Shandong Airlines Co., Ltd.
IndependentAuditor’s Report
Ruihua Shen Zi[2014] No. 48390002 I. Auditor report
To The Board of Directors of Shandong Airlines Co.,Ltd.：
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereafter, Shandong Airlines), which comprise the consolidated and separate statements of financial position as at 31 December 2013, 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 shareholders' equity for the year then ended and a summary of significant accounting policies and other explanatory notes.ⅠManagement’s responsibility for the financial statements
Management of Shandong Airlines is responsible for the preparation and fair presentation of financial statements. This responsibility includes: (1) preparation of financial statements in accordance with Enterprise Accounting Standards of China and for the purpose of fair presentation; (2) designing, implementing and maintaining internal control necessary to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
ⅡAuditors’ responsibility
Our responsibility is to express an opinion on those financial statements based on our audit. We conducted our audit in accordance with the Chinese Certified Public Accountants' Auditing Standards (hereafter, the Standards). The Standards require that we comply with Chinese Certified Public Accountants Ethical Requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves the performance of audit procedures to obtain audit evidence relevant to
the amounts and disclosures in the financial statements. The procedures selected depend on judgment of the Certified Public Accountants (hereafter, the CPAs), including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the CPAs consider internal control relevant to theentity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Ⅲ Audit opinion
In our opinion, the financial statements of Shandong Airlines have been prepared in accordance with the Enterprise Accounting Standards of China and present fairly, in all material respects, the consolidated and separate financial position of Shandong Airlines Co., Ltd. as at 31 December 2013 and its consolidated and separate financial performance and cash flows for the year then ended.
Ruihua Certified Public Accountants Certified Public Accountants:Yang Ganlin China. Beijing Certified Public Accountants:Yang Yunhui 20 March 2014
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated Balance Sheet
Prepared by Shandong Airlines Co., Ltd
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Current assets:|||
|Monetary funds|444,522,271.21|155,417,742.97|
|Settlement provisions|||
|Capital lent|||
|Transaction finance asset|||
|Notes receivable|||
|Accounts receivable|250,524,757.67|186,090,177.17|
|Accounts paid in advance|88,182,040.98|56,927,205.61|
|Insurance receivable|||
|Reinsurance receivables|||
|Contract reserve of reinsurance|||
|receivable|||
|Interest receivable|||
|Dividend receivable|14,325,586.06||
|Other receivables|236,105,804.44|252,147,802.11|
|Purchase restituted finance asset|||
|Inventories|107,973,473.35|116,944,913.89|
|Non-current asset due within one|||
|year|||
|Other current assets|71,828,962.65||
|Total current assets|1,213,462,896.36|767,527,841.75|
|Non-current assets:|||
|Granted loans and advances|||
|Finance asset available for sales|||
|Held-to-maturity investment|||
|Long-term account receivable|||
|Long-term equity investment|88,352,100.00|88,352,100.00|
|Investment property|||

||||
|-|-|-|
|Fixed assets|7,564,658,140.23|8,132,786,866.22|
|Construction in progress|1,647,915,995.78|1,430,885,814.11|
|Engineering material|||
|Disposal of fixed asset|||
|Productive biological asset|||
|Oil and gas asset|||
|Intangible assets|101,127,636.82|78,814,771.55|
|Expense on Research and|||
|Development|||
|Goodwill||10,220,816.22|
|Long-term expenses to be|347,945,540.61|301,867,908.75|
|apportioned|||
|Deferred income tax asset|439,662,119.02|450,885,311.43|
|Other non-current asset|||
|Total non-current asset|10,189,661,532.46|10,493,813,588.28|
|Total assets|11,403,124,428.82|11,261,341,430.03|
|Current liabilities:|||
|Short-term loans|434,137,220.00|321,378,829.28|
|Loan from central bank|||
|Absorbing deposit and interbank|||
|deposit|||
|Capital borrowed|||
|Transaction financial liabilities|296,902.47|7,198,783.59|
|Notes payable||100,000.00|
|Accounts payable|1,132,126,690.25|950,968,778.60|
|Accounts received in advance|343,468,052.97|215,107,573.13|
|Selling financial asset of|||
|repurchase|||
|Commission charge and|||
|commission payable|||
|Wage payable|338,866,981.54|343,703,794.71|
|Taxes payable|110,064,437.61|229,684,478.03|
|Interest payable|16,064,294.43|16,466,095.25|
|Dividend payable|11,940.00|11,940.00|
|Other accounts payable|193,868,858.34|210,075,013.94|
|Reinsurance payables|||
|Insurance contract reserve|||
|Security trading of agency|||

||||
|-|-|-|
|Security sales of agency|||
|Non-current liabilities due within 1|533,150,658.42|392,573,521.87|
|year|||
|Other current liabilities|||
|Total current liabilities|3,102,056,036.03|2,687,268,808.40|
|Non-current liabilities:|||
|Long-term loans|3,525,047,206.06|3,854,676,638.03|
|Bonds payable|500,000,000.00|500,000,000.00|
|Long-term account payable|1,542,515,998.39|1,554,204,331.04|
|Special accounts payable|||
|Projected liabilities|||
|Deferred income tax liabilities|||
|Other non-current liabilities|25,367,524.34|186,135,800.28|
|Total non-current liabilities|5,592,930,728.79|6,095,016,769.35|
|Total liabilities|8,694,986,764.82|8,782,285,577.75|
|Owner’s equity (or shareholders’|||
|equity):|||
|Paid-in capital (or share capital)|400,000,000.00|400,000,000.00|
|Capital public reserve|75,410,363.70|75,410,363.70|
|Less: Inventory shares|||
|Reasonable reserve|||
|Surplus public reserve|297,349,585.70|257,642,799.31|
|Provision of general risk|||
|Retained profit|1,935,377,714.60|1,746,002,689.27|
|Balance difference of foreign currency|||
|translation|||
|Total owner’s equity attributable to|2,708,137,664.00|2,479,055,852.28|
|parent company|||
|Minority interests|||
|Total owner’s equity ( or shareholders’|||
||2,708,137,664.00|2,479,055,852.28|
|equity)|||
|Total liabilities and owner’s equity( or|||
||11,403,124,428.82|11,261,341,430.03|
|shareholders’ equity)|||

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
2. Balance Sheet of Parent Company
Prepared by Shandong Airlines Co., Ltd
In RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|Current assets:|||
|Monetary funds|421,826,370.62|143,242,750.59|
|Transaction finance asset|||
|Notes receivable|||
|Accounts receivable|243,767,591.18|178,623,467.86|
|Accounts paid in advance|87,961,234.82|56,697,404.55|
|Interest receivable|||
|Dividend receivable|14,325,586.06||
|Other receivables|278,365,290.97|287,010,996.18|
|Inventories|107,972,423.35|116,944,913.89|
|Non-current asset due within one|||
|year|||
|Other current assets|71,828,962.65||
|Total current assets|1,226,047,459.65|782,519,533.07|
|Non-current assets:|||
|Finance asset available for sales|||
|Held-to-maturity investment|||
|Long-term account receivable|||
|Long-term equity investment|194,352,785.43|194,352,785.43|
|Investment property|||
|Fixed assets|7,454,288,584.97|8,016,147,993.09|
|Construction in progress|1,647,839,995.78|1,430,885,814.11|
|Engineering material|||
|Disposal of fixed asset|||
|Productive biological asset|||
|Oil and gas asset|||
|Intangible assets|86,384,749.30|64,037,228.25|
|Expense on Research and|||
|Development|||
|Goodwill|||
|Long-term expenses to be|||
||347,945,540.61|301,798,566.81|
|apportioned|||

||||
|-|-|-|
|Deferred income tax asset|439,209,204.04|450,970,591.69|
|Other non-current asset|||
|Total non-current asset|10,170,020,860.13|10,458,192,979.38|
|Total assets|11,396,068,319.78|11,240,712,512.45|
|Current liabilities:|||
|Short-term loans|434,137,220.00|321,378,829.28|
|Transaction financial liabilities|296,902.47|7,198,783.59|
|Notes payable||100,000.00|
|Accounts payable|1,130,120,671.84|947,683,544.83|
|Accounts received in advance|338,572,262.93|211,382,526.62|
|Wage payable|338,104,603.04|343,449,526.33|
|Taxes payable|109,369,269.33|229,290,824.09|
|Interest payable|16,064,294.43|16,466,095.25|
|Dividend payable|11,940.00|11,940.00|
|Other accounts payable|195,015,301.41|204,933,548.07|
|Non-current liabilities due within 1|533,150,658.42|392,573,521.87|
|year|||
|Other current liabilities|||
|Total current liabilities|3,094,843,123.87|2,674,469,139.93|
|Non-current liabilities:|||
|Long-term loans|3,525,047,206.06|3,854,676,638.03|
|Bonds payable|500,000,000.00|500,000,000.00|
|Long-term account payable|1,542,515,998.39|1,554,204,331.04|
|Special accounts payable|||
|Projected liabilities|||
|Deferred income tax liabilities|||
|Other non-current liabilities|25,367,524.34|186,135,800.28|
|Total non-current liabilities|5,592,930,728.79|6,095,016,769.35|
|Total liabilities|8,687,773,852.66|8,769,485,909.28|
|Owner’s equity (or shareholders’|||
|equity):|||
|Paid-in capital (or share capital)|400,000,000.00|400,000,000.00|
|Capital public reserve|86,911,168.71|86,911,168.71|
|Less: Inventory shares|||
|Reasonable reserve|||
|Surplus public reserve|296,688,881.17|256,982,094.78|

||||
|-|-|-|
|Provision of general risk|||
|Retained profit|1,924,694,417.24|1,727,333,339.68|
|Balance difference of foreign|||
|currency translation|||
|Total owner’s equity ( or shareholders’|||
||2,708,294,467.12|2,471,226,603.17|
|equity)|||
|Total liabilities and owner’s equity( or|||
||11,396,068,319.78|11,240,712,512.45|
|shareholders’ equity)|||

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
3. Consolidated Profit Statement
Prepared by Shandong Airlines Co., Ltd
In RMB
||||
|-|-|-|
|Item|This Period|Last Period|
|I. Total operating income|11,427,157,933.15|10,993,024,914.41|
|Including: Operating income|11,427,157,933.15|10,993,024,914.41|
|Interest income|||
|Insurance gained|||
|Commission charge and|||
|commission income|||
|II. Total operating cost|11,174,234,367.33|10,361,111,969.46|
|Including: Operating cost|9,709,865,647.38|8,576,272,368.85|
|Interest expense|||
|Commission charge and|||
|commission expense|||
|Cash surrender value|||
|Net amount of expense of|||
|compensation|||
|Net amount of withdrawal of|||
|insurance contract reserve|||
|Bonus expense of guarantee slip|||
|Reinsurance expense|||
|Operating tax and extras|238,665,537.66|363,292,935.61|
|Sales expenses|775,204,419.75|745,690,102.02|

||||
|-|-|-|
|Administration expenses|225,319,947.49|238,415,387.65|
|Financial expenses|142,819,611.58|243,510,475.66|
|Losses of devaluation of asset|82,359,203.47|193,930,699.67|
|Add: Changing income of fair|||
||6,901,881.12|-5,053,262.49|
|value(Loss is listed with “-”)|||
|Investment income (Loss is listed|||
||14,163,176.50|14,394,514.79|
|with “-”)|||
|Including: Investment income on|||
|affiliated company and joint venture|||
|Exchange income (Loss is listed|||
|with “-”)|||
|III. Operating profit (Loss is listed|||
||273,988,623.44|641,254,197.25|
|with “-”)|||
|Add: Non-operating income|270,407,969.61|147,187,472.57|
|Less: Non-operating expense|13,449,762.40|7,392,852.70|
|Including: Disposal loss of|||
||9,856,591.93|6,908,093.55|
|non-current asset|||
|IV. Total Profit (Loss is listed with|||
||530,946,830.65|781,048,817.12|
|“-”)|||
|Less: Income tax expense|141,865,018.93|191,237,884.65|
|V. Net profit (Net loss is listed with “-”)|389,081,811.72|589,810,932.47|
|Including: Net profit of combined|||
|party realized before combination|||
|Net profit attributable to owner’s of|||
||389,081,811.72|589,810,932.47|
|parent company|||
|Minority shareholders’ gains and|||
|losses|||
|VI. Earnings per share|--|--|
|i. Basic earnings per share|0.97|1.47|
|ii. Diluted earnings per share|0.97|1.47|
|VII. Other consolidated income|||
|VIII. Total consolidated income|389,081,811.72|589,810,932.47|
|Total consolidated income|||
|attributable to owners of parent|389,081,811.72|589,810,932.47|
|company|||
|Total consolidated income|||
|attributable to minority shareholders|||

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
4. Profit Statement of Parent Company
Prepared by Shandong Airlines Co., Ltd
In RMB
||||
|-|-|-|
|Item|This Period|Last Period|
|I. Operating income|11,411,894,387.57|10,975,580,616.97|
|Less: Operating cost|9,701,412,394.23|8,570,545,554.82|
|Operating tax and extras|238,106,240.18|362,295,788.73|
|Sales expenses|780,085,329.96|748,222,436.40|
|Administration expenses|218,483,884.21|233,679,178.89|
|Financial expenses|142,873,515.27|243,533,200.81|
|Losses of devaluation of asset|70,348,934.03|194,946,539.59|
|Add: Changing income of fair|||
||6,901,881.12|-5,053,262.49|
|value(Loss is listed with “-”)|||
|Investment income (Loss is|||
||14,163,176.50|14,394,514.79|
|listed with “-”)|||
|Including: Investment income|||
|on affiliated company and joint venture|||
|II. Operating profit (Loss is listed|||
||281,649,147.31|631,699,170.03|
|with “-”)|||
|Add: Non-operating income|270,405,947.11|147,181,559.72|
|Less: Non-operating expense|13,435,099.03|7,382,942.99|
|Including: Disposal loss of|||
||9,841,928.56|6,905,518.55|
|non-current asset|||
|III. Total Profit (Loss is listed with|||
||538,619,995.39|771,497,786.76|
|“-”)|||
|Less: Income tax expense|141,552,131.44|189,210,011.19|
|IV. Net profit (Net loss is listed with|||
||397,067,863.95|582,287,775.57|
|“-”)|||
|V. Earnings per share|--|--|
|i. Basic earnings per share|||
|ii. Diluted earnings per share|||
|VI. Other consolidated income|||
|VII. Total consolidated income|397,067,863.95|582,287,775.57|

