsidiaries
7.1.1 Composition of Corporate Group
110
Place Holding
Place of Nature
Subsidiaries of proportion % Acquired method
operation of business
registration Directly Indirectly
Shandong aviation Logistics
Qingdao, Qingdao, Logistics and
Ltd 100.00 Acquired through investment
Shandong Shandong storage
(hereafter, Qingdao Logistics)
Qingdao Feisheng International
Acquired through business
Aviation Training Technology Qingdao, Qingdao,
Pilot training 100.00 combination not under
Development Co., Ltd Shandong Shandong
common control
(hereafter, Qingdao Feisheng)
Shandong Jinping Air Catering Aeronautical Acquired through business
Jinan, Jinan,
Co., Ltd. (hereinafter referred food 100.00 combination not under
Shandong Shandong
to as "Jinping food") processing common control
Shandong Airlines Qingdao Aeronautical Acquired through business
Qingdao, Qingdao,
Food Co., Ltd. (hereinafter food 49.70 50.30 combination not under
Shandong Shandong
referred to as "Qingdao Food") processing common control
7.2 The Equity in Joint Ventures and Associates
7.2.1 Significant Joint Ventures and Associates
Holding proportion % The accounting
Name of joint Place treatment of
Place of Nature
ventures and of investments in joint
operation of business Directly Indirectly
associates registration ventures and
associates
Shandong Rainbow
Jinan, Jinan, Aero
Commercial Jet Co., 45.00 Equity method
Shandong Shandong transportation
Ltd.
7.2.2 Key Financial Information of Significant Associate - Shandong Rainbow Commercial Jet Co., Ltd.
31 December 2019 31 December 2019
Item
/Year 2019 /Year 2019
Current assets 1,802,740.67 1,803,040.67
Non-current assets 21,752.86 23,120.72
Total assets 1,824,493.53 1,826,161.39
Current liabilities 167,765,813.33 167,765,813.33
Non-current liabilities
Total liabilities 167,765,813.33 167,765,813.33
M inority interests
111
31 December 2019 31 December 2019
Item
/Year 2019 /Year 2019
Equity attributable to shareholders of the parent -165,933,676.34 -165,939,651.94
Pro rata shares 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 -7,643.46 -17,619.24
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from associates during the year
7.2.8 Excess Loss Occurred by Joint Ventures and Associates
Cumulative unrecognized Unrecognized losses of current Cumulative unrecognized
Name of joint ventures and
losses as of 31 December year (Share of net profit of losses as of 31 December
associates
2018 current year) 2019
Shandong Rainbow
-74,672,945.64 -3,439.56 -74,676,385.20
Commercial Jet Co., Ltd.
Note 8 RIS KS RELATED TO FINANCIAL INS TRUMENTS
The main financial instruments of the Company include equity investments, loans, accounts receivable, and accounts payable etc.
Please see Note 5 for details of related items. The risks 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 analyze the impact of reasonable and possible changes of risk
variables on the profit and loss or shareholders' equity for the current period. While risk variables seldomly change individually, the
correlation among variables has 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.
8.1 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
112
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 analyze the risks w hich
are faced by the Company, to establish suitable risk tolerance baseline and proceed the risk management, and to supervise a variety of
risks timely and reliably, and control the risk within a limited range.
8.1.1 M arket Risk
(1) Foreign exchange risk
Foreign exchange risk refers to the risk of loss due to exchange rate fluctuations. The Company bears the foreign exchange risk
primarily concerned with USD, and uses USD settlement in main financing transactions, operating leases, and financing leasing. On
31 December 2019, except the following assets or liabilities in Note 5.54 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 o f bank
borrowings (see Note 5.18, 5.25, 5.26, 5.27). 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 are measured at fair value on the balance
sheet date. Hence, the Company bears the risk of changes in the stock market.
8.1.2 Credit Risk
As of 31 December 2019, 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 recognized 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 sets 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 recognized 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 working capital was deposited in banks with high credit ratings, so that the credit risk of working capital was low.
8.1.3 Liquidity Risk
When managing liquidity risk, the Company’s management believes maintaining adequate cash and cash equivalents, and monitoring
that at same time, meets the needs of operation of the Company, and reduces the impact of fluctuations in cash flows. The
management of the Company monitors the use of bank borrowings and ensures to abide by loan agree ments.
113
Note 9 FAIR VALUE DIS CLOS URES
The inputs used in the fair value measurement in its entirety are to be classified in the level of the hierarchy in which the lowest level
input that is significant to the measurement is classified.
Level 1: Inputs consist of unadjusted quoted prices in active markets for identical assets or liabilities
Level 2: Inputs for the assets or liabilities (other than those included in Level 1) that are either directly or indirectly observable.