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
5. Consolidated Cash Flow Statement
Prepared by Shandong Airlines Co., Ltd
In RMB
||||
|-|-|-|
|Item|This Period|Last Period|
|I. Cash flows arising from operating|||
|activities:|||
|Cash received from selling|||
|commodities and providing labor|11,821,940,861.03|10,958,543,064.30|
|services|||
|Net increase of customer deposit|||
|and interbank deposit|||
|Net increase of loan from central|||
|bank|||
|Net increase of capital borrowed|||
|from other financial institution|||
|Cash received from original|||
|insurance contract fee|||
|Net cash received from reinsurance|||
|business|||
|Net increase of insured savings and|||
|investment|||
|Net increase of disposal of|||
|transaction financial asset|||
|Cash received from interest,|||
|commission charge and commission|||
|Net increase of capital borrowed|||
|Net increase of returned business|||
|capital|||
|Write-back of tax received|||
|Other cash received concerning|||
||298,723,497.82|138,366,954.40|
|operating activities|||
|Subtotal of cash inflow arising from|||
||12,120,664,358.85|11,096,910,018.70|
|operating activities|||
|Cash paid for purchasing|||
||8,296,965,395.58|7,134,742,062.38|
|commodities and receiving labor|||

||||
|-|-|-|
|service|||
|Net increase of customer loans and|||
|advances|||
|Net increase of deposits in central|||
|bank and interbank|||
|Cash paid for original insurance|||
|contract compensation|||
|Cash paid for interest, commission|||
|charge and commission|||
|Cash paid for bonus of guarantee|||
|slip|||
|Cash paid to/for staff and workers|1,491,076,519.28|1,280,713,318.55|
|Taxes paid|687,341,028.75|706,663,961.17|
|Other cash paid concerning|||
||234,094,893.09|248,473,175.85|
|operating activities|||
|Subtotal of cash outflow arising from|||
||10,709,477,836.70|9,370,592,517.95|
|operating activities|||
|Net cash flows arising from operating|||
||1,411,186,522.15|1,726,317,500.75|
|activities|||
|II. Cash flows arising from investing|||
|activities:|||
|Cash received from recovering|||
|investment|||
|Cash received from investment|||
||2,447,115.15|16,247,366.84|
|income|||
|Net cash received from disposal of|||
|fixed, intangible and other long-term|174,681,542.77|82,725.86|
|assets|||
|Net cash received from disposal of|||
|subsidiaries and other units|||
|Other cash received concerning|||
|investing activities|||
|Subtotal of cash inflow from investing|||
||177,128,657.92|16,330,092.70|
|activities|||
|Cash paid for purchasing fixed,|||
||1,723,086,948.06|2,233,827,146.00|
|intangible and other long-term assets|||
|Cash paid for investment|||
|Net increase of mortgaged loans|||

||||
|-|-|-|
|Net cash received from|||
|subsidiaries and other units|||
|Other cash paid concerning|||
||2,609,524.71|1,852,852.05|
|investing activities|||
|Subtotal of cash outflow from investing|||
||1,725,696,472.77|2,235,679,998.05|
|activities|||
|Net cash flows arising from investing|||
||-1,548,567,814.85|-2,219,349,905.35|
|activities|||
|III. Cash flows arising from financing|||
|activities|||
|Cash received from absorbing|||
|investment|||
|Including: Cash received from|||
|absorbing minority shareholders’|||
|investment by subsidiaries|||
|Cash received from loans|1,707,943,187.26|1,677,158,004.62|
|Cash received from issuing bonds||500,000,000.00|
|Other cash received concerning|||
||903,064,822.94|7,470,000.00|
|financing activities|||
|Subtotal of cash inflow from financing|||
||2,611,008,010.20|2,184,628,004.62|
|activities|||
|Cash paid for settling debts|1,664,222,540.40|1,243,570,158.09|
|Cash paid for dividend and profit|||
||343,574,678.36|326,407,154.44|
|distributing or interest paying|||
|Including: Dividend and profit of|||
|minority shareholder paid by|||
|subsidiaries|||
|Other cash paid concerning|||
||175,939,104.72|207,713,467.59|
|financing activities|||
|Subtotal of cash outflow from financing|||
||2,183,736,323.48|1,777,690,780.12|
|activities|||
|Net cash flows arising from financing|||
||427,271,686.72|406,937,224.50|
|activities|||
|IV. Influence on cash and cash|||
|equivalents due to fluctuation in|-755,865.78|1,297,175.59|
|exchange rate|||
|V. Net increase of cash and cash|||
||289,134,528.24|-84,798,004.51|
|equivalents|||

||||
|-|-|-|
|Add: Balance of cash and cash|||
||155,387,742.97|240,185,747.48|
|equivalents at the period -begin|||
|VI. Balance of cash and cash|||
||444,522,271.21|155,387,742.97|
|equivalents at the period -end|||

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
6. Cash Flow Statement of Parent Company
Prepared by Shandong Airlines Co., Ltd
In RMB
||||
|-|-|-|
|Item|This Period|Last Period|
|I. Cash flows arising from operating|||
|activities:|||
|Cash received from selling|||
|commodities and providing labor|11,804,162,169.30|10,940,139,794.93|
|services|||
|Write-back of tax received|||
|Other cash received concerning|||
||284,668,066.98|142,167,899.49|
|operating activities|||
|Subtotal of cash inflow arising from|||
||12,088,830,236.28|11,082,307,694.42|
|operating activities|||
|Cash paid for purchasing|||
|commodities and receiving labor|8,294,746,672.13|7,140,620,035.20|
|service|||
|Cash paid to/for staff and workers|1,486,359,737.00|1,276,278,315.90|
|Taxes paid|685,735,029.36|702,281,591.79|
|Other cash paid concerning|||
||237,896,956.32|269,198,909.75|
|operating activities|||
|Subtotal of cash outflow arising from|||
||10,704,738,394.81|9,388,378,852.64|
|operating activities|||
|Net cash flows arising from operating|||
||1,384,091,841.47|1,693,928,841.78|
|activities|||
|II. Cash flows arising from investing|||
|activities:|||
|Cash received from recovering|||
|investment|||
|Cash received from investment|2,447,115.15|16,247,366.84|

||||
|-|-|-|
|income|||
|Net cash received from disposal of|||
|fixed, intangible and other long-term|174,669,237.27|64,695.86|
|assets|||
|Net cash received from disposal of|||
|subsidiaries and other units|||
|Other cash received concerning|||
|investing activities|||
|Subtotal of cash inflow from investing|||
||177,116,352.42|16,312,062.70|
|activities|||
|Cash paid for purchasing fixed,|||
||1,706,500,870.09|2,209,331,003.27|
|intangible and other long-term assets|||
|Cash paid for investment|||
|Net cash received from|||
|subsidiaries and other units|||
|Other cash paid concerning|||
||2,609,524.71|1,852,852.05|
|investing activities|||
|Subtotal of cash outflow from investing|||
||1,709,110,394.80|2,211,183,855.32|
|activities|||
|Net cash flows arising from investing|||
||-1,531,994,042.38|-2,194,871,792.62|
|activities|||
|III. Cash flows arising from financing|||
|activities|||
|Cash received from absorbing|||
|investment|||
|Cash received from loans|1,707,943,187.26|1,677,158,004.62|
|Cash received from issuing bonds||500,000,000.00|
|Other cash received concerning|||
||903,064,822.94|7,470,000.00|
|financing activities|||
|Subtotal of cash inflow from financing|||
||2,611,008,010.20|2,184,628,004.62|
|activities|||
|Cash paid for settling debts|1,664,222,540.40|1,243,570,158.09|
|Cash paid for dividend and profit|||
||343,574,678.36|326,407,154.44|
|distributing or interest paying|||
|Other cash paid concerning|||
||175,939,104.72|207,713,467.59|
|financing activities|||
|Subtotal of cash outflow from financing|||
||2,183,736,323.48|1,777,690,780.12|
|activities|||

||||
|-|-|-|
|Net cash flows arising from financingactivities|||
||427,271,686.72|406,937,224.50|
|IV. Influence on cash and cash|||
|equivalents due to fluctuation in|-755,865.78|1,297,175.59|
|exchange rate|||
|V. Net increase of cash and cashequivalents|||
||278,613,620.03|-92,708,550.75|
|Add: Balance of cash and cashequivalents at the period -begin|||
||143,212,750.59|235,921,301.34|
|VI. Balance of cash and cashequivalents at the period -end|||
||421,826,370.62|143,212,750.59|

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
7. Statement of Changes inOwners’ Equity (Consolidated)
Prepared by Shandong Airlines Co., Ltd
This Period
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||This Period||||||||||
||Owners’ equity attributable to parent company||||||||||
||Paid-up|||||Provisio|||Minor|Total|
|Item|||||||||||
||||Less:|Reasona|||||||
||capital(|Capital|||Surplus|n of|Retaine||sharehold|owners’|
||||inventor|ble||||Other|||
||or share|reserves|||reserves|general|d profit||ers’ equity|equity|
||||y shares|reserve|||||||
||capital)|||||risk|||||
||400,000|75,410,3|||257,642||1,746,00|||2,479,055,|
|I. Balance at the end of last|||||||||||
|year|,000.00|63.70|||,799.31||2,689.27|||852.28|
|Add: Change of|||||||||||
|accounting policy|||||||||||
|Correcting of|||||||||||
|previous errors|||||||||||
|Other|||||||||||
||400,000|75,410,3|||257,642||1,746,00|||2,479,055,|
|II. Balance at the beginning of|||||||||||
|current year|,000.00|63.70|||,799.31||2,689.27|||852.28|
||||||39,706,||189,375,|||229,081,81|
|III. Changed in current|||||||||||
|term(Loss is listed with “-”)|||||786.39||025.33|||1.72|
||||||||389,081,|||389,081,81|
|(I) Net profit|||||||||||
||||||||811.72|||1.72|
|(II) Other consolidated income|||||||||||

|||||||
|-|-|-|-|-|-|
|||||389,081,|389,081,81|
|Subtotal of (I) and (II)||||||
|||||811.72|1.72|
|(III) Owners’ input and||||||
|withdraw of share capital||||||
|1. Capital input by owners||||||
|2. Share payment accounted||||||
|into owners’ equity||||||
|3. Others||||||
||||39,706,|-199,70|-160,000,0|
|(IV) Profit distribution||||||
||||786.39|6,786.39|00.00|
||||39,706,|-39,706,||
|1. Providing of surplus||||||
|reserves|||786.39|786.39||
|2. Common risk provision||||||
|||||-160,00|-160,000,0|
|3. Dividend to owners’(or||||||
|shareholders)||||0,000.00|00.00|
|4. Others||||||
|(V) Internal settlement of||||||
|owners’ equity||||||
|1. Capital reserves transferred||||||
|to share capital||||||
|2. Surplus reserves transferred||||||
|to share capital||||||
|3. Making up losses by||||||
|surplus reserves||||||
|4. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in the report||||||
|period||||||
|2. Usage in the report period||||||
|(VII) Other||||||
||400,000|75,410,3|297,349|1,935,37|2,708,137,664.00|
|IV. Balance at the end of this||||||
|term|,000.00|63.70|,585.70|7,714.60||

 Last year
In RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Last year||||||||||
||Owners’ equity attributable to parent company||||||||||
||Paid-up|||||Provisio|||Minor|Total|
|Item|||||||||||
||||Less:|Reasona|||||||
||capital(|Capital|||Surplus|n of|Retaine||sharehold|owners’|
||||inventor|ble||||Other|||
||or share|reserves|||reserves|general|d profit||ers’ equity|equity|
||||y shares|reserve|||||||
||capital)|||||risk|||||
|I. Balance at the end of last|400,000|75,410,3|||199,414||1,374,42|||2,049,244,|
|year|,000.00|63.70|||,021.75||0,534.36|||919.81|

|||||||
|-|-|-|-|-|-|
|Add: retroactive adjustment||||||
|arising from enterprise||||||
|combination under same||||||
|control||||||
|Add: Change of accounting||||||
|policy||||||
|Correcting of previous errors||||||
|Other||||||
||400,000|75,410,3|199,414|1,374,42|2,049,244,|
|II. Balance at the beginning of||||||
|current year|,000.00|63.70|,021.75|0,534.36|919.81|
||||58,228,|371,582,|429,810,93|
|III. Changed in current||||||
|term(Loss is listed with “-”)|||777.56|154.91|2.47|
|||||589,810,|589,810,93|
|(I) Net profit||||||
|||||932.47|2.47|
|(II) Other consolidated income||||||
|||||589,810,|589,810,93|
|Subtotal of (I) and (II)||||||
|||||932.47|2.47|
|(III) Owners’ input and||||||
|withdraw of share capital||||||
|1. Capital input by owners||||||
|2. Share payment accounted||||||
|into owners’ equity||||||
|3. Others||||||
||||58,228,|-218,22|-160,000,0|
|(IV) Profit distribution||||||
||||777.56|8,777.56|00.00|
||||58,228,|-58,228,||
|1. Providing of surplus reserves||||||
||||777.56|777.56||
|2. Common risk provision||||||
|||||-160,00|-160,000,0|
|3. Dividend to owners’(or||||||
|shareholders)||||0,000.00|00.00|
|4. Others||||||
|(V) Internal settlement of||||||
|owners’ equity||||||
|1. Capital reserves transferred||||||
|to share capital||||||
|2. Surplus reserves transferred||||||
|to share capital||||||
|3. Making up losses by surplus||||||
|reserves||||||
|4. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in the report||||||

|||||||
|-|-|-|-|-|-|
|period||||||
|2. Usage in the report period||||||
|(VII) Other||||||
|IV. Balance at the end of this|400,000|75,410,3|257,642|1,746,00|2,479,055,|
|term|,000.00|63.70|,799.31|2,689.27|852.28|

 Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
8. Statement of Changes inOwners’ Equity (Parent Company)
Prepared by Shandong Airlines Co., Ltd
This Period
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||This Period||||||||
||Paid-up||||||||
||||Less:|||Provision||Total|
|Item|capital(or|Capital||Reasonable|Surplus||Retained||
||||inventory|||of general||owners’|
||share|reserves||reserve|reserves||profit||
||||shares|||risk||equity|
||capital)||||||||
||400,000,00|86,911,168|||256,982,09||1,727,333,|2,471,226,|
|I. Balance at the end of last year|||||||||
||0.00|.71|||4.78||339.68|603.17|
|Plus: Change of accounting|||||||||
|policy|||||||||
|Correcting of previous|||||||||
|errors|||||||||
|Other|||||||||
||400,000,00|86,911,168|||256,982,09||1,727,333,|2,471,226,|
|II. Balance at the beginning of|||||||||
|current year|0.00|.71|||4.78||339.68|603.17|
||||||39,706,786||197,361,07|237,067,86|
|III. Changed in current|||||||||
|term(Loss is listed with “-”)|||||.39||7.56|3.95|
||||||||397,067,86|397,067,86|
|(I) Net profit|||||||||
||||||||3.95|3.95|
|(II) Other consolidated income|||||||||
||||||||397,067,86|397,067,86|
|Subtotal of (I) and (II)|||||||||
||||||||3.95|3.95|
|(III) Owners’ input and withdraw|||||||||
|of share capital|||||||||
|1. Capital input by owners|||||||||
|2. Share payment accounted|||||||||
|into owners’ equity|||||||||
|3. Others|||||||||

|||||||
|-|-|-|-|-|-|
||||39,706,786|-199,706,7|-160,000,0|
|(IV) Profit distribution||||||
||||.39|86.39|00.00|
||||39,706,786|-39,706,78||
|1. Providing of surplus||||||
|reserves|||.39|6.39||
|2. Common risk provision||||||
|||||-160,000,0|-160,000,0|
|3. Dividend to owners’(or||||||
|shareholders)||||00.00|00.00|
|4. Others||||||
|(V) Internal settlement of||||||
|owners’ equity||||||
|1. Capital reserves transferred||||||
|to share capital||||||
|2. Surplus reserves transferred||||||
|to share capital||||||
|3. Making up losses by surplus||||||
|reserves||||||
|4. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in the report||||||
|period||||||
|2. Usage in the report period||||||
|(VII) Other||||||
||400,000,00|86,911,168|296,688,88|1,924,694,|2,708,294,467.12|
|IV. Balance at the end of this||||||
|term|0.00|.71|1.17|417.24||