Level 3: Inputs are unobservable inputs for the assets or liabilities
9.1 Assets and Liabilities Measured at Fair Value as at 31 December 2019
The fair value at 30 December 2019
The 1st level The 2nd level The 3rd level
Item
measured by fair measured by fair measured by Total
value value fair value
1. Continuous measurement by fair value
1.1 Other equity instrument investments 222,265,779.77 652,462,853.55 874,728,633.32
Total amount of assets continuous
222,265,779.77 652,462,853.55 874,728,633.32
measurement by fair value
2. Financial liabilities at fair value
126,264.75 126,264.75
through profit or loss
2.1 Interest rate swaps 126,264.75 126,264.75
Total amount of liabilities continuous
126,264.75 126,264.75
measurement by fair value
The fair value of financial instruments traded in an active market is based on quoted market prices at the reporting date. Th e fair
value of financial instruments not traded in an active market is determined by using valuation techniques. Specific valuation
techniques used to value the above financial instruments include discounted cash flow and market approach to comparable company
model. Inputs in the valuation technique include risk-free interest rates, benchmark interest rates, exchange rates, credit spreads,
liquidity premiums, discount for lack of liquidity.
9.2 Determined on the Basis of Continuous and Noncontinuous First Level for Fair Value Measurement of the Market of
Project
Investment in other equity instruments for continued fair value measurement is an investment in TravelSky Technology Limited, of
which fair value was determined based on the closing price for the stock market in Hong Kong Stock Exchange on balance sheet
date.
9.3 Continuous and Noncontinuous Second Level for Fair Value Measurement of the Market of Project, the Qualitative and
114
Quantitative Information of the Valuation Techniques and Important Parameters
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.
9.4Continuous and Noncontinuous Third Le vel for Fair Value Measurement of the Market of Project, the Qualitative and
Quantitative Information of the Valuation Techniques and Important Parameters
Other equity instrument investments that continue to be measured at fair value are investments in Sichuan Airlines and Jinan
International Airport. Unlisted equity instrument investments which using comparable company multiplier models to estimate fair
value, their assumptions adopted are not supported by observable market prices or interest rates.The Company needs to make an
estimate of the liquidity discount. The Company believes that the fair value and its changes estimated by valuation techniques are
reasonable and are also the most appropriate value on the balance sheet date.
Note 10 RELATED PARTIES AND RELATED PARTY TRANS ACTIONS
Recognition of related parties: The Company has control or joint control of, or exercis e significant influence over another p arty; or
the Company is controlled or jointly controlled, or significant influenced by another party.
10.1 Major Parent Companies
Shareholding in the Voting right in
Parent Place of
Nature of operation Registered capital Company the Company
companies registration
(%) (%)
Investment and management of
SDA Group Jinan 580,000,000.00 42.00 42.00
aero transportation
Air China Beijing Aero transportation 14,524,815,185.00 22.80 22.80
Note: SDA Group and Air China is the first and second largest shareholders 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.
10.2 Subsidiaries
See Note 7 for subsidiaries.
10.3 Joint Ventures and Associates
See Note 7 for joint ventures and associates.
10.4 Other Related Parties
Other related parties Relationship to the Company
Taikoo (Shandong) Aircraft Engineering Company Limited Controlled by major investors
115
Other related parties Relationship to the Company
Shandong XiangYu Air Technology Co., Ltd. Controlled by major investors
Shandong Rainbow Commercial Jet Co., Ltd. Controlled by major investors
Shandong Air New M edia Co., Ltd. Controlled by major investors
Air China Import & Export Co., Ltd. Controlled by major investors
Zhejiang Aviation Service Co., Ltd. Controlled by major investors
Air China Shanghai Aviation Service Co., Ltd. Controlled by major investors
Beijing Golden Phoenix Human Resources Service Co., Ltd. Controlled by major investors
CATIC Industrial Co., Ltd. Controlled by major investors
Air M acau Corporation Controlled by major investors
Air China Offshore Holding Company Controlled by major investors
Air China Hongkong Development Limited Controlled by major investors
Beijing Airlines Co., Ltd. Controlled by major investors
China International Aviation Shantou Industrial Controlled by major investors
Development Corporation
Chengdu Fukai Aircraft Engineering Services Limited Controlled by major investors
Beijing Aircraft M aintenance and Engineering Corporation Controlled by major investors
Air China Cargo Co., Ltd. Controlled by major investors
China Aviation Group Finance Co., Ltd. Controlled by major investors
Shenzhen Airlines Co., Ltd. Controlled by major investors
Dalian Airlines Co., Ltd. Controlled by major investors
China International Airlines Inner M ongolia Co., Ltd. Controlled by major investors
Kunming Airlines Ltd Controlled by major investors
Sichuan international aero engine maintenance Co., Ltd. Jointly operated by major investors
Shanghai Pudong International Airport West Public Cargo Jointly operated by major investors
Terminal Co., Ltd.