 Last year
In RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||Last year||||||||
||Paid-up||||||||
||||Less:|||Provision||Total|
|Item|capital(or|Capital||Reasonabl|Surplus||Retained||
||||inventory|||of general||owners’|
||share|reserves||e reserve|reserves||profit||
||||shares|||risk||equity|
||capital)||||||||
||400,000,00|86,911,168|||198,753,31||1,363,274,|2,048,938,|
|I. Balance at the end of last year|||||||||
||0.00|.71|||7.22||341.67|827.60|
|Add: Change of accounting|||||||||
|policy|||||||||
|Correcting of previous|||||||||
|errors|||||||||
|Other|||||||||
||400,000,00|86,911,168|||198,753,31||1,363,274,|2,048,938,|
|II. Balance at the beginning of|||||||||
|current year|0.00|.71|||7.22||341.67|827.60|
||||||58,228,777||364,058,99|422,287,77|
|III. Changed in current term(Loss|||||||||
|is listed with “-”)|||||.56||8.01|5.57|

|||||||
|-|-|-|-|-|-|
|||||582,287,77|582,287,77|
|(I) Net profit||||||
|||||5.57|5.57|
|(II) Other consolidated income||||||
|||||582,287,77|582,287,77|
|Subtotal of (I) and (II)||||||
|||||5.57|5.57|
|(III) Owners’ input and withdraw||||||
|of share capital||||||
|1. Capital input by owners||||||
|2. Share payment accounted||||||
|into owners’ equity||||||
|3. Others||||||
||||58,228,777|-218,228,7|-160,000,0|
|(IV) Profit distribution||||||
||||.56|77.56|00.00|
||||58,228,777|-58,228,77||
|1. Providing of surplus||||||
|reserves|||.56|7.56||
|2. Common risk provision||||||
|||||-160,000,0|-160,000,0|
|3. Dividend to owners’(or||||||
|shareholders)||||00.00|00.00|
|4. Others||||||
|(V) Internal settlement of||||||
|owners’ equity||||||
|1. Capital reserves transferred to||||||
|share capital||||||
|2. Surplus reserves transferred||||||
|to share capital||||||
|3. Making up losses by surplus||||||
|reserves||||||
|4. Others||||||
|(VI) Reasonable reserve||||||
|1. Withdrawal in the report||||||
|period||||||
|2. Usage in the report period||||||
|(VII) Other||||||
||400,000,00|86,911,168|256,982,09|1,727,333,|2,471,226,|
|IV. Balance at the end of this||||||
|term|0.00|.71|4.78|339.68|603.17|

 Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian Person in charge of Accounting Institution: Sun Jingping
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
for the Year Ended 31 December 2013
(All amounts are expressed in CNY unless otherwise stated)
Note 1 Corporation profile
1.1Company’s history
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign-invested limited liability company incorporated in thePeople’s Republic of China. The Company was incorporated through the restructuring project jointly initiated by Shandong Airlines Group Co., Ltd. (hereafter, SDA Group), Inspur Co., Ltd. (previously known as Inspur Electronic Information Industry Group Company(浪潮电子信息产业集团公司), Shandong Hualu Group Co., Ltd, Shandong Group Corp. of Fisheries Enterprises and Luyin Investment Group(鲁银投资集团股份有限公司) following the approval (LuTiGaiQiZi(1999)No.88(鲁体改企字(1999)第88号)) granted by the Economic Reform Commission of Shandong Province(山东省经济体制改革委员会) on July 29th, 1999.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares(国有法人股), with CNY 1.00 at par, of the Company by transferring its air transportation operation and the related assets and liabilities to the Company on November 25th, 1999. Inspur Co., Ltd., Shandong Hualu Group Co., Ltd. and Shandong Group Corp. of Fisheries Enterprises each acquired 199,000 state-owned corporate shares, with CNY 1.00 at par, by cash investment of CNY 200,000.00 each on November 26th, 1999. Luyin Investment Group acquired 199,000 domestic corporate shares(国内法人股), with CNY 1.00 at par, by cash investment of CNY 200,000.00 on November 26th, 1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign currency(境内上市外资股) (hereafter, B share(s)), with par value at CNY 1.00 each and issue price at HKD 1.58 each, on August 28th, 2000 upon the approval(ZhengJianFaXingZi[2000]No.116(证监发行字[2000]116号)) granted by the China Securities Regulatory Commission on August 22nd, 2000; and, the Company was listed on the Shenzhen Stock Exchange on September 12th, 2000. Immediately after the issuance of the B shares, the capital of the Company increased to CNY 400,000,000.00.
The Agreement of Share Transfer(《股份转让协议》) signed by SDA Group and China National Aviation Holding Company (hereafter, China Aviation Group) on February 28th, 2004 authorised the transfer of 91,200,000 shares of the Company, equal to22.8% shareholding, from SDA Group to China Aviation Group. Immediately after the share transfer, SDAGroup’s shareholding in the Company was42.00%. In November 2004, the Board of Directors of the Company, in accordance with the approval(GuoZiChanQuan[2004]No.956
(国资产权[2004]956号：《关于中国航空集团公司将受让山东航空股份有限公司国有股的合同实施转让有关问题的批复》)) issued by the State-owned Assets Supervision and Administration Commission of the State Council, authorised China Aviation Group to transfer the state-owned corporate shares received from SDA Group to Air China Co., Ltd. (hereafter, Air China). As so provided inGuoZiChanQuan[2004]No.956, the rights and obligation attributable to China Aviation Group as specified in the Agreement of Share Transfer shall be afforded by Air China. The change of share ownership was registered at the China Securities Depository and Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on December 3rd, 2004; And, 91,200,000 shares of the Company then became held by Air China.
Legal representative of the Company: ZHANG, Xingfu
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746– East 2nd Ring Road, Jinan, Shandong
1.2 Industry of operation
The Company operates in the industry of transportation.
1.3 Operating capacity
The Company is permitted to undertake international and domestic passenger and cargo transportation, hotel and beverage related operation (limited to operation through branch); provision of aircraft maintenance, training of civil aviation pilots and air crew, insurance brokerage (limited to air accident insurance, with period of operation valid until September 3rd, 2015); inter-airline agenting, and principal operation related ground services; sales of airborne material and equipments, non-food grocery, art work, souvenir, etc.; retailing of tobacco products (limited to Qingdao Red-Crowned Crane Hotel); lease of airborne material and equipments; business services; conference services; transportation agency; air cargo storage; and aviation pilot provision (for other domestic airlines). The operating activities listed herein does not involve operation related to commodity that are subject to State Administered Trading(国营贸易管理),but involve operation related to commodity that are subject to quotas , licence requirements, which are restricted to obtain permission before the operation.
1.4 Principal products services
The principal service supplied by the Company is domestic air transportation.
1.5 The financial statements of the Company has been approved by the board of directors on 20 Mar 2014
Note 2 Basis of Preparation
The financial statements of the Company have been prepared on the basis of going concern in conformity with Enterprise Accounting Standard - General Standard and 38 specific standards issued by the Ministry of
Finance ofPeople’s Republic of China on 15 February 2006, and the application guidance, explanation and relevant regulations subsequently issued (hereafter, collectively as Enterprise Accounting Standards or CASs); and Compilation Rules for Information Disclosure by Companies Offering Securities to the PublicNo.15—General Provisions on Financial Reports (2010 Revision) issued by the China Securities Regulatory Commission (CSRC).
According to the relevant accounting regulations in Chinese Accounting Standards for Business Enterprises, the Company has adopted the accrual basis of accounting. Except for certain financial instruments which are measured by at fair value, the Company adopts the historical cost as the principle of measurement in the financial statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant requirements.
Note 3 Statement of Compliance with Enterprise Accounting Standards
The financial statements of the Company are prepared in accordance with the requirements of the Enterprise Accounting Standards and give a true and complete view of the consolidated and separate financial position of the Company as at 31 December 2013, and the consolidated and separate business result and cash flows for the year then ended. In addition, the consolidated and separate financial statements of the Company comply, in all material respects, with the revised disclosing requirements for financial statements and the notes‖ Compilation Rules for Information Disclosure by Companies Offering Securities to the PublicNo.15—General Provisions on Financial Reports (2010 Revision) issued by China Securities Regulatory Commission (CSRC) in 2010.
Note 4 Important Accounting Principles and Accounting Estimates
4.1 Accounting period
The accounting period of the Company is classified as interim period and annual period. Interim period refers to the reporting period shorter than a complete annual period. A complete accounting period of the Company is the calendar year from January 1 to December 31.
4.2 Monetary Unit
Yuan (CNY) is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose CNY as their functional currency. The Company adopts CNY as the functional currency to prepare its financial statements.
4.3 Business combination
A business combination is a transaction or event that brings together two or more separate entities into one reporting entity. Business combinations are classified into business combinations involving enterprises under common control and business combinations not involving enterprises under common control.
(1) Business combination involving entities under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory.
For a business combination involving enterprises under common control, the party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. Combination date is the date on which the absorbing party effectively obtains control of the party being absorbed.
The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of consideration paid for the combination (or the total face value of shares issued) is adjusted to the capital premium (or share premium) in the capital reserve. If the balance of the capital premium (or share premium) is insufficient, any excess is adjusted to retained earnings.
The cost of a combination incurred by the absorbing party includes any costs directly attributable to the combination shall be recognized as an expense through profit or loss for the current period when incurred. (2) Business combination involving entities not under common control
A business combination involving enterprises not under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties both before and after the business combination.
For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree. Acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services etc and other associated administrative expenses attributable to the business combination are recognized in profit or loss when they are incurred.
The transaction cost arose from issuing of equity securities or liability securities shall be initially recognized as equity securities or liability securities.
The contingent consideration related to the combination shall be booked as combination cost at the fair value at the acquisition date. If, within the 12 months after acquisition, additional information can prove the existence of related information at acquisition date and the contingent consideration need to be adjusted, goodwill can be offset.
Combination cost of theacquirer’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 theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference shall be recognized as goodwill. Where the cost of combination is less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference shall be accounted for according to the following requirements: (i) the acquirer shall reassess the measurement of the fair values of theacquiree’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 theacquirer’s interest in the fair values of theacquiree’s identifiable net assets, the acquirer shall recognize the remaining difference immediately in profit or loss for the current period.
Where the temporary difference obtained by the acquirer was not recognized due to inconformity with the conditions applied for recognition of deferred income tax, if, within the 12 months after acquisition, additional information can prove the existence of related information at acquisition date and the expected economic benefits on the acquisition date arose from deductible temporary difference by the acquiree can be achieved, relevant income tax assets can be recognized, and goodwill offset. If the goodwill is not sufficient, the difference shall be recognized as profit of the current period.
Apart from above, the differences shall be taken into profit or loss of the current period if the recognition of deferred income tax assets is related to the combination.
For business combination involving entities not under common control achieved through multiple transactions (acquistion in stages), the multiple agreements are assessed to determine whether they should be viewed as a whole with reference the conditions stipulated by the Notice of the Ministry of Finance on the No. 5 Explanation of Enterprise Accounting Standards (Cai Kuai[2012] No. 19) (see Note 4.4.2 for details). Where multiple agreements of an acquisition in stages are viewed as a whole, the accounting treatment for the multiple agreements shall be performed in accordance with the previous paragraphs and Note 4.10; and, where multiple agreements of an acquistion in stages fail the conditions ofCaiKuai[2012]19Hao, the accounting treatments shall be perfomed as follow.
For the purpose of the separate financial statements, the cost of acquistion is measured as the sum of the carrying amount of investment in the investee immediately prior to the acquistion and the consideration for the addition investment. Cumulative other comprehensive income relevant to the investment recognised prior to the acquistion is reclassfied to profit or loss as investment income at the time of acquistion.
For the purpose of the consolidated financial statements, the investment in the investee prior to the acquistion is remeasured by fair value, difference between the acquistion date fair value of the investment in the investee prior to the acquisition and its carrying amount is recognised in profit or loss as investment income at the time of acquistion. Cumulative other comprehensive income relevant to the investment recognised prior to the
acquistion is reclassfied to profit or loss as investment income at the time of acquistion.
4.4 Preparation of the consolidated financial statements
(1) The scope of consolidation
The scope of consolidation for the consolidated financial statements is determined on the basis of control. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. The scope of consolidation includes the Company and all of the subsidiaries. Subsidiary is an enterprise or entity under the control of the Company.
(2) Preparation of the consolidated financial statements
The subsidiary of the Company is included in the consolidated financial statements from the date when the control over the net assets and business decisions of the subsidiary is effectively obtained, and excluded from the date when the control ceases.
For a subsidiary disposed of by the Company, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. For a subsidiary disposed during the period, no adjustment is made to the opening balance of the consolidated financial statements.
For a subsidiary acquired through a business combination not under common control, the operating results and cash flows from the acquisition (the date when the control is obtained) are included in the consolidated income statement and consolidated statement of cash flows, as appropriated; no adjustment is made to the opening balance and comparative figures in the consolidated financial statements.
Where a subsidiary was acquired during the reporting period, through a business combination involving enterprises under common control, the financial statements of the subsidiary are included in the consolidated financial statements. The results of operations and cash flow are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts, from the date that common control was established, and the opening balances and the comparative figures of the consolidated financial statements are restated.
When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on theCompany’s own accounting period or accounting policies. Where a subsidiary was acquired during the reporting period through a business combination not under common control, the financial statements was reconciliated on the basis of the fair value of identifiable net assets at the date of acquisition. Intra-Group balances and transactions, and any unrealized profit or loss arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements.
Minority interest and the portion in the net profit or loss not attributable to the Company are presented
separately in the consolidated balance sheet withinshareholders’/owners’ equity and net profit. Net profit or loss attributable to minority shareholders in the subsidiaries is presented separately as minority interest in the consolidated income statement below the net profit line item.
When the amount of loss for the current period attributable to the minority shareholders of a subsidiary exceeds the minorityshareholders’ portion of the opening balance of[shareholders’][owners’] equity of the subsidiary, the excess is allocated against the minority interests.
When the Company loses control of a subsidiary due to the disposal of a portion of an equity investment or other reasons, the remaining equity investment is re-measured at its fair value at the date when control is lost. The difference between 1) the total amount of consideration received from the transaction that resulted in the loss of control and the fair value of the remaining equity investment and 2) the carrying amounts of the interest in the formersubsidiary’s net assets immediately before the loss of the control is recognized as investment income for the current period when control is lost. The amount recognized in other comprehensive income in relation to the formersubsidiary’s equity investment is reclassified as investment income for the current period when control is lost. The retained interest is subsequently measured according to the rules stipulated in the―Chinese Accounting Standards for Business EnterprisesNo.2—Long-term equityinvestment‖ or―Chinese Accounting Standards for Business EnterprisesNo.22—Determination and measurement of financialinstruments‖ . See Note 4.10 Long-term equity investments and Note 4.7 Financial instruments for details. Where loss of control over a subsidiary results from multiple transactions (agreements), asssessment shall be made as to whether the multiple agreements shall be viewed as a whole as a single transaction. Multiple agreements giving rise to loss of control over a subsidiary is generally viewed as a whole as a single transaction if the terms, conditions and economic implications of the multiple agreements satisfy one or more of the following conditions: 1) the agreements are entered into simultaneously or taking into account the implication of each other; 2) the business objective cannot be achieved without successful completion of all the agreements; the occurrance of one agreement is dependent on the result of at least another one agreement; and/or 4) any one single agreement is not recognised as economic and the agreements as a whole is economic. Where multiple agreements do not satisfy the conditions of being viewed as a single transaction, each agreement shall be treated and accounted for in accordance with the provisions of disposal of long-term equity investments not resulting loss of control (see Note 4.10.2.2)) or loss of control due to disposal of shares or other events (see the previous paragraph). Where nultiple agreements satisfy the conditions of being viewed as a single transaction, each agreement shall be treated and accounted for as a transaction which results in loss of control; differences between the consideration for disposals prior to loss of control and the net assets proportionate to the shares disposed prior to loss of control are recognised as other comprehensive income in the consolidated financial statements and transfered to profit or loss at the time of loss of control. 4.5 Cash equivalent
Cash and cash equivalents of the Company include cash on hand, ready usable deposits and investments having short holding term (normally will be due within three months from the day of purchase), with strong liquidity and easy to be exchanged into certain amount of cash that can be measured reliably and have low risks of change.
4.6 Foreign exchange
(1) Translation in foreign exchange transactions
The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying[the spot exchange rate on the date of the transaction / an exchange rate that approximates the actual spot exchange rate on the date oftransaction]. The exchange of foreign currency and transactions related to the foreign exchange are translated at the spot exchange rate.
(2) Translation of monetary foreign currency and non-monetary foreign currency
At the balance sheet date, foreign currency monetary items are translated using the spot exchange rate at the balance sheet date. All the exchange differences thus resulted are taken to profit or loss, except forthose relating to foreign currency borrowings specifically for construction and acquisition of qualifying assets, which are capitalized in accordance with the principle of capitalization of borrowing costs;② hedging accounting, the exchange difference related to hedging instruments for the purpose of net oversea operating investment is recorded in the comprehensive income till the date of disposal and recognized in profit or loss of theperiod; exchange difference from changes of other account balance of foreign currency monetary items available-for-trade is recorded into profit or loss except for amortized cost.
Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetary foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date when the fair values are determined. The exchange difference thus resulted are recognized in profit or loss for the current period or as capital reserve.
(3) The translation of financial statement in foreign currency
When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary item constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are recognized as―exchange differences arising on translation of financial statements denominated in foreigncurrencies‖ inowner’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 andshareholders’ 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 overGroup’s oversea operation due to disposal, the Company transfers the accumulated or proportionate share of the accumulated exchange difference arising on translation of financial statements of this oversea operation attributable to theowners’ equity of the Company and presented undershareholders’ equity, to profit or loss in the period in which the disposal occurs.
Foreign currency cash flows and cash flow of oversea subsidiaries are translated at the spot exchange rates on the date of cash flows.The effect of exchange rate changes on cash is separately presented as an adjustment item in the cash flow statement.
The opening and actual amount of last year are presented in the financial statement after translation
4.7 Financial instruments
(1) Determination of financial assets andliabilities’ fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in anarm’s length transaction. For a financial instrument which has an active market, the Company uses quoted price in the active market to establish its fair value. The quoted price in the active market refers to the price that can be regularly obtained from exchange market, agencies, industry associations, pricing authorities; it represents the fair market trading price in the actual transaction.