Ji'an Beijing Aviation Asset M anagement Co., Ltd. Jointly operated by major investors
Shanghai International Airport Ground Service Co., Ltd. Jointly operated by major investors
Shandong Airlines Rainbow Auto Service Co., Ltd. Controlled by major investors
Chongqing Golden Phoenix Aviation Service Co., Ltd. Controlled by major investors
10.5 Related Party Transactions
10.5.1 Purchases or Sales of Goods, Rendering or Receiving of Services
Purchase of goods and services
116
Related party Transaction Current year Prior year
Beijing Aircraft M aintenance and Engineering
Repairment 116,116,748.68 55,204,506.94
Corporation
Beijing Aircraft M aintenance and Engineering Purchase / lease of aircraft
92,482.10 167,487.51
Corporation materials
Beijing Aircraft M aintenance and Engineering
Rentals 688,109.49
Corporation
Beijing Aircraft M aintenance and Engineering
Ground service 18,179,004.78 20,260,962.92
Corporation
Beijing Golden Phoenix Human Resources Service
Ground service 1,799,775.84 1,860,814.69
Co., Ltd.
Chengdu Fukai Aircraft Engineering Services
Repairment 7,008,038.49 10,577,784.85
Limited
Aircraft offerings and
Shandong Air New M edia Co., Ltd. 9,560,365.94 12,537,535.57
advertising fees
Shandong Air New M edia Co., Ltd. Ground service 390,345.13 937,382.08
Taikoo (Shandong) Aircraft Engineering Company
Aircraft maintenance 122,396,133.28 114,539,387.51
Limited
Taikoo (Shandong) Aircraft Engineering Company
Aircraft meal offerings 75,548.23 138,965.52
Limited
Shandong XiangYu Air Technology Co., Ltd. Repairment 103,903,114.32 86,068,411.87
Purchase / lease of aircraft
Shandong XiangYu Air Technology Co., Ltd. 114,999.43 29,110.10
materials
Office lease rental and
SDA Group 39,875,357.20 36,048,450.45
catering
SDA Group Group fee 8,807,487.39 12,471,675.35
SDA Group Irregular flight 50,560.00
Vehicle rental fee and
Shandong Airlines Rainbow Auto Service Co., Ltd. 75,928,882.21 68,974,066.66
maintenance fee
Shandong Airlines Rainbow Auto Service Co., Ltd. Group fee 3,364,092.04 3,303,430.00
Shandong Airlines Rainbow Auto Service Co., Ltd. Irregular flight 538,690.00 573,383.02
Shandong Airlines Rainbow Auto Service Co., Ltd. Ground service 14,630.00
Shenzhen Airlines Co., Ltd. Ground service 9,904.49
Shenzhen Airlines Co., Ltd. Agency service 1,378,901.00 2,766,348.96
Shenzhen Airlines Co., Ltd. Purchase / lease of aircraft 58,422.10 173,256.79
117
Related party Transaction Current year Prior year
materials
Shenzhen Airlines Co., Ltd. Catering 1,550,231.72 1,546,308.54
Shenzhen Airlines Co., Ltd. Irregular flight 271,698.11 192,965.46
Sichuan International Aero Engine M aintenance
Repairment 77,076,397.08
Co., Ltd.
Air China Ground service 15,716,089.93 15,613,836.08
Purchase / lease of aircraft
Air China 161,556.60 2,564,417.48
materials
Air China Agency service 881,070.68 15,679,347.66
Air China Irregular flight expenditure 18,223,211.35 27,481,100.22
Air China Cargo Co., Ltd. Ground service 2,369,147.87 4,180,905.82
Kunming Airlines Co., Ltd Agency service 8,465.66 18,900.68
Dalian Airlines Co., Ltd. Irregular flight 251,094.34 276,000.00
Shanghai International Airport Ground Service Co.,
Ground service 204,195.79 207,224.24
Ltd.
Air M acau Corporation Agency service 39.06 23,342.07
Total 549,300,283.76 572,181,815.61
Sales of goods and rendering of services
Related party Transaction Current year Prior year
Sale /rent of aircraft
BeijingAircraftMaintenanceandEngineeringCorporation 1,200,284.95 229,271.21
materials
Dalian Airlines Co., Ltd. Ground service 1,186,801.33 1,332,910.83
Non-routine
Dalian Airlines Co., Ltd. maintenance/machinery 154,949.57 111,066.10
service
Kunming Airlines Co., Ltd Ground service 53,396.23 82,830.19
Kunming Airlines Co., Ltd Locomotive service income 146,742.19 141,050.10
Kunming Airlines Co., Ltd Agency service 18,957.39 24,722.49
Shandong Air New M edia Co., Ltd. M edia resource fee 9,416,790.90 9,713,675.22
Shandong Air New M edia Co., Ltd. M edia freight 471,698.10
Taikoo (Shandong) Aircraft Engineering Company
Sale of aircraft materials 236,238.67 535,703.95
Limited
Taikoo (Shandong) Aircraft Engineering Company
Training fee 76,839.62 81,415.09
Limited
Taikoo (Shandong) Aircraft Engineering Company M aintenance fee 84,391.51
118
Related party Transaction Current year Prior year
Limited
Shandong XiangYu Air Technology Co., Ltd. Sale of aircraft materials 779,378.54 179,334.35
Shenzhen Airlines Co., Ltd. Agency service 1,302,625.14 1,219,936.77
Shenzhen Airlines Co., Ltd. Ground service 29,150.94 201,698.12
Sale /rent of aircraft
Shenzhen Airlines Co., Ltd. 271,360.52 102,468.20
materials
Irregular flight
Shenzhen Airlines Co., Ltd. maintenance/locomotive 6,210.11 11,586.21
service income
Air China Ground service 7,811,955.83 7,019,502.31
Simulator maintenance /
Air China 4,485,428.61 3,956,673.95
House rental income
Sale /rent of aircraft
Air China 106,019.52
materials
Irregular flight
Air China maintenance/locomotive 24,741.68
service income
Air China Agency service 251,630.49 1,652,870.13
Air China Cargo Co., Ltd. Warehouse rent income 2,641.51
Beijing Airlines Co., Ltd. Ground service 51,647.17
China International Airlines Inner M ongolia Co., Ltd. Ground service 6,713.20
Shandong Airlines Rainbow Auto Service Co., Ltd. Storage income 359,082.82 435,690.56
Shandong Airlines Rainbow Auto Service Co., Ltd. Property fee income 27,509.43 27,509.43
Shandong Airlines Rainbow Auto Service Co., Ltd. Rentals 17,142.86
Total 28,471,667.80 27,168,576.24
10.5.2 Borrowing of funds from related parties
Related Party Borrowing money Beginning date Due date Description
Borrowing:
China Aviation Group Balance as at 31 December 2019
296,000,000.00 20 June 2016 20 June 2026
Finance Co., Ltd. is CNY 192,400,000.00.