For a financial instrument which does not have an active market, the Company establishes fair value by using a valuation technique. Valuation techniques include using recentarm’s length market transactions between knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.
(2) Classification, recognition and measurement of financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. On initial recognition, theCompany’s financial assets are classified into one of the four categories, including financial assets at fair value though profit or loss, held-to maturity investments, loans and receivables and available-for-sale financial assets. A financial asset is recognized initially at fair value. In the case of financial assets at fair value through profit or loss, relevant transaction costs are immediately charged to the profit and loss of the current period; transaction costs relating to financial assets of other categories are included in the amount initially recognized.
1) Financial assets at fair value through profit or loss:
Including financial assets held-for-trade and financial assets designated at fair value through profit or loss. Financial asset held-for-trade is the financial asset that meets one of the following conditions:
A. the financial asset is acquired for the purpose of selling it in a short term;
B. the financial asset is a part of a portfolio of identifiable financial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profits;
C. the financial asset is a derivative, except for a derivative that is designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. For such kind of financial assets, fair values are adopted for subsequent measurement.
Financial asset is designated on initial recognition as at fair value through profit or loss only when it meets one of the following conditions:
A. the designation eliminates or significantly reduces the inconsistency in the measurement or recognition of relevant gains or losses that would otherwise arise from measuring the financial instruments on different bases.
B. a Group of financial instruments is managed and its performance is evaluated on a fair value basis, and is reported to theenterprise’s key management personnels. Formal documentation regarding risk management or investment strategy has prepared.
Financial assets at fair value through profit or loss are subsequently measured at the fair value. Any gains or losses arising from changes in the fair value and any dividends or interest income earned on the financial assets are recognized in the profit or loss.
2) Investment held-to maturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. Such kind of financial assets are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition, impairment or amortization are recognized in profit or loss for the current period.
Effective interest rate is the rate that exactly discounted estimated future cash flows through the expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Company shall estimate future cash flow considering all contractual terms of the financial asset or financial liability without considering future credit losses, and also consider all fees paid or received between the parties to the contract giving rise to the financial asset and
financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or discounts, etc.
3) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed determinable payment that are not quoted in an active market. Financial assets classified as loans and receivables by the Company include note receivables, account receivables, interest receivable dividends receivable and other receivables.
Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gain or loss arising from derecognition, impairment or amortization is recognized in profit or loss.
4) Financial assets available-for-sale
Financial assets available-for-sale include non-derivative financial assets that are designated on initial recognition as available for trade, and financial assets that are not classified as financial assets at fair value through profit or loss, loans and receivables or investment held-to-maturity.
The cost of an available-for-sale debt instrument at each balance sheet date is determined by the amortised cost, ie. the residual amount after adjustment on the cost upon initial recognition for the following items: a. repaid principal (negative adjustment);
b. cumulative amortisation of the difference between the amount upon expiry and the amount upon initial recognition using teh effective interest rate method (positive adjustment if expiry amount higher than amount upon initial recognition and vice versa);
c. cumulative impairment.
The cost of an available-for-sale instrument at each balance sheet date is its cost upon initial recognition. Financial assets available-for-sale are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensive income and included in the capital reserve, except that impairment losses and exchange differences related to amortized cost of monetary financial assets denominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at which time the gains or losses are released and recognized in profit or loss.
Interests obtained and dividends declared by the investee during the period in which the financial assets available-for-sale are held, are recognized in investment gains.
(3) Impairment of financial assets
The Company assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicating a financial asset may be impaired, a provision is provided for the impairment.
An impairment test shall be made on the financial assets with significant single amounts. The financial assets which single amount is not significant shall be tested for asset impairment or be included in any combination of
financial assets with similar risk features for any impairment test. Where,upon independent test, the financial assets (including those financial assets with significant single amounts and those with insignificant amounts) has not been impaired, it shall be included in a combination of financial assets with similar risk features so as to conduct another impairment test. The financial assets which have suffered from an impairment loss in any single amount shall not be included in any combination of financial assets with similar risk features for any impairment test.
1) Impairment on held-to maturity investment, loans and receivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, the impairment loss recorded originally can be reversed. The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without provisions of impairment loss on the reserving date.
2) Impairment loss on available-for-sale financial assets
Where the fair value of the equity instrument investment drops significantly or not contemporarily according to the integrated relevant factors, an available-for-trade financial asset is impaired.
When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair value that had been recognized in capital reserve shall be removed and recognized in profit or loss. The amount of the cumulative loss that is removed shall be difference between the acquisition cost with deduction of recoverable amount less amortized cost, current fair value and any impairment loss on that financial asset previously recognized in profit or loss.
If, after an impairment loss has been recognized, there is objective evidence that the value of the financial asset is recovered, and it is objectively related to an event occurring after the impairment loss was recognized, the initial impairment loss can be reversed and the reserved impairment loss on available-for-trade equity instrument is recorded in the profit or loss, the reserved impairment loss on available-for-trade debt instrument is recorded in the current profit or loss.
The equity instrument where there is no quoted price in an active market, and whose fair value cannot be reliably measured, or impairment loss on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument shall not be reversed.
(4) Recognition and measurement of financial assets transfer
The Company derecognizes a financial asset when one of the following conditions is met:
1) the rights to receive cash flows from the asset have expired;
2) the enterprise has transferred its rights to receive cash flows from the asset to a third party under a
―pass-through‖ arrangement; or
3) the enterprise has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
If the enterprise has neither retained all the risks and rewards from the financial asset nor control over the asset, the asset is recognized according to the extent it exists as financial asset, and correspondent liability is recognized. The extent of existence refers the level of risk by the financial asset changes the enterprise is facing.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, (a). the carrying amount of the financial asset transferred; and (b) the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.
If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair value of those parts. The difference between (a) the carrying amount allocated to the part derecognized; and (b) the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to the part derecognized which has been previously recognized in other comprehensive income, is recognized in profit or loss.
For financial assets transferred in which the Company has continued involvement, the financial assets are accounted for in accordance with the following criteria:
a. if the risks and rewards associated with the ownership of the financial assets are transferred to the transferee, the Company de-recognises the financial assets;
b. if the risks and rewards associated with the ownership of the financial assets are retained by the Company, the Company continue to recognise the financial assets;
c. if the Company neither retain nor transfer the risks and rewards associated with the ownership of the financial assets, the Company accounts for the financial assets in accordance with the provisions present in previous paragraph with reference to whether the Company retains control of the financial assets.
(5) Classification and measurement of financial liabilities
TheCompany’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or loss and other financial liabilities. For financial liabilities at fair value through profit or loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating to other financial liabilities are included in the initial recognition amounts.
1) Financial liabilities measured by the fair value and the changes recorded in profit or loss
The classification by which financial liabilities held-for-trade and financial liabilities designed at the initial recognition to be measured by the fair value follows the same criteria as the classification by which financial assets held-for-trade and financial assets designed at the initial recognition to be measured by the fair value and their changes are recorded in the current profit or loss.
For the financial liabilities measured by the fair value and changes recorded in the profit or loss, fair values are adopted for subsequent measurement. All the gains or losses on the change of fair value and the expenses on dividends or interests related to these financial liabilities are recognized in profit or loss for the current period. 2) Other financial liabilities
Derivative financial liabilities that linked with equity instruments, which do not have a quoted price in an active market and their fair value cannot be measured reliably, is subsequently measured by cost Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition or amortization are recognized in profit or loss for the current period.
3) Financial guarantee contracts
For financial guarantee contracts that are not designated as at fair value through profit or loss,they are, after initial recognition, subsequently measured at the higher of: (i) the amount determined according to the principles of Accounting Standards for Business Enterprises No. 13 - Contingencies, and (ii) the amount initially recognized less the accumulated amortization determined according to the principles of Accounting Standards for Business Enterprises No. 14 - Revenue.
(6) Derecognition
The Company derecognizes a financial liability (or part of it) when the underlying present obligation (or part of it) is discharged or cancelled or has expired. An agreement between the Company (an existing borrower) and existing lender to replace original financial liability with a new financial liability with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. When the Company derecognizes a financial liability or a part of it, it recognizes the difference between the carrying amount of the financial liability (or part of the financial liability) derecognized the consideration paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.
(7) Derivatives and embedded derivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are substantially re-measured at fair value. The resulting gain and loss is recognized in profit or loss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely
related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss.
(8) Offsetting financial assets and financial liabilities
When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.
(9) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The consideration received from issuing equity instruments, net of transaction costs, are added to[shareholders’ /owners’] equity.
All types of distribution (excluding stock dividends) made by the Company to holders of equity instruments are deducted from[shareholders’/owners’] equity. The Group does not recognize any changes in the fair value of equity instruments.
4.8 Accounts receivable
The receivables by the Company includes account receivables, and other receivables.
(1) Criteria for recognition of bad debts:
The Company carries out an inspection on the balance sheet date. Where there is any objective evidence proving that the receivables have been impaired, an impairment provision shall be made:
1) A serious financial difficulty occurs to the issuer or debtor;
2) The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.;
3) The debtor will probably become bankrupt or carry out other financial reorganizations;
4) Other objective evidences showing the impairment of the receivables.
(2) Method for bad debts provision
1) Provisions of bad debts in account receivables that is individually significant.
Individual receivables equal to or higher than5% of total receivables are classified as receivables of individual significance.
For an account receivable that is individually significant, the asset is individually assessed for impairment, the
impairment loss is recognized at the difference between the present value of future cash flow less the carrying amount, and provision is made accordingly.
2) Provisions of bad debts in account receivables that individually insignificant items with similar credit risk characteristics that have significant risk:
A.Evidence of credit risk characteristics
Whether the financial asset is individually significant or not individually significant, it is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Such credit risk reflects the repayment of all due amount under the contract, and is related to the estimation of future cash flow expected to be derived from the assets.
Evidence of portfolios:
Item Basis
Receivables not individually assessed for impairment are categorised on the basis of
credit risk. Provision for bad debts for each category of receivables is recognised at
Categorisation by nature of receivables
the actual rate of loss for the previous year of the same or similar category bearing
similar credit risk characteristics after adjustment for the current year circumstances.
B.Provision by credit risk characteristics
During the Company impairment test, the amount of bad debts provisions is determined by the assessed result from the experience of historical loss and current economic status and the existing loss in the estimated account receivables according to the set of account receivables and credit risk characteristic.
Provisions for difference portfolios:
Item Provision
Categorisation by nature of receivables Percentage of carrying amount
a. Portfolio 1 by Aging analysis
Percentage of carrying amount for recognition of
Percentage of carrying amount for recognition of Category allowance for bad debt applicable to accounts
allowance for bad debt applicable to other receivables receivable
Categorisation by nature of
5% 5% receivables
3) Provisions of bad debts that is individually insignificant.
For the account receivables not individually significant, the Company assesses the account receivables individually for impairment when are of following characteristics: if there is objective evidence indicating the
impairment, the impairment loss is recognized at the difference between the present value of future cash flow less the carrying amount, and provision is made accordingly. For examples: receivables of individual insignificance bears differing credit risk characteristics to other receivables of individual insignificance account receivables with related parties; account receivables under litigations or arbitrations, or account receivables with obvious indication that debtor cannot fulfill the obligation of repayment.
(3) The reversal of bad debts provision
If there is objective evidence of recovery in value of account receivables, and the recovery can be related to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and recognized in profit or loss. However, the reversal shall not result in a carrying amount that exceeds what the amortized cost would have been had the impairment loss not been recognized at the date the impairment is reversed.
4.9 Inventories
(1) Classification of inventory
TheCompany’s inventory mainly include air materials and low-valueconsumables.。
(2) Valuation method of inventories upon delivery
Inventories are initially carried at the actual cost. The actual cost of inventories transferred out is assigned by using first-in, first out (FIFO) method.
(3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purpose of holding inventories and effect of post balance sheet events.
At the balance sheet date, inventories are measured at the lower of the cost and net realizable value. If the net realizable value is below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is determined normally by the difference of the cost of individual item less its realizable value. For large quantity and low value items of inventories, provision for decline in value is made based on categories of inventories. For items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same or similar end users or purposes, and cannot be practicably evaluated separately from other items in that product line provision for decline in value is determined on an aggregate basis.
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is
higher than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss for the period.
(4) The perpetual inventory system is maintained for stock system.
(5) Amortization method for low cost and short-lived consumable items and packaging materials.
Low cost and short-lived consumable items are amortized using immediate write-off method; packaging materials are amortized using immediate write-off method.
4.10 Long-term equity investments
(1) Determination of Investment cost
For a business combination involving enterprises under common control, the initial investment cost of the long-term equity investment shall be carrying value of the absorbingparty’s share of theshareholder’s equity of the party being absorbed at the date of combination.
For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services etc and other associated administrative expenses attributable to the business combination are recognized in profit or loss when they are incurred.
The transaction cost for the equity securities or liability securities issued by the acquirer in the business combination shall be recognized as initial amount of equity security or liability.
The equity investments other than the long-term equity through combination shall be initially measured by cost. The cost shall be recognized to the difference in the way of acquisition of long-term equity investment. Theses ways include the cash purchase price the Companythe Company actually paid, the fair value of equity security issued by the Companythe Company, value specified in the investment contract or agreement, the fair value or carrying value of the asset out in the transaction of non-monetary asset exchanges, and the fair value of the long-term equity investment.
Expenses, taxes and other necessary expenditures directly attributable to the acquisition of long-term equity investment are taken into investment cost.
(2) Subsequent Measurement
Cost method shall be adopted in a long-term equity investment where the investing enterprise does not have common control or significant influence over the investee, the investment is not quoted in an active market and its fair value cannot be measured reliably.
Where an investing enterprise can exercise common control or significant influence over the investee, a long-term investment shall be accounted for using the equity method.
When an investing enterprise can no longer exercise joint control or common control nor significant influence
over the investee, and its fair value cannot be measured reliably, a long-term investment shall be counted as financial asset ready-for trade.
A long-term equity investment where cost method is adopted in theCompany’s financial statements can exercise controls over the investee.
1) Cost method of accounting for long-term equity investments
Under the cost method, a long-term equity investment is measured at initial investment cost. Except for cash dividends or profits declared but not yet paid that are included in the price or consideration actually paid upon acquisition of the long-term equity investment, investment income is recognized in the period in accordance with the attributable share of cash dividends or profit distributions declared by the investee.
2) Equity method of accounting for long-term equity investments
Where the initial investment cost of a long-term equity investment exceeds the investingenterprise’s interest in the fair values of theinvestee’s identifiable net assets at the time of acquisition, no adjustment shall be made to the initial investment cost.
Where the initial investment cost of a long-term equity investment is less than the investingenterprise’s interest in the fair values ofinvestee’s identifiable net assets at the time of acquisition, the difference shall be charged to profit or loss for the current period, and the cost of the long-term equity investment shall adjusted accordingly.
Under the equity method, the Company recognizes its share of the net profit or loss of the investee for the period as investment income or loss for the period. The Group recognizes it share of theinvestee’s net profit or loss based on the fair value of theinvestee’s individual separately indentible assets, etc at the acquisition date after making appropriate adjustments to confirm with theCompany’s accounting policies and accounting period. Unrealized profits or losses resulting from theCompany’s transactions with its associates and joint ventures are recognized as investment income or loss to the extent that those attributable to theCompany’s equity interest are eliminated. However, unrealized losses resulting from theCompany’s transactions with its investees on the transferred assets, in accordance with "Accounting Standards for Enterprises No. 8 - Impairment of Assets", are not eliminated. Changes inowners’ equity of the investee other than net profit or loss are correspondingly adjusted to the carrying amount of the long-term equity investment, and recognized as other compressive income which is included in the capital reserve.
When the investee is recognized net losses, reduce the carrying value of long-term equity investments and long-term equity of net investment (in substance) in investee to zero. In addition, the Company has the obligations on additional losses, then the expected obligation as estimated liabilities and included in the current investment losses. Where the net profit from investee units, restoration confirm the amount of revenue sharing after offset the amount of unrecognized loss sharing.
For long-term equity investments in associates and joint ventures which had been held by the Company before its first time adoption of Accounting Standards for Business Enterprises, where the initial investment cost of a long-term equity investment exceeds theCompany’s interest in theinvestee’s net assets at the time of acquisition, the excess is amortized and is recognized in profit or loss on a straight line basis over the original remaining life.
3) Acquisition of minority interest
The difference between newly increased equity investment due to acquisition of minority interests and portion of net asset cumulatively calculated from the acquisition date is adjusted as capital reserve. If the capital reserve is not sufficient to absorb the difference, the excess are adjusted against returned earnings.
4) Disposal of long-term equity investment
Where the parent company disposes long-term investment in a subsidiary without a change in control, the difference in the net asset between the amount of disposed long-term investment and the amount of the consideration paid or received is adjusted to theowner’s equity. If the disposal of long-term investment in a subsidiary involves loss of control over the subsidiary, the related accounting policies in Note 4.2(2) applies. On disposal of a long-term equity investment, the difference between the proceeds actually received and receivable and the carrying amount is recognized in profit or loss for the period. For along-term equity investment accounted for using the equity method, the amount included in theowners’ equity attributable to the percentage interest disposed is transferred to profit or loss for the period.
For any retained interest, it shall be subsequently measured according to the related accounting policies in regard of long-term equity investments or financial assets as described above if its carrying amount is recognized as long-term equity investments or other related financial assets. Retroactive adjustment is made on the basis of relevant policies if the retained interests are settled from cost method to equity method. (3) Recognition of investee under common control or significant influence
Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities.
Common control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee held be the investing enterprise or other parties that are currently exercisable or convertible shall be considered.
(4) Impairment testing methods and recognition of impairment provision
The company assesses the long-term equity investment at the balance sheet date whether there is any indication of impairment. If any indication exists that an asset may be impaired, the enterprise shall estimate its recoverable value of the asset. If the recoverable value of the asset is less than its carrying amount, a provision for impairment loss of the asset is recognized accordingly.
Once an impairment loss is recognized, it shall not be reversed in a subsequent period.
4.11 Fixed assets
(1) The conditions of recognition
Fixed assets refers to the tangible assets that are held for the sake of producing commodities, rendering labor service, renting or business management and their useful life is in excess of one fiscal year.
(2) The method for depreciation
Fixed assets are stated at cost and consider the impact of expected costs of abandoning the initial measurement. From the following month of state of intended use, depreciation method of the straight-line method is used for different categories of fixed assets to take depreciation. The recognition of the classification, useful life and estimated residual rate are as follows:
Estimated residual
Category Expected useful life Depreciation(%)
value(%)
Houses and building 27-33 5.00 2.88-3.52
Key components and power supports of
15-20 5.00 4.75-6.33
aircraft engine
Replacement parts of aircraft body 6-8 0.00 12.5-16.67
Replacement parts of engine 3-5 0.00 20-33.33
Equipments, electronic devices and furniture 4-10 0-5.00 9.5-23.75
High value rotables 15-18 0.00 5.56-6.67
Transportation vehicles 5-10 5.00 9.5-19.00
Expected net residual value of fixed assets is the balance of the Company currently obtained from the disposal of the asset less the estimated costs of disposal amount, assuming the asset is out of useful life and state the expected service life in the end.
(3) Measurement and recognition of fixed assets
Impairment and provisions of fixed assets are disclosed on Note 4.16.
(4) Fixed Assets under finance leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred.
Fixed assets that are held under finance leases shall be depreciated by applying the same policy as that for the fixed assets owned by the Company. If it can be reasonably determined that the ownership of the leased assets can be obtained at the end of the lease period, the leased assets are depreciated over their useful lives; otherwise, the leased assets are depreciated over the shorter of the lease terms and the useful lives of the leased assets.
(5) Others
A fixed asset is recognized only when the economic benefits associated with the asset will probably flow to the Company and the cost of the asset can be measured reliably. Subsequent expenditure incurred for a fixed asset that meet the recognition criteria shall be included in the cost of the fixed asset, and the carrying amount of the component of the fixed asset that is replaced shall be derecognized. Otherwise, such expenditure shall be recognized in profit or loss in the period in which they are incurred.
The revenue from selling or transferring, or disposing a fixed asset is booked into profit and loss after deduction of carrying value and related tax.
The Company conducts a review of useful life, expected net realizable value and depreciation methods of the fixed asset at least on an annual base. Any change is regarded as change in accounting estimates.
4.12 Construction in progress
Construction in progress is measured at its actual cost. The actual costs include various construction expenditures during the construction period, borrowing costs capitalized before it is ready for intended use and other relevant costs. Construction in progress is transferred to a fixed asset when it is ready for intended use. Testing method for provision impairment of construction in progress and accrued method for provision impairment please refer to Note 4.16.
4.13 Borrowing costs
Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currency borrowings.
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized. The amounts of other borrowing costs incurred are recognized as an expense in the period in which they are incurred. Qualifying assets are asset (fixed assets, investment property and inventories, etc.) that necessarily take a substantial period of time for acquisition, construction or production to get ready for their intended use or sale.
Where funds are borrowed for a specific-purpose, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed for a general-purpose, the amount of interest to be capitalized on such borrowings is determined by applying a weighted average interest rate to the weighted average of the excess amounts of accumulated expenditure on the asset over and above the amounts of specific-purpose borrowings
During the capitalization period, exchange differences related to a specific-purpose borrowing denominating in foreign currency are all capitalized. Exchange differences in connection with general-purpose borrowings are recognized in profit or loss in the period in which they are incurred.
Assets qualified for capitalization are the fixed assets, investment properties or inventories which need a long time of construction or production activities before ready for intended used or sale.
Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted by activities other than those necessary to prepare the asset for its intended use or sale, when the interruption is for a continuous period of more than 3 months. Borrowing costs incurred during these periods recognized as an expense for the current period until the acquisition, construction or production is resumed.
4.14 Intangible assets
(1) Intangible asset
The term―intangibleasset‖ 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.
(2) the expenditure of research and development
The expenditures for its internal research and development projects of the Company shall be classified into research expenditures and developmentexpenditures.
The research expenditures shall be recorded into the profits and losses of the current period when they are incurred.
Development expenditures in internal research and development projects shall be recognized as intangible assets where they satisfy all of the following conditions:
①Technical feasibility of completing the intangible asset so that it will be available for use or sale;
②Intention to complete the intangible asset and use or sell it;
③How the intangible asset will generate economic benefits, including the ability to demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;
④Availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;
⑤Ability to measure reliably the expenditure that is attributable to the intangible asset during its development. The expenses which can not be distinguished between research and development stage, shall be recorded into the profit or loss for the current period.
(3) Impairment testing methods and recognition of impairment provision of intangible assets
Impairment and provisions of intangible assets are disclosed on Note 4.16.
4.15 Deferred charges
Deferred charges represent expenses incurred that should be borne and amortized over the current and subsequent period (together of more than one year). Deferred charges are amortized by using straight line method. Such as expenses forpilots’ initial trainings, those expenses are amortized at 10 years according to their benefit period respectively. When a pilot is transferred from the Company, the cost of transfer is the unamortized part of the original expenditure.
4.16 Impairment of non-current non-financial assets
Non-financial assets with non-current nature include fixed assets, construction in progress, intangible assets with definite useful lives, investment properties measured by cost methods and long-term equity investment on subsidiaries, jointly operations. The Company assesses whether there are any indicators of impairment for all
non-financial assets at the balance sheet date, and impairment test is carried out and recoverable value is estimated if such an indicator exits. Goodwill and intangible assets with indefinite useful lives, as well as intangible assets not ready for use, are tested for impairment annually regardless of indicators of impairment. Impairment of loss is calculated and provisions taken by the difference if the recoverable value of the assets is lower than the book value. The recoverable value is the higher of estimated present value of the future expected cash flows from the asset and net fair value of the asset less disposed cost. The fair value of asset is determined by the sales agreement price within anarm’s length transaction. In case there is no sales agreement, but there is active market of assets, the fair value can be determined by the selling price. If there is neither sales agreement nor active market, the fair value of the asset can be estimated based on the best information obtained.
Disposal expenses include expenses related to the legislation, taxes, transportations and the direct expense for the asset to be ready for sale. When calculating the present value of expected future cash flows from an asset or asset Group, the management shall estimate the expected future cash flows from the asset or asset Group and choose a suitable discount rate in order to calculate the present value of those cash flows.
Provision for asset impairment is calculated and determined on the individual basis. If the recoverable of individual asset is hard to estimate, the recoverable amount can be determined by the asset Group where subject asset belongs. Asset Group is the smallest set of assets that can have cash flow in independently. The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the present value of the future expected cash flows from the asset Groups or sets of asset Groups to which the goodwill is allocated. Estimating the present value requires the Company to make an estimate of the expected future cash flows from the asset Groups or sets of asset Groups and also choose a suitable discount rate in order to calculate the present value of those cash flows.
Once the loss from above asset impairment is recognized, the recoverable part cannot be reserved in the subsequent periods.
4.17 Revenue
(1) Revenue from rendering of service
① The Company company recognise revenue from rendering of air service for carriage of passengers when the service is rendered or when an unused ticket expires. The sale of a ticket does not constitute revenue. An unused ticket expires on the annual anniversary of its sale. Tickets sold but of which the service is not yet rendered are recognised in current liabilities as Advances from customers. If service is rendered through code sharing, revenue arising from the service provision is apportioned amongst parties to the code sharing agreement. The revenue arising from code sharing is also recognised when the service is rendered.
② The Company company recognise air cargo revenue from rendering of air service for carriage of cargo
when the service is rendered
③ Revenue arising from other air service rendering is recognised when the service rendering is completed. (2) Royalty Revenue
According to the contract or agreement, the revenue is recognized on an accrual basis.
(3) Interest Income
The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the enterprise's cash is used by others and the actual interest rate.
4.18 Government Grants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Company at no consideration, excluding the capital invested by the government as equity owner. Government grant can be classified as grant related to the assets and grants related to the income. Government grants obtained by the Company which are relevant to construction or acquisition of long-term assets are classified as asset-related government grants; all other government grants are classified as revenue-related government grants. For government grants without speficied beneficiary, the Company performs classification in accordance with the following criteria.
(1) Where a grant is obtained for a specified project, the grant is spitted into asset-related and revenue related portions proportionate to the project's investment to expense ratio; the classification is reviewed on each balance sheet date and revised if necessary.
(2) Where a grant is obtained for general purpose, the grant as a whole is classified as a revenue-related government grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a nominal amount is recognized immediately in profit or loss for the period.
A government grant related to an asset is recognized as deferred income, and evenly amortized to profit or loss over the useful life of the related asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent period, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or loss for the period.
For repayment of a government grant already recognized, if there is a related deferred income, the repayment is offset against the carrying amount of the deferred income, and any excess is recognized in profit or loss for the period. If there is no related deferred income, the repayment is recognized immediately in profit or loss for
the period.
4.19 Deferred tax assets and deferred tax liabilities
(1) Income tax for the current period
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, according to the requirements of tax laws. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects at the balance sheet date, to recover the assets or settle the liabilities.
At the balance sheet date, current income tax liabilities or assets for the current and prior periods, are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. The calculation for income tax expenses in the current period is based on the taxable income according to the related tax laws after adjustment to the accounting profit of the reporting period.
(2) Deferred income tax assets and liabilities
For temporary differences between the carrying amount of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognized using the balance sheet liability method.
For temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized.
For taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax liability related is recognized except where the Company is able to control the timing of reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
All deferred income tax liabilities arising from taxable temporary differences except the ones mentioned above are recognized.
For temporary deductible differences associated with the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset is recognized.
For taxable temporary deductible differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax asset related is recognized if it is impossible to reversal the temporary difference in the foreseeable future, or it is not probable to obtain taxable income which can be used
for the deduction of the temporary difference in the future.
Except mentioned above, the Company recognizes other deferred income tax assets that can deduct temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized.
For the deductible losses and tax credit that can be carried forward, deferred tax assets for deductible temporary differences are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates according to tax laws, that are expected to apply in the period in which the asset is realized or the liability is settled.
At the balance sheet date, the Company reviews the carrying amount of deferred tax assets. If it is no longer probable that sufficient taxable profit will be available in future periods to allow the benefits of the deferred tax assets to be used, the Company reduces the carrying amount of deferred tax assets. The amount of such reduction is reversed when it becomes probable that sufficient taxable profit will be available
(3) Income tax expenses
Income tax expenses consist of current income tax and deferred income tax.
The expenses from income tax and deferred income tax, as well as the revenue, shall be recorded into profit or loss in current accounting period, except expense for income tax of the current period and deferred income tax that booked into other income or equity and adjusted carrying value of deferred income tax goodwill arose from business combination.
(4) Income tax offset
When we have the legal right, and have intended to, to make settlement with net amount, or through the asset acquisition and liability fulfillment simultaneously, the Company shall present the net value from the offset between current income tax asset and current income tax liability in the financial statement.
When the Company has the legal right to make a settlement with the current income tax asset and current income tax liability, and the deferred income tax asset and deferred income tax liability are related to the same taxable subject under the same tax payer, or related to different taxable subject, but the intension of net value settlement in regard of the current income tax asset and current income tax liability, the Company shall present net value after the offset of deferred income tax asset and deferred income tax liability.
4.20 Leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred. An operating lease is a lease other than a finance lease. (1) The Company as Lessee under operating Lease
Lease payments under an operating lease are recognized by a lessee on a straight-line basis over the lease
term, and either included in the cost of the related asset or charged to profit or loss for the current period. The contingent rents shall be recorded in the profit or loss of the period in which they actually arise.