Balance as at 31 December 2019
is CNY 150,000,000.00, and the
SDA Group 150,000,000.00 11 November 2019 19 October 2020 loan is entrusted by the Industrial
and Commercial Bank of China
Co., Ltd. Jinan M inghu Branch.
119
10.5.3 Remuneration to Key M anagement Personnel
Item Current year Prior year
Key management personnel compensation CNY 12.7084 million CNY 14.6679 million
10.5.4 Other Related Party Transactions
Related party Transaction Current year Prior year
Air China Frequent flyer cooperation 72,000,000.00 100,000,000.00
Air China Cargo Co., Ltd. Code sharing for cargo 1,005,335.71 7,167,959.00
Total 73,005,335.71 107,167,959.00
10.6 Related Party Balances
10.6.1 Receivables
31 December 2019 31 December 2018
Related party Provision for bad Provision for bad
Carrying amount Carrying amount
debt debt
Accounts receivable
Air China 5,441,837.40 8,564,966.57
China International Cargo Airlines Co.,
907,509.39
Ltd.
Dalian Airlines Co., Ltd. 16,894.80 87,473.50
Taikoo (Shandong) Aircraft Engineering
24,700.00 8,400.00
Company Limited
Shandong Air New M edia Co., Ltd. 75,000.00
Total 5,558,432.20 9,568,349.46
Other receivables
Air China 5,134,920.42 6,033,885.98
Shenzhen Airlines Co., Ltd. 75,988.90 50,787.34
Shandong Rainbow Commercial Jet Co.,
101,551,717.65 101,551,717.65 101,551,717.65 101,551,717.65
Ltd.
Shandong XiangYu Air Technology Co.,
1,835,674.33 50,712.31
Ltd.
Taikoo (Shandong) Aircraft Engineering
180,217.72 235,380.70
Company Limited
Shandong Air New M edia Co., Ltd. 10,095,530.78 11,745,680.45
120
31 December 2019 31 December 2018
Related party Provision for bad Provision for bad
Carrying amount Carrying amount
debt debt
Beijing Aircraft Maintenance and
1,224,188.64 169,241.85
Engineering Corporation
Dalian Airlines Co., Ltd. 56,450.80 241,412.00
Kunming Airlines Co., Ltd 174,620.00 202,090.00
Shandong Airlines Rainbow Auto Service
240.00 14,040.50
Co., Ltd.
Total 120,329,549.24 101,551,717.65 120,294,948.78 101,551,717.65
10.6.2 Payables
Related party 31 December 2019 31 December 2018
Accounts payable
Shandong XiangYu Air Technology Co., Ltd. 24,885,130.73 8,707,204.12
Taikoo (Shandong) Aircraft Engineering Company Limited 60,317,020.35 45,732,196.37
Air China 216,889,212.07 138,532,747.16
Air China Cargo Co., Ltd. 483,782.83 507,357.91
Beijing Golden Phoenix Human Resources Service Co., Ltd. 316,512.86 350,189.85
Shenzhen Airlines Co., Ltd. 352,836.71 686,733.52
Aircraft M aintenance and Engineering Corporation (Ameco) 33,686,285.52 25,913,065.74
Sichuan International Aero Engine M aintenance Co., Ltd. 88,209.29 7,343,500.43
Shandong Air New M edia Co., Ltd. 4,691,884.84 5,567,055.00
Shandong Airlines Rainbow Auto Service Co., Ltd. 6,375,000.00 4,602,800.00
Dalian Airlines Co., Ltd. 31,200.00
Chengdu Fukai Aircraft Engineering Service Co., Ltd. 3,494,468.69 3,130,432.94
Shanghai International Airport Ground Service Co., Ltd. 54,398.40 34,557.70
Total 351,634,742.29 241,139,040.74
Other payables
SDA Group 14,933,120.85 1,648,781.43
Taikoo (Shandong) Aircraft Engineering Company Limited 484,291.74 484,291.74
Shandong Air New M edia Co., Ltd. 6,368,095.92 7,094,412.89
Shandong Rainbow Commercial Jet Co., Ltd. 7,798.95
Total 21,793,307.46 9,227,486.06
Note 11 COMMITMENTS AND CONTINGENCIES
11.1 Significant Commitments
121
The nature and amount of significant commitments existing at the balance sheet date:
11.1.1 Capital Commitment
Capital commitments signed but not yet recognized in the 31 December 2019 31 December 2018
financial statements
Commitment for purchase long-term assets 7,036,492,465.21 8,514,239,377.41
Large contract
Commitment for external investment
11.1.2 Operating Lease Commitment
M inimum lease payments under non-cancellable operating leases 31 December 2019 31 December 2018
Within 1 year 3,014,893,635.26 2,940,809,183.76
1-2 years 2,842,138,245.44 2,868,211,237.17
2-3 years 2,672,068,066.30 2,616,077,071.91
After 3 years 9,875,497,392.11 11,464,973,122.44
Total 18,404,597,339.11 19,890,070,615.28
11.1.3 Other Commitment
The Company has no other significant commitment needed to be disclosed as of 31 December 2019.
11.2 Contingencies
The Company has no other significant contingencies needed to be disclosed as of 31 December 2019.
Note 12 EVENTS AFTER THE REPORTIN G PERIOD
12.1Impact Assessment on Epidemic Situation of New Coronavirus Pneumonia
Since the outbreak of pneumonia caused by the new coronavirus in the country in January 2020, the prevention and control of the
pneumonia epidemic is continuing nationwide. The Company will earnestly implement the requirements of the “Notice on Further
Improving the Prevention and Control of Pneumonia Epidemic Situation of New Coronavirus Infection” (《关于进一步做好新型冠
状病毒感染的肺炎疫情防控工作的通知》) issued by the Civil Aviation Administration of China, and support the epidemic
prevention and control work.
Affected by the pneumonia epidemic, the domestic passenger traffic volume since January 2020 has decreased compared to the same
period, which has affected theCompany's air transportation service revenue to a certain extent. The degree of impact will dep end on
the situation, duration of the epidemic p revention and control, and the implementation of various regulatory policies.
M eanwhile the Civil Aviation Administration of China has successively released the "Notice on Supporting Policies for Actively
Coping with New Coronary Pneumonia Epidemic" ( 关于积极应对新冠肺炎疫情有关支持政策的通知》 and "Notice on Funding
Support Policies for Civil Aviation Transport Enterprises during the New Coronary Pneumonia Epidemic Prevention and Control
122
Period" (《关于民航运输企业新冠肺炎疫情防控期间资金支持政策的通知》) and other documents. These documents provide
positive measures including exemption ofcivil aviation development funds for the civil aviation transportation industry, lowering
airport take-off and landing fees, optimizing the management of airline and flight permits, and providing flight subsidies.
On the premise of ensuring the protection of the epidemic demand, the Company flexibly adjusts its flight plan according to market
demand to ensure that its operational impact on the Company is minimized.The Company will continue to pay close attention to the
development of the pneumonia epidemic situation, evaluate and actively respond to its impact on the Company's financial posit ion
and operating results.
12.2 Other Events After the Reporting Date
As of M arch 26, 2020, the Company does not have any other events after the reporting date that should be disclosed.
Note 13 OTHER S IGNIFIC ANT MATTERS
13.1 Pension Plan
No significant change of the annuity program occurred for current year, see Note 5.22, 5.28.
Note 14 NOTES TO ELEMENTS OF THE S EPARATE F INANCIAL S TATEMENTS
14.1 Accountsreceivable
14.1.1 Disclosure by Age
Age 31 December 2019 31 December 2018
Within 1 year 437,495,880.93 424,951,409.97
1 to 2 years 35,122,001.00 9,114.06
2 to 3 years
3 to 4 years
4 to 5 years 8,057,209.85
Over 5 years 8,477,739.50 420,529.65
Subtotal 481,095,621.43 433,438,263.53
Less: provision for bad debt 24,493,161.92 20,867,525.52
Total 456,602,459.51 412,570,738.01
14.1.2 Disclosure by Category
31 December 2019
Category
Book balance Provision for bad debt Carrying
123
Proporti Provision amount
Amount Amount
on (%) ratio (%)
Accounts receivable subject to
8,057,209.85 1.67 8,057,209.85 100.00
individual impairment assessment
Accounts receivable subject to
473,038,411.58 98.33 16,435,952.07 3.47 456,602,459.51
group impairment assessment
Total 481,095,621.43 100.00 24,493,161.92 5.09 456,602,459.51
(Continued)
31 December 2018
Book balance Provision for bad debt
Category
Proportion Provision ratio Carrying amount
Amount Amount
(%) (%)
Accounts receivable with
individually significant
105,366,572.73 24.31 105,366,572.73
balance and provision for bad
debt recognized individually
Accounts receivable with bad
debt provision recognized
256,206,313.25 59.11 12,810,315.67 5.00 243,395,997.58
collectively by similar credit
risk characteristics
Accounts receivable with
individually insignificant
71,865,377.55 16.58 8,057,209.85 11.21 63,808,167.70
balance but provision for bad
debt recognized individual
Total 433,438,263.53 100.00 20,867,525.52 4.81 412,570,738.01
Accounts receivable with individually significant balance and provision for bad debt recognized individually as of 31 December
2018
31 December 2018
Entity name Provision for bad Provision
Accounts receivable Reason
debt ratio (%)
No indication of
BSP-CHINA 56,778,788.70 impairment upon
individual assessment
124
31 December 2018
Entity name Provision for bad Provision
Accounts receivable Reason
debt ratio (%)
No indication of
Accounting Center of China Aviati
48,587,784.03 impairment upon
on
individual assessment
Total 105,366,572.73
Accounts receivablewith bad debt provisions recognized based on the balance percentage method as of 31 December 2018
31 December 2018
Entity name Accounts Provision for bad Provision ratio
Reason
receivable debt (%)
No indication of
BSP-Other areas(notes) 47,835,858.63 impairment upon
individual assessment
No indication of
Air China 7,813,395.57 impairment upon
individual assessment
Impairment upon
Debtor #1 8,057,209.85 8,057,209.85 100.00
individual assessment
No indication of
5,479,498.61 impairment upon
UATP individual assessment
No indication of
Air China Cargo 907,509.39 impairment upon
individual assessment
No indication of
CR Airways 1,763,505.50 impairment upon
individual assessment
No indication of
Taikoo (Shandong) Aircraft
8,400.00 impairment upon
Engineering Company Limited
individual assessment
Total 71,865,377.55 8,057,209.85 11.21
Notes: BSP-Other areas (notes) includes Tai Wan, Korea, Japan, Hong Kong, Australia, Russia, Canada, Thailand, Germany,
Cambodia, Vietnam, Singapore, Indonesia, Philippines, France etc.
Accounts receivable subject to impairment assessment by group as of 31 December 2018
125
31 December 2018
Age
Accounts receivable Provision for bad debt Provision ratio (%)
Group by nature 256,206,313.25 12,810,315.67 5.00
Total 256,206,313.25 12,810,315.67 5.00
Accounts receivable with individually significant balance and provision for bad debt recognized individually as of 31 December
2019
31 December 2019
Entity name Provision for bad Provision ratio
Accounts receivable Reason
debt (%)
Impairment upon individual
Debtor #1 8,057,209.85 8,057,209.85 100.00
assessment
Total 8,057,209.85 8,057,209.85 100.00
Accounts receivable subject to impairment assessment by credit risk characteristics of a groupas of 31 December 2019
31 December 2019
Age Provision for bad
Accounts receivable Provision ratio (%)
debt
Amounts due from the clearing center 42,716,664.57
Amounts due from the aviation association 93,939,923.14
Amounts due from related parties 7,662,782.50
Other receivables 328,719,041.37 16,435,952.07 5.00
Total 473,038,411.58 16,435,952.07 3.47
The Company calculate provision of bad debt according to the combination of credit risk characteristics and the expected loss
amount.
14.1.3 Changes of Provision for Bad Debt During the Reporting Period
Changes during the reporting period
Changes of
31 December Recovery 31 December
Category accounting 1 January 2019
2018 Provision or Write-off 2019
policy
reversal
Accounts
receivable subject
to individual 8,057,209.85 8,057,209.85 8,057,209.85
impairment
assessment
126
Changes during the reporting period
Changes of
31 December Recovery 31 December
Category accounting 1 January 2019
2018 Provision or Write-off 2019
policy
reversal
Accounts
receivable subject
to impairment 12,810,315.67 12,810,315.67 3,710,306.40 84,670.00 16,435,952.07
assessment by
group
Total 20,867,525.52 20,867,525.52 3,710,306.40 84,670.00 24,493,161.92
14.1.4 There are no written off to accounts receivable during the reporting period.
14.1.5 Top five closing balances by entity as at 31 December 2019
The total amount of top five accounts receivable summarized by debtors as at the end of current year is CNY 211,645,117.22,
accounting for 43.99% of the total accounts receivable as at the end of current year, the total corresponding provision for bad debt is
CNY5,899,189.67.
14.1.6 The Company has no derecognition of accounts receivable due to the transfer of financial assets.
14.1.7 The Company has no assets or liabilities arising from continuing involvement in transferred accounts receivable.
14.2 Other receivables
14.2.1 Other receivables by category
Items 31 December 2019 31 December 2018
Interests receivable
Dividends receivable
Other receivables 237,966,773.59 239,078,612.04
Total 237,966,773.59 239,078,612.04
14.2.2 Other Receivables
①Other receivables by age
Age 31 December 2019 31 December 2018
Within one year 206,592,316.53 224,226,432.51
1-2 years 18,721,168.79 7,144,621.12
2-3 years 4,917,213.36 1,141,630.35
3-4 years 830,749.97 4,340,781.36
127
Age 31 December 2019 31 December 2018
4-5 years 4,163,874.36 1,986,169.92
Over 5 years 110,876,843.58 109,212,847.91
Subtotal 346,102,166.59 348,052,483.17
Less: provision for bad debt 108,135,393.00 108,973,871.13
Total 237,966,773.59 239,078,612.04
②Other receivables by nature
Nature 31 December 2019 31 December 2018
Deposits receivable 87,059,915.18 65,174,607.89
Amounts due from related parties 127,368,744.43 134,434,805.80
Other receivables 131,673,506.98 148,443,069.48
Subtotal 346,102,166.59 348,052,483.17
Less: provision for bad debt 108,135,393.00 108,973,871.13
Total 237,966,773.59 239,078,612.04
③Other receivables by bad debt provision method
A．Provision for bad debts recognized based on three stages model as of 31 December 2019 is as follows:
Provision for bad debt in the first stage as of 31 December 2019:
Lifetime
Provision for
Category Book balance expected credit Carrying amount Reason
bad debt
losses rate (%)
Provision for bad debt
recognized individually
Provision for bad debt
244,550,448.94 2.69 6,583,675.35 237,966,773.59
recognized collectively
No significant
Including: Deposits
87,059,915.18 87,059,915.18 increase on
receivable
credit risk
No significant
Amounts due
25,817,026.78 25,817,026.78 increase on
from related parties
credit risk
No significant
Otherreceivables 131,673,506.98 5.00 6,583,675.35 125,089,831.63
increase on
128
Lifetime
Provision for
Category Book balance expected credit Carrying amount Reason
bad debt
losses rate (%)
credit risk
Total 244,550,448.94 2.69 6,583,675.35 237,966,773.59
As of 31 December 2019, the Company has no interest receivable, dividends receivable or other receivables recognized in the second
stage.
Provision for bad debt in the third stage as of 31 December 2019:
Lifetime
expected Provision for bad Carrying
Category Book balance Reason
credit losses debt amount
rate (%)
Credit
Provision for bad debt
101,551,717.65 100.00 101,551,717.65 impairment has
recognized individually
occurred
Credit
1．Shandong Rainbow
101,551,717.65 100.00 101,551,717.65 impairment has
Commercial Jet Co., Ltd
occurred
Total 101,551,717.65 100.00 101,551,717.65
B．Provision for bad debts based on incurred loss model as of 31 December 2018 is as follows:
31 December 2018
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Other receivables with
individually significant
249,586,501.51 71.71 106,200,587.24 42.55 143,385,914.27
balance and provision for bad
debt recognized individually
Other receivables with bad
debt provision recognized
55,465,677.85 15.94 2,773,283.89 5.00 52,692,393.96
collectively by similar credit
risk characteristics
Other receivables with
43,000,303.81 12.35 43,000,303.81
individually insignificant
129
31 December 2018
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
balance but recognized
provision for bad debt
individually
Total 348,052,483.17 100.00 108,973,871.13 31.31 239,078,612.04
B1.Other receivables with individually significant balance and provision for bad debt recognized individually
as of 31 December 2018
31 December 2018
Entity name Provision for bad
Other receivables Provision ratio (%) Reason
debt
Shandong Rainbow Impairment upon individual
101,551,717.65 101,551,717.65 100.00
Commercial Jet Co., Ltd. assessment
No indication of impairment
Debtor #1 55,057,392.23
upon individual assessment
Impairment assessment by
Debtor #2 33,202,261.73 1,660,113.09 5.00
group
Impairment assessment by
Debtor #3 59,775,129.90 2,988,756.50 5.00
group
Total 249,586,501.51 106,200,587.24 42.55
B2.Other receivableswith bad debt provisions recognized based on the balance percentage method as of 31 December
2018
31 December 2018
Group name
Accounts receivable Provision for bad debt Provision ratio (%)
Group by nature 55,465,677.85 2,773,283.89 5.00
Total 55,465,677.85 2,773,283.89 5.00
④Changes of provision for bad debt during the reporting period
Changes during the reporting period
31 December
Category 31 December 2018 Recovery or
Provision Write-off 2019
reversal
Other receivables of individual
significance and subject to 101,551,717.65 101,551,717.65
individual impairment assessment
Other receivables subject to
impairment assessment by credit 7,422,153.48 838,478.13 6,583,675.35
risk characteristics of a group
130
Changes during the reporting period
31 December
Category 31 December 2018 Recovery or
Provision Write-off 2019
reversal
Total 108,973,871.13 838,478.13 108,135,393.00
⑤There are no written off to other receivables during the reporting period.
⑥Top five closing balances by entity
Proportion of the
Balance as at 31 Provision for
Entity name Nature Age balance to the total
December 2019 bad debt
other receivables (%)
Shandong Rainbow
Others 101,551,717.65 Over 5 years 29.34 101,551,717.65
Commercial Jet Co., Ltd.
Debtor #1 Deposits 56,331,234.29 Within 1 year 16.28
Debtor #2 Others 50,854,558.62 Within 1 year 14.69 2,542,727.93
Debtor #3 Others 22,857,234.53 Within 1 year 6.6 1,142,861.73
Shandong Air New M edia Within 1 year
Others 10,095,530.78 2.92
Co., Ltd.
Total 241,690,275.87 69.83 105,237,307.31
⑦The Company has no other receivables relating to government grants.
⑧The Company has no other receivables relating to derecognition of other receivablesfor transfer of financial
assets.
⑨The Company has no assets or liabilities arising from continuing involvement in transferred other receivables.
14.3 Long-term equity investments
14.3.1 Investments in Subsidiaries
31 December Current year Current year 31 December Provision Year-end
Investee
2018 increase decrease 2019 recognized provision
Shandong aviation
48,323,205.97 48,323,205.97
Logistics Ltd
Qingdao Feisheng
International Aviation
57,677,479.46 57,677,479.46
Training Technology
Development Co., Ltd
Shandong Jinping
30,310,200.00 30,310,200.00
aviation food Co., Ltd.
Shandong Airlines
Qingdao Food Co., 7,790,400.00 7,790,400.00
Ltd.
Total 144,101,285.43 144,101,285.43
14.3.2 Investments in Joint Ventures and Associates
131
Changes in the current period (+, -)
Investment gains
Other Other
31 December Impairment and losses
Investee Additional Investment comprehensive changes
2018 provision recognized under
investment reduction income in
the equity
adjustment equity
method
Associates
Shandong
Rainbow
22,500,000.00 22,500,000.00
Commercial
Jet Co., Ltd.
Total 22,500,000.00 22,500,000.00
(Continued)
Changes in the current period (+, -)
Declared cash 31 December Year-end
Investee Provision
dividends or Others 2019 provision
recognized
profits
Associates
Shandong Rainbow
22,500,000.00 22,500,000.00
Commercial Jet Co., Ltd.
Total 22,500,000.00 22,500,000.00
14.4 Operating revenues and operating costs
2019 2018
Items
Operating revenues Operating costs Operating revenues Operating costs
Principal
18,277,680,628.43 17,204,720,972.91 18,089,027,687.91 17,186,382,224.35
activities
Other activities 685,084,701.46 6,736,014.89 646,489,679.61 3,547,659.75
Total 18,962,765,329.89 17,211,456,987.80 18,735,517,367.52 17,189,929,884.10
14.5 Investment Income
Items 2019 2018
Income from financial assets measured by fair value with changes in fair value
— 91,605.86
recognized in profit or loss
Income from holding of financial assets available for sale — 17,934,220.07
Investment income from held-for-trading financial assets during holding period 9,316.91 —
Dividend income from other equity instrument income during holding period 6,284,357.21 —
Total 6,293,674.12 18,025,825.93
132
Note 15S UPPLEMENTARY INFORMATION
15.1 Current non-recurring statement of profit and loss
Items 2019 2018 Description
Gains /(losses) on disposal of non-current assets -2,066,959.25 25,187,750.35
Government grants recognized in current profit or loss
(except government grants that is closely related to
102,684,463.91 210,862,890.39
operations and determined based on a fixed scale
according to the national unified standard)
Gains /(losses) arising from changes in fair value of
held-for-trading financial assets, derivative financial
assets, held-for-trading financial liabilities and derivative
financial liabilities during the holding period and
investment income arising from disposal of
-207,436.01
held-for-trading financial assets, derivative financial
assets, held-for-trading financial liabilities, derivative
financial liabilities and other debt investmentexcept
effective hedging transactions related to the Company's
principal activities
Fair value changes of tradable financial assets and
tradable financial liabilities held and gains or losses
arising from disposals of tradable financial assets,
— 3,789,484.18
tradable financial liabilities and financial assets available
for sale, excluding hedging contracts relevant to the
Company’s daily operating activities
Other non-operating income/expenses except for items
105,248,418.17 35,762,795.56
mentioned above
Other gains or losses satisfying the definition of
4,954,383.18 10,952,470.45
extraordinary gains or losses
Total extraordinary gains/(losses) 210,612,870.00 286,555,390.93
Less: tax effect 52,714,956.95 71,725,366.00
Net extraordinary gains/(losses) 157,897,913.05 214,830,024.93
Less: net extraordinary gains/(losses) attributable to
minority interests
Net extraordinary gains/(losses) attributable to ordinary
157,897,913.05 214,830,024.93
shareholders
15.2 Return on Net Assets and Earnings Per S hare (‘EPS ’)
133
15.2.1 2019
Weighted average return on EPS
Profit for the reporting period
net assets (%) Basic Diluted
Net profit attributable to ordinary shareholders 7.22 0.9 0.9
Net profit attributable to ordinary shareholders after
4.06 0.51 0.51
extraordinary gains and losses
15.2.2 2018
Weighted average return EPS
Profit for the reporting period
on net assets (%) Basic Diluted
Net profit attributable to ordinary shareholders 7.94 0.87 0.87
Net profit attributable to ordinary shareholders
3.03 0.33 0.33
after extraordinary gains and losses
134