(2) The Company as Leasor under operating Lease
Lease income from operating leases shall be recognized by the leasor in profit or loss on a straight-line basis over the lease term. Initial direct cost of significance in amount shall be capitalized when incurred. If another basis is more systematic and rational, that basis may be used. Contingent rents are credited to profit or loss in the period in which they actually arise.
(3) The Company as Lessee under financing Lease
For an asset that is held under a finance lease, at the lease commencement, the leased asset is recorded at the lower of its fair value at the lease commencement and the present value of the minimum lease payments, and the minimum lease payment is recorded as the carrying amount of the long-term payables; the difference between the recorded amount of the leased asset and the recorded amount of the payable is accounted for as unrecognized finance charge, Initial direct costs incurred by the lessee during the process of negotiating and securing the lease agreement shall be added to the amount recognized for the leased asset.
The net amount of minimum lease payment deducted by the unrecognized finance shall be separated into long-term liabilities and long-term liability within one year for presentation.
Unrecognized finance charge shall be computed by the effective interest method during the lease term. Contingent rent shall be booked into profit or loss when actually incurred.
(4) In the case of the leasor of a financing lease
For an asset that is leased out under a finance lease, the aggregate of the minimum lease receipts at the inception of the lease and the initial direct costs is recorded as a finance lease receivable, and unguaranteed residual value is recorded at the same time; the difference between the aggregate of the minimum lease receipt, initial direct costs, and unguaranteed residual value, and the aggregate of their present values, is recognized as unearned finance income, which is amortized using the effective interest rate method over each period during the lease term.
Finance lease receivable less unearned finance income shall be separated into long-term liabilities and long-term liability within one year for presentation.
Unearned finance income shall be computed by the effective interest method during the lease term. Contingent rent shall be credited into profit or loss in which actually incurred.
4.21 Assets held-for-sale
The Company has made decision on disposal of some non-current assets, and signed irrecoverable transferring agreements with buyers. The transaction is probably to be completed with one year. If so, the non-current asset shall be counted as an asset ready-for-sale, not depreciated or amortized, and shall be
measured by the lower of carrying amount and faire value less net value of disposal expenses. Non-current assets ready-for-sale includes individual asset and disposal group. If disposal group is an asset group, and has allocated goodwill acquired during the combination according to the Accounting Standard for Business Enterprises No. 8 - Impairment, or. the disposal Group is an operation in the asset group, the disposal group includes goodwill in the business combination.
Where an asset or a disposal group is classified as held-for-trade, but cannot satisfy the condition of non-current asset ready-for-trade, the Company shall derecognize it as held-for-trade, and measure it by the lower of the followings:
(1) the carrying amount of the asset or disposal Group before it is classified as held-for-trade, the value after the adjustment of depreciation, amortization or impairment recognized under the assumption that it is not classified as held-for-trade;
(2) the recoverable value on the date when decided not to trade any more.
4.22 Employee Benefits
During the accounting period of anemployee’ providing services to the Company, the Company recognizes the compensation payable as liabilities.
The Company participates in the employees social security system set up by government agencies, including pensions, medical insurance, housing fund and other social security system, and the corresponding expenditures are included in the cost of related assets or the profit or loss.
When an enterprise terminates the employment relationship with employees before the end of the employment contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision shall be recognized for the compensation arising from termination of employment relationship with employees, with a corresponding charge to the profit or loss for the current period. The enterprise cannot unilaterally withdraw from the termination plan or the redundancy offer.
The early retirement plan adopts the same principles of termination benefits. Salaries and social insurance (from the date of ceasing services to the date of normal retirement) are paid by the Company, subject to the conditions to be recognized in profit or loss (termination benefits).
4.23 Regular repair and substantial repair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is accounted for through profit or loss for the period in which it is incurred. Substantial repair expenditure eligible for capitalisation is capitalised when incurred and recognised as replacement cost of non-current assets and depreciated over a reasonable length of time. Substantial repair expenditure of aircrafts under an operating lease incurred before the lease expiry date is amortised on the basis of air hours over the lease period.
4.24 Changes in major accounting policies and accounting estimates
(1) Change of accounting policies
Monetary unit: CNY The contents and reasons for the changes of approval procedure The names of the The accounting policies affected items affected amounts Before July 1, 2013, the inventories are valued
Decisions shall take Due to variety within the N/A using the First-In-First-Out method when sending
effect upon approval by inventory, and frequent
out.
the fourth interim board sending and receiving
The SAP software was used on July 1, 2013 for the meeting of the fifth factors, it is not feasible to
purpose of establishment of engineering and session of the Board of determine the cumulative
financial integrated management, and Directors, which was held effects resulting from
enhancement of thecorporation’s on 10th July, 2013. changes in accounting
core competence . principles. According to
The company believes that, with the adopting of the
《Accounting Standards
moving weighted average method instead of the for Enterprises- Changes
First-In-First-Out method, the inventory value can of Accounting Policies
be adjusted timely, the inventory unit price and the and Accounting Estimates
total inventory amount can be promptly reflected. and ErrorCorrection》, the
prospective approach will
Under the moving weighted average method, the
be implemented
inventory cost sending out comes close to the true
beginning on July 1,
cost and the ending inventory cost is close to the
2013.
current market price, and the inventory price risk
can be reduced.
The moving weighted average method is employed
by the SAP software. The
changes in accounting policies to comply with the
SAP software can ensure the proper functioning of
the software and improve the management level.
With the purpose of ensuring timeliness and
accuracy of accounting records, the moving
weighted average method shall
come into force as of July, 2013.
(2) Change of accounting estimates
There is no significant change of accounting estimates for the Company during the reporting period.
4.25 Correction of prior period errors
There is no significant change of previous accounting errors for the Company during the reporting period. 4.26 Significant accounting judgments and estimates
The Company is required to make judgments, estimates and assumptions about the carrying amounts of items in the financial statements that cannot be measured accurately, due to the internal uncertainties of operation activities. These judgments, estimates and assumptions are based on historical experiences of theCompany’s management as well as other factors that are considered to be relevant. These judgments, estimates and assumptions may affect value of the financial statements in revenue, expenses, assets and liabilities and the disclosure of contingency at the balance sheet date. However, the result derived from those uncertainties in estimates may lead significant adjustments to the carrying amounts of the assets or liabilities affected in the future.
The Company has reviews the judgments, estimates and assumptions regularly on the basis of going concern. Where the changes in accounting estimates only affect the period when changes occurred, and they are recognized within the same period. Where the changes in accounting estimates affect both current period and future period, the changes are recognized within the period of change and future period.
At balance sheet date, the followings are the significant areas where the Company needs to make judgment, estimates and assumptions over the value of items in the financial statements:
(1) Classification of lease
The Company classifies leases as operating lease and financing lease according to the rule stipulated in the Accounting Standard for Business Enterprises No. 21--Leasing-. The management shall make analysis and judgment on whether the risks and rewards related to the title of leased assets has been transferred to the leaser, or whether the Company has substantially held the risks and rewards related to the ownership of leased assets.
(2) Allowance for bad debt
According to the relevant accounting policies of the Company in receivables, allowance method is used for baddebt’s calculation. The impairment of receivables is calculated based on the assessment of recoverable of receivables. Assurance of receivable impairment needs judgments and estimations from the management. The difference between actual results and original estimates shall have impact on the carrying amount of receivables and receivable bad debt provisions or the reverse during the change of estimation.
(3) Impairment of inventories
The Company measures inventories by the lower of cost and realizable net value according to the accounting
policies in regard of inventories and provisions for decline in value of inventories is made if the cost is higher than their net realizable value, and obsolete and slow-movement inventories. Inventories decline in value to net realizable value is the estimated selling price in the ordinary course of business. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect of post balance sheet events. The difference between the actual result and the original estimates shall have impact on reverse of the carrying amount of the inventories and their decline in value or provisions during the period of change.
(4) The fair value of financial instruments
For a financial instrument which has no active market, the Company establishes fair value by using various valuation methods, including of discounted cash flow analysis model. The Company needs to estimate future cash flow, credit risk, volatility and relationship during the valuation and choose appropriate discount rate. Such assumptions have uncertainties and their changes shall have impact on the fair value of financial instruments.
(5) Impairment of non-financial, non-current assets
The Company assesses whether there are any indicators of impairment for all non-current assets other than financial assets at the balance sheet date. For an intangible asset that has indefinite useful life, impairment test is made in addition to the annual impairment test if there is any indication of impairment. For non-current assets other than financial assets, impairment test is made when there is any indication that its account balance cannot be recovered.
Impairment exists when the recoverable amount of an asset is the higher of its fair value less cost of disposal and present value of the future cash flows expected to be derived from the asset.
Net value between the difference of fair value and disposal cost is determined by reference of the price of similar product in a sale agreement in anarm’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 theasset’s production, selling price and relevant operating expenses, and discount rate used to calculate present value. All available materials that are considered to be relevant shall be used in the estimation of recoverable value. These materials include estimations of production, selling price and operating expenses based on reasonable and supportable assumptions.
The Company makes an impairment test for goodwill at least at each year end. This requires an estimation of present value of future cash flow of the assets or assets group where goodwill has been allocated. The Company shall makes estimation on the future cash flow derived from assets or assets group and determine an appropriate discount rate for the present value of future cash flow when the estimation of present value of future cash flow is made.
(6) Depreciation and amortization
Investment property, fixed assets and intangible assets are depreciated and amortized using the straight-line method over their useful lives after taking into account residual value. The useful lives are regularly reviewed to determine the depreciation and amortization costs charged in each reporting period. The useful lives are determined based on historical experience of similar assets and the estimated technical changes. If there is an indication that there has been a change in the factor used to determine the depreciation or amortization, the rate of depreciation or amortization is revised.
(7) Deferred tax assets
The Company shall recognize all unused tax losses as deferred tax assets to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. This requires the management of the Company make a lot of judgments over the estimation of time period, value and tax planning strategies when future taxable profit incurs so that the value of deferred tax assets can be determined.
(8) Income tax
There are some transactions where ultimate tax treatments and calculations have uncertainties in theCompany’s everyday operation. Whether it is possible for some items to make expenditure before tax needs approval from competent tax authorities. If there is any difference between finalized determination value and their initial estimations value, the difference shall have the impact on the income tax and deferred income tax of the current period during the final determination.
(9) Aircraft operating lease and engine overhaul expenses
Aircraft operating lease and engine overhaul expenses are accrued and charged to profit or loss in accordance with the expected maintenance cycle, based on flight hours, flight cycles overhaul period and the amount of the cost of repairs which may occur. These estimates are largely based on past historical data about the same or similar types of aircraft and engines repairance. The withholding amount and overhaul costs may be affected by different judgments and estimates and affect current profit or loss.
Note 5 Taxation
5.1 Major taxes and tax rate
Tax Tax rate(%)
The Company pays the value-added tax based on value-added amount from sale of Value Added Tax goods or rendering of services, which will be subject to deduction of the input tax credit, and the rate of value-added tax of the main goods is11%.
Business Tax Business tax rate is the3%-5% of taxable income
Tax Tax rate(%)
Enterprise income tax Income tax is calculated with the ratio of25%.
Civil aviation development fund shall be calculated using the rates set out within Civil Aviation Development Fund applicable to the relevant category of flight routes, maximum departure weight and flight distance adopted by the civil aviation industry.
Prior to 1 August 2013, revenue arising from air transportation was taxable for business tax at the rate of3%. As from 1 August 2013, value added tax, instead of business tax, became chargeable on such revenue at the rate of11% in accordance with the Tax Policy Concerning Nationwide Implementation of VAT Pilot Program for Transport and Modern Services Sectors (Cai Shui[2013] No. 37).
5.2 Tax incentives
5.2.1. Revenue earned by domestic individuals and incorporation domiciled in the PRC for the provision of international transportation services is exempted for operating tax purposes as from January 1st, 2010 as provided byCaishui[2010]No.8(财政部国家税务总局关于国际运输劳务免征营业税的通知) 5.2.2. According to CAI SHUI[2013] No. 37 (Circular 37) Notice on Tax Policy Concerning Nationwide Implementation of VAT Pilot Program for Transport and Modern Services Sectors, as from 1 August 2013, the zero VAT rate applies to international transport services provided by any entity or individual within the territory of the people's republic of china (hereinafter referred to as within chinese territory), foreign research and develop services, roundtrip transportation services between Hongkong, Marcau,and Taiwan, as well as transport services provided in Hongkong, Marcau, and Taiwan.
5.2.3. As provided byCaiShui[2011]No.48(财税[2011]48号《关于跨境设备租赁合同继续实行过渡性营业税免税政策的通知》) jointly issued by the Ministry of Finance and the State Adnimistration of Taxation on June 30, 2011 and approved by the State Council, the transitional operating tax exemption applicable to revenue received by overseas leasor(s) to lease contracts (applicable to both financing lease and operating lease) of machinery and equipment import leasing involving domestic leasee(s) and overseas leasor(s) entered into prior to and remaining in force as at December 31, 2008 continues to apply from January 1, 2010 to the expiry date of the relevant contract.
5.2.4. Notice of the General Administration of Customs. CAAC on issuing thepolicies[2004]No.43(财关税[2004]43号《财政部国家税务总局关于调整国内航空公司进口飞机有关增值税政策的通知》), upon the approval of the State Council on October 01, 2004, import VAT of only4% will be levied on passenger and freight planes with an unladen weight of 25 tons or more (hereinafter referred to as―planes‖) imported by domestic airline companies. As provided byCaiShui[2013]No.53, the tax rate of imported planes, which were obligated to be levied at a reduced tax rate of4%, shall be adjusted to5%. Note 6 Business combination and consolidated financial statements
6.1 Subsidiaries
6.1.1 Subsidiaries acquired through establishment or investment
Unit: CNY ten thousand yuan Registered Scope of
Subsidiary Type of subsidiary Place of registration Nature of operation
capital operation
Qingdao International Strorage and
Air Logistics Centre ground logistics
Wholly-owned
Co., Ltd Qingdao, Shandong Logistics and storage
3,000.00
for aero cargo,
Subsidiary
(hereafter, Qingdao electionic
Logistics) commerce, etc.
(Continued)
Balance of
Type of Acutal investment as other de facto
Subsidiary Legal representative Institution code
incorporation at the reporting date investment in
subsidiary
Qingdao International
Air Logistics Centre
Limited liability
Co., Ltd SU, Zhongmin 73349654-1 4,832.32 0.00
company
(hereafter, Qingdao
Logistics)
(Continued)
Equity attributable to minority interst for
Shareholding Voting right Minority
Subsidiary Consolidation set-off of profit or loss attributable to Note
(%) (%) interests
minority intterest
Qingdao
100.00 100.00 Yes 0.00 0.00
Logistics
6.1.2 Subsidiaries acquired through business combination not under common control
Unit: CNY ten thousand yuan
Nature of
Subsidiary Type of subsidiary Place of registration Registered capital Scope of operation
operation
Qingdao Feisheng Ddevelopment and
International Aviation application of civil
Training Technology Wholly-owned aviation new
Qingdao, Shandong Pilot training 5,154.55
Development Co., Ltd Subsidiary technology, pilot
(hereafter, Qingdao training and related
Feisheng) consultancy
(Continued)
Balance of
Type of Acutal investment as other de facto
Subsidiary Legal representative Institution code
incorporation at the reporting date investment in
subsidiary
Qingdao Feisheng
International Aviation
Training Technology Limited liability
SONG, Yuxia 72557262-0 5,767.75 0.00
Development Co., Ltd company
(hereafter, Qingdao
Feisheng)
(Continued)
Equity attributable to minority
Shareholding Voting right Consolidatio Minority
Subsidiary interst for set-off of profit or loss Note
(%) (%) n interests
attributable to minority intterest
Qingdao Feisheng 100.00 100.00 Yes 0.00 0.00
6.2 Change of scope of consolidation
No change of scope of consolidation from last year.
Note 7 Notes to significant elements of the financial statements
Unless otherwise stated, the meaning of "B/f", "C/f", "Current year", "Prior year" in the following notes (incl. notes to significant elements of the financial statements is "1st January 2013", "31st December 2013", "the year ended 31st December 2013", and "the year ended 31st December 2012" respectively.
7.1 Monetary funds
C/f B/f
Item
Currency Exchange CNY Currency Exchange CNY amount rate amount amount rate amount Cash at hand: 348,205.99 349,489.05 - CNY — — 258,386.68 — — 277,891.69 USD 13,137.00 6.0969 80,094.98 4,881.63 6.2855 30,683.48 GBP 308.55 10.0556 3,102.66 1,658.55 10.1611 16,852.69 Others — — 6,621.67 — — 24,061.19 Bank deposit: 444,168,730.31 155,038,253.92 - CNY — — 441,037,854.80 — — 144,719,592.51 USD 444,224.11 6.0969 2,708,389.97 1,424,159.60 6.2855 8,951,555.18 Others — — 422,485.54 — — 1,367,106.23 Other monetary funds: 5,334.91 30,000.00 - CNY — — — — — 30,000.00 USD 875.02 6.0969 5,334.91 — — — Total 444,522,271.21 155,417,742.97 7.2 Accounts receivables
7.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance
and subject to individual impairment 179,936,813.57 70.72 0.00 0.00 assessment
Accounts receivable subject to impairment
assessment by portfolio
Portfolio by nature 60,090,747.20 23.62 3,004,537.36 5.00 Subtotal 60,090,747.20 23.62 3,004,537.36 5.00
Accounts receivable of individual insignificance
but subject to individual impairment 14,418,242.31 5.66 916,508.05 6.36 assessment
Total 254,445,803.08 100.00 3,921,045.41 1.54 (Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance
and subject to individual impairment 137,210,577.33 72.52 0.00 0.00 assessment
Accounts receivable subject to impairment
assessment by portfolio
Portfolio by nature 43,875,679.81 23.19 2,193,763.64 5.00 Subtotal 43,875,679.81 23.19 2,193,763.64 5.00 Accounts receivable of individual insignificance
but subject to individual impairment 8,114,191.72 4.29 916,508.05 11.30 assessment
Total 189,200,448.86 100.00 3,110,271.69 1.64 7.2.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 240,499,205.27 94.52 181,367,393.86 95.86 1 to 2 years 7,722,963.06 3.04 3,699,462.88 1.96 2 to 3 years 2,163,566.48 0.85 1,121,571.85 0.59 Over 3 years 4,060,068.27 1.59 3,012,020.27 1.59 Total 254,445,803.08 100.00 189,200,448.86 100.00 7.2.3 Allowance for bad debt
① Accounts receivable of individual significance and subject to individual impairment assessment
Rate of allowance
Debtor Carrying amount Allowance for bad debt Reason for allowance(%)
No indication of impairment Air China 123,439,238.90 0.00 0.00
upon individual assessment No indication of impairment BSP-CHINA 56,497,574.67 0.00 0.00
upon individual assessment Total 179,936,813.57 0.00 0.00
② Accounts receivable subject to impairment assessment by portfolio
Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance(%) Allowance for bad debt Portfolio by nature 60,090,747.20 5.00 3,004,537.36 Total 60,090,747.20 5.00 3,004,537.36③ Accounts receivable of individual insignificance but subject to individual impairment assessment
Allowance for bad Rate of
Debtor Carrying amount Reason for allowance debt allowance(%)
BSP-JAPAN No indication of impairment 320,905.02 0.00 0.00
upon individual assessment BSP-TAIWAN No indication of impairment 2,149,104.94 0.00 0.00
upon individual assessment UATP No indication of impairment 1,770,413.66 0.00 0.00
upon individual assessment Accounting Center of China Aviation No indication of impairment 9,261,310.64 0.00 0.00
Limited Company upon individual assessment CR Airways Non recoverable upon
916,508.05 100.00 916,508.05
individual assessment
Total 14,418,242.31 6.36 916,508.05
7.2.4 Accounts receivable owed by investors holding5% or more of the shares of the Company
Investor C/f B/f
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt Air China 123,439,238.90 0.00 54,927,044.11 0.00 Total 123,439,238.90 0.00 54,927,044.11 0.00 7.2.5 Top five accounts receivable
Relationship to the % of total accounts Debtor Amount Age
Company receivable Air China Related party 123,439,238.90 Within 1 year 48.51 BSP-CHINA Third party 56,497,574.67 Within 1 year 22.20 Accounting Center of China Aviation
Third party 9,261,310.64 Within 1 year
Limited Company 3.64 Air China Cargo Co., Ltd. Related party 2,585,423.47 Within 1 year 1.02 Hainan Airlines Company Limited Third party 2,360,400.00 Within 1 year 0.93 Total 194,143,947.68 76.30 7.2.6 Related party balances
See Note 8.6 Related party balances for details.
7.3 Prepayments
7.3.1 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 87,515,232.08 99.24 56,117,454.43 98.58 1 to 2 years 87,000.00 0.10 163,289.18 0.29 2 to 3 years 2,315.50 0.00 159,468.60 0.28 Over 3 years 577,493.40 0.66 486,993.40 0.85 Total 88,182,040.98 100.00 56,927,205.61 100.00 7.3.2 Top five prepaid suppliers
Relationship to the Reason for pending Supplier Amount Age
Company settlement Prepayment for aircraft Supplier#1 Third party 22,053,240.02 Within 1 year
lease rental
Supplier#2 Third party 7,112,809.59 Within 1 year Prepayment for aircraft
lease rental
Prepayment for aircraft Supplier#3 Third party 6,835,033.31 Within 1 year
lease rental
Prepayment for aircraft Supplier#4 Third party 5,542,565.51 Within 1 year
lease rental
Prepayment for aircraft Supplier#5 Third party 5,355,323.68 Within 1 year
lease rental
Total 46,898,972.11
7.3.3 No prepayment was owed by investors holding5% or more of the shares of the Company.
7.4 Dividends receivable
Current year Current year Reason for Indication of Item B/f C/f
increase decrease unsettlement impairment Dividends receivable within 1 year 0.00 16,772,701.21 2,447,115.15 14,325,586.06
including:
TravelSky Technology Limited 0.00 1,735,051.50 1,735,051.50 0.00
Payment
Sichuan Airlines 0.00 14,325,586.06 0.00 14,325,586.06 No pending
Shandong International Airport
0.00 712,063.65 712,063.65 0.00
Company Limited
Total 0.00 16,772,701.21 2,447,115.15 14,325,586.06
7.5 Other receivables
7.5.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
178,108,064.87 51.89 101,551,717.65 57.02 subject to individual impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 112,247,264.53 32.70 5,612,363.23 5.00 Subtotal 112,247,264.53 32.70 5,612,363.23 5.00
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual insignificance but
52,914,555.92 15.41 0.00 0.00 subject to individual impairment assessment
Total 343,269,885.32 100.00 107,164,080.88 31.22 (Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
170,529,977.31 46.45 109,051,717.65 63.95 subject to individual impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 117,991,367.19 32.14 5,899,568.36 5.00 Subtotal 117,991,367.19 32.14 5,899,568.36 5.00 Other receivables of individual insignificance but
78,577,743.62 21.41 0.00 0.00 subject to individual impairment assessment
Total 367,099,088.12 100.00 114,951,286.01 31.31 7.5.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 139,365,183.80 40.60 156,252,301.80 42.56 1 to 2 years 23,296,453.58 6.79 9,668,933.94 2.64 2 to 3 years 5,178,629.05 1.51 15,390,105.67 4.19 Over 3 years 175,429,618.89 51.10 185,787,746.71 50.61 Total 343,269,885.32 100.00 367,099,088.12 100.00 7.5.3 Allowance for bad debt
① Other receivables of individual significance and subject to individual impairment assessment
Rate of
Allowance for bad
Debtor Carrying amount allowance Reason for allowance debt
(%)
Impaired collectibility Shandong Rainbow Commercial Jet Co.,
101,551,717.65 101,551,717.65 100.00 identified upon individual Ltd.
assessment
No indication of impairment CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00 upon individual
assessment
No indication of impairment Debtor#1 17,901,423.94 0.00 0.00 upon individual
assessment
No indication of impairment Debtor#2 17,300,360.00 0.00 0.00 upon individual
assessment
Total 178,108,064.87 101,551,717.65 57.02
② Other receivables subject to impairment assessment by portfolio
Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance(%) Allowance for bad debt Portfolio by nature 112,247,264.53 5.00 5,612,363.23 Total 112,247,264.53 5.00 5,612,363.23③ Other receivables of individual insignificance but subject to individual impairment assessment
Rate of allowance
Debtor Carrying amount Allowance for bad debt Reason for allowance(%)
No indication of impairment Air China 13,047,895.61 0.00 0.00
upon individual assessment No indication of impairment Debtor#1 185,361.00 0.00 0.00
upon individual assessment Debtor#2 166,824.90 0.00 0.00 No indication of impairment
Rate of allowance
Debtor Carrying amount Allowance for bad debt Reason for allowance(%)
upon individual assessment No indication of impairment Debtor#3 469,581.20 0.00 0.00
upon individual assessment No indication of impairment Debtor#4 490,736.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#5 617,870.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#6 4,942,960.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#7 3,262,353.60 0.00 0.00
upon individual assessment No indication of impairment Debtor#8 4,238,588.20 0.00 0.00
upon individual assessment No indication of impairment Jinan Customs 11,472,711.51 0.00 0.00
upon individual assessment No indication of impairment Capital Airport Customs 14,019,673.90 0.00 0.00
upon individual assessment Total 52,914,555.92 0.00 0.00
7.5.4 Other receivables owed by investors holding5% or more of the shares of the Company
C/f B/f
Investor
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt Air China 13,047,895.61 0.00 9,336,264.20 0.00 Total 13,047,895.61 0.00 9,336,264.20 0.00 7.5.5 Top five other receivables
Relationship to the % of total other Debtor Amount Age
Company receivables Shandong Rainbow Commercial Jet Co.,
Related party 101,551,717.65 Over 3 years 29.58 Ltd.
Debtor#1 Third party 61,213,069.70 Within 1 year 17.83
Relationship to the % of total other Debtor Amount Age
Company receivables CBD-leasing Co., Ltd. Third party 41,354,563.28 Over 3 years 12.05 Debtor#2 Third party 17,901,423.94 Over 3 years 5.22 Debtor#3 Third party 17,300,360.00 Over 3 years 5.04 Total 239,321,134.57 69.72 7.5.6 Related party balances
See Note 8.6 Related party balances for details.
7.5.7 Other receivables denominated in foreign currencies and the relevant rate for translation
C/f B/f
Currency
Currency Exchange CNY Currency Exchange CNY
amount rate amount amount rate amount USD 20,080,940.89 6.0969 122,431,488.54 13,821,767.06 6.2855 86,876,716.86 7.6 Inventories
Disclosure by type
C/f
Type
Impairment
Gross carrying amount Net carrying amount allowance
Consumable air quipements 104,936,631.52 0.00 104,936,631.52 Low-value consumables 2,075,509.92 0.00 2,075,509.92 Materials 961,331.91 0.00 961,331.91 Total 107,973,473.35 0.00 107,973,473.35 (Continued)
B/f
Type
Gross carrying amount Impairment allowance Net carrying amount Consumable air quipements 110,802,491.47 0.00 110,802,491.47 Low-value consumables 5,405,045.57 0.00 5,405,045.57 Materials 737,376.85 0.00 737,376.85
Total 116,944,913.89 0.00 116,944,913.89 7.7 Other current assets
Type C/f B/f
VAT deductible 13,184,687.03 0.00 Income tax overpaid 58,644,275.62 0.00 Total 71,828,962.65 0.00 7.8 Long-term equity investments
7.8.1 Disclosure by category
Current year Current year
Category B/f C/f increase decrease
Investment in associates 22,500,000.00 0.00 0.00 22,500,000.00 Other equity investments 88,352,100.00 0.00 0.00 88,352,100.00 Less: Impairment allowance 22,500,000.00 0.00 0.00 22,500,000.00 Total 88,352,100.00 0.00 0.00 88,352,100.00 7.8.2 Details of long-term equity investments
Investee Measurement method Cost of investment China Travelsky Technology Co., Ltd. Cost method 6,690,000.00 Sichuan Airlines Cost method 35,000,000.00 Jinan International Airport Co., Ltd. Cost method 46,662,100.00 Shandong Rainbow Commercial Jet Co., Ltd. Equity method 22,500,000.00 Total 110,852,100.00 (Continued)
Current year
Investee B/f C/f
movement
China Travelsky Technology Co., Ltd. 6,690,000.00 0.00 6,690,000.00 Sichuan Airlines 35,000,000.00 0.00 35,000,000.00 Jinan International Airport Co., Ltd. 46,662,100.00 0.00 46,662,100.00
Current year
Investee B/f C/f
movement
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 22,500,000.00 Total 110,852,100.00 0.00 110,852,100.00 (Continued)
Investee Shareholding Voting right Reason for disagreement between(%) (%) shareholding and voting right China Travelsky Technology Co., Ltd. 0.45 0.45 In agreement
Sichuan Airlines 10.00 10.00 In agreement
Jinan International Airport Co., Ltd. 2.53 2.53 In agreement
Shandong Rainbow Commercial Jet Co., Ltd. 45.00 45.00 In agreement
Total
(Continued)
Impairment allowance Impairment allowance recognised Cash dividend in current Investee
in current year year
China Travelsky Technology Co., Ltd. 0.00 0.00 1,735,051.50 Sichuan Airlines 0.00 0.00 14,325,586.06 Jinan International Airport Co., Ltd. 0.00 0.00 712,063.65 Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 0.00 Total 22,500,000.00 16,772,701.21 7.8.3 Details of long-term equity investments in associates
Investee Type of Place of registration Legal Nature of operation incorporation representative
Shandong Rainbow Commercial Jet Co., Ltd. Limited liability Jinan, Shandong ZHAO, Hong Aero
company transportation (Continued)
Investee Registered capital Shareholding(%) Votingright(%) Shandong Rainbow Commercial Jet Co., Ltd. 50.00 million 45.00 45.00
(Continued)
Investee Total assets c/f Total liabilities c/f Net assets c/f
Shandong Rainbow Commercial Jet Co., Ltd. 2,119,218.84 167,931,418.33 -165,812,199.49
(Continued)
Revenue for Net profit for Relationship to the
Investee Institution code
current year current year company
Shandong Rainbow Commercial Jet Co., Ltd. 0.00 -2,321,195.73 Associate 72497146X
7.8.4 Details of impairment allowance for long-term equity investments
Current year Current year
Investee B/f C/f
increase decrease
Investment in associates
Shandong Rainbow Commercial Jet Co., Ltd. 22,500,000.00 0.00 0.00 22,500,000.00
Total 22,500,000.00 0.00 0.00 22,500,000.00
7.9 Fixed assets
7.9.1 General information
Current year Current year
Category B/f C/f
increase decrease
1. Historical cost 12,502,314,115.70 400,162,087.51 776,260,421.91 12,126,215,781.30 Houses and buildings 283,494,370.54 26,509,810.31 0.00 310,004,180.85 Aircrafts and engines 11,425,420,286.95 220,065,472.81 738,508,309.35 10,906,977,450.41 High-value rotables 620,652,258.77 94,411,502.28 27,089,139.68 687,974,621.37 Transportation vehicles 57,414,226.49 5,455,103.39 2,110,161.52 60,759,168.36 Others 115,332,972.95 53,720,198.72 8,552,811.36 160,500,360.31 2. Cumulative depreciation Addition Recognition
Total cumulative
3,985,755,426.26 787,573,958.19 530,774,983.32 4,242,554,401.13 depreciation
Houses and buildings 44,880,915.72 8,895,408.20 0.00 53,776,323.92 Aircrafts and engines 3,635,313,040.46 728,461,662.99 516,874,879.88 3,846,899,823.57
Current year Current year
Category B/f C/f
increase decrease
High-value rotables 218,256,536.65 32,667,613.39 5,686,334.44 245,237,815.60 Transportation vehicles 24,348,244.01 4,617,873.62 1,850,551.79 27,115,565.84 Others 62,956,689.42 12,931,399.99 6,363,217.21 69,524,872.20 3. NBV before impairment
8,516,558,689.44 7,883,661,380.17 allowance
Houses and buildings 238,613,454.82 256,227,856.93 Aircrafts and engines 7,790,107,246.49 7,060,077,626.84 High-value rotables 402,395,722.12 442,736,805.77 Transportation vehicles 33,065,982.48 33,643,602.52 Others 52,376,283.53 90,975,488.11 4. Impairment allowance 383,771,823.22 79,114,818.66 143,883,401.94 319,003,239.94 Houses and buildings 0.00 0.00 0.00 0.00 Aircrafts and engines 351,887,855.38 79,114,818.66 142,757,186.08 288,245,487.96 High-value rotables 31,883,967.84 0.00 1,126,215.86 30,757,751.98 Transportation vehicles 0.00 0.00 0.00 0.00 Others 0.00 0.00 0.00 0.00 5. NBV 8,132,786,866.22 7,564,658,140.23 Houses and buildings 238,613,454.82 256,227,856.93 Aircrafts and engines 7,438,219,391.11 6,771,832,138.88 High-value rotables 370,511,754.28 411,979,053.79 Transportation vehicles 33,065,982.48 33,643,602.52 Others 52,376,283.53 90,975,488.11 Note: Depreciation recognised during the current year amounted to 787,573,958.19; historical cost of fixed assets transferred from construction in progress during the current year amounted to 71,852,227.56.
7.9.2 Fixed assets with imposed restriction on ownership
As at reporting date, aircrafts and engines with NBV amounting to 4,970,849,215.75 (historical cost amounting to 6,882,550,190.06; 2012 comparative: NBV and historical cost amounting to 5,290,960,014.07 and
6,784,301,763.02 respectively) were pledged as security for long-term borrowings amounting to 3,218,251,198.06 (2012 comparative: 3,854,676,638.03, see Note 7.27) and long-term borrowings due within one year amounting to 283,870,512.12 (2012 comparative: 283,051,698.10, see Note 7.26); ownership of aircrafts and engines with NBV amountig to 1,069,241,837.97 (historical cost amounting to 1,737,112,531.96; 2012 comparative: NBV and historical cost amounting to 1,191,901,011.49 and 1,737,224,257.96 respectively) was restricted as the fact that they were acquired under financial leases.
7.9.3 Fixed assets acquired under financial leases
Category C/f B/f
1. Historical cost
Aircrafts and engines 1,737,112,531.96 1,737,224,257.96 Total 1,737,112,531.96 1,737,224,257.96 2. Cumulative depreciation
Aircrafts and engines 667,870,693.99 545,323,246.47 Total 667,870,693.99 545,323,246.47 3. NBV before impairment allowance
Aircrafts and engines 1,069,241,837.97 1,191,901,011.49 Total 1,069,241,837.97 1,191,901,011.49 4. Impairment allowance
Aircrafts and engines 0.00 0.00 Total 0.00 0.00 5. NBV
Aircrafts and engines 1,069,241,837.97 1,191,901,011.49 Total 1,069,241,837.97 1,191,901,011.49 7.9.4 Fixed assets pending ownership registration
Item Reason for pending Estimated registration NBV
Jinan cargo arrival and departure Land rented from Jinan Air Control, not eligible for
warehouses ownership registration —— 14,245,708.27 Qingdao aircraft maintenance
Ownership registration in process
workshops 2014 37,468,457.04
Yantai terminal building Ownership registration in process 2014 25,293,122.35 Total 77,007,287.66 7.9.5 Impairment of fixed assets
Impairment allowance amounting to 79,114,818.66 for five 737-300 aircrafts was recognised during the current year with reference to the disposal plan signed with China Post Air for the said aircrafts.
7.10. Construction in progress
7.10.1 General information
C/f
Project
Gross carrying amount Impairment allowance Net carrying amount
Prepayment for aircrafts 1,611,984,965.18 0.00 1,611,984,965.18
Others 35,931,030.60 0.00 35,931,030.60
Total 1,647,915,995.78 0.00 1,647,915,995.78
(Continued)
B/f
Project
Gross carrying amount Impairment allowance Net carrying amount
Prepayment for aircrafts 1,414,569,228.22 0.00 1,414,569,228.22
Others 16,316,585.89 0.00 16,316,585.89
Total 1,430,885,814.11 0.00 1,430,885,814.11
7.10.2 Significant projects
Project Budget B/f Current year increase
Prepayment for aircrafts 5,939,797,500.00 1,414,569,228.22 1,169,204,218.46
Others 192,431,000.00 16,316,585.89 22,743,013.71
Total 6,132,228,500.00 1,430,885,814.11 1,191,947,232.17
(Continued)
Transferred to fixed assets in
Project Other decrease C/f
current year
Prepayment for aircrafts 68,723,658.56 903,064,822.94 1,611,984,965.18
Others 3,128,569.00 0.00 35,931,030.60
Total 71,852,227.56 903,064,822.94 1,647,915,995.78
(Continued)
Cumulative borrowing costs Borrowing costs capitalised Rate of interest capitalisation
Project
capitalised in the current year for the current year
Prepayment for aircrafts -1,965,738.22 -522,887.25 2.46-3.95
Others 0.00 0.00 N/A
Total -1,965,738.22 -522,887.25 —
(Continued)
Percentage of Source of
Project % of investment : budget
completion finance
Borrowings from
Prepayment for aircrafts 27.14 27.14 financial
institutions
Others 18.67 18.67 Self-financing
Total — —
7.10.3 Impairment of construction in progress
No indication of impairment on construction in progress was present as at the reporting date, therefore no impairment allowance was recognised.
7.11 Intangible assets
7.11.1 General information
Current year Current year
Category B/f C/f
increase decrease
1. Historical cost 84,663,933.13 24,196,624.41 0.00 108,860,557.54
Land rights 84,663,933.13 0.00 0.00 84,663,933.13
Software 0.00 24,196,624.41 0.00 24,196,624.41
2. Cumulative depreciation 5,849,161.58 1,883,759.14 0.00 7,732,920.72
Land rights 5,849,161.58 1,428,139.77 0.00 7,277,301.45
Software 0.00 455,619.27 0.00 455,619.27
Current year Current year
Category B/f C/f
increase decrease
3. Impairment allowance 0.00 0.00 0.00 0.00
Land rights 0.00 0.00 0.00 0.00
Software 0.00 0.00 0.00 0.00
4. NBV 78,814,771.55 101,127,636.82
Land rights 78,814,771.55 77,386,631.68
Software 0.00 23,741,005.14
Amortisation recognised during the current year amounted to 1,883,759.14.
7.11.2 Impairment of intangible assets
No indication of impairment on intangible assets was present as at the reporting date, therefore no impairment allowance was recognised.
7.12 Goodwill
7.12.1 General information
Current year Current year Impairment alowance Investee B/f C/f
increase decrease c/f
Qingdao Feisheng 10,220,816.22 0.00 0.00 10,220,816.22 10,220,816.22 Total 10,220,816.22 0.00 0.00 10,220,816.22 10,220,816.22 7.12.2 Impairment and provisions of goodwill
Management concluded that impairment on goodwil arising from Qingdao Feisheng was present, and the full provisions of goodwill shall be taken as at the reporting date after assessment made on the basis of the current operation assets of Qingdao Feisheng and with reference to the audited operating results of Qingdao Feisheng for the current year and the valuation report as at the reporting date.
7.13 Deferred charges
Current year Current year Other Reason for other Item B/f C/f
increase amortisation decrease decrease
Pilot training 283,833,279.68 97,907,569.95 48,083,707.83 0.00 333,657,141.80
Decoration expenditure 18,034,629.07 419,244.00 4,165,474.26 0.00 14,288,398.81
Total 301,867,908.75 98,326,813.95 52,249,182.09 0.00 347,945,540.61
7.14 Deferred tax assets
Category C/f B/f
Deductible temporary Deductible temporary Deferred tax Deferred tax
difference and tax loss difference and tax loss assets assets
carried forwards carried forwards
Allowance for bad debt 27,771,281.57 111,085,126.29 29,515,389.43 118,061,557.70 Impairment allowance for fixed assets 79,750,809.99 319,003,239.94 95,942,955.81 383,771,823.22 Fair value movement of financial
74,225.62 296,902.47 1,799,695.90 7,198,783.59 liabilities held for trading
Provisions 242,560,865.24 970,243,460.92 198,150,745.16 792,602,980.62 Employment benefits payable 83,026,150.77 332,104,603.04 85,129,768.80 340,519,075.19 Deferred income 6,341,881.10 25,367,524.34 40,300,683.54 161,202,734.16 Tax loss carried forwards 136,904.73 547,618.90 46,072.79 184,291.18 Total 439,662,119.02 1,758,648,475.90 450,885,311.43 1,803,541,245.66 7.15 Allowance for asset impairment
Current year
Current decrease
Category B/f C/f
recognition
Reversal Expanded
1. Allowance for bad debt 118,061,557.70 523,568.59 7,500,000.00 0.00 111,085,126.29 2. Impairment allowance for long-term
22,500,000.00 0.00 0.00 0.00 22,500,000.00 equity investments
3. Impairment allowance for fixed
383,771,823.22 79,114,818.66 0.00 143,883,401.94 319,003,239.94 assets
4. Impairment allowance for goodwill 0.00 10,220,816.22 0.00 0.00 10,220,816.22 Total 524,333,380.92 89,859,203.47 7,500,000.00 143,883,401.94 462,809,182.45 7.16 Assets with imposed restriction on ownership
Category C/f Reason of restriction
Assets pledged as security
Aircrafts and engines 4,970,849,215.75 Pledge as security for borrowings
Other form of restriction:
Aircrafts and engines 1,069,241,837.97 Assets acquired under financial lease
Category C/f Reason of restriction
Total 6,040,091,053.72
7.17 Short-term borrowings
Type C/f B/f
Credit loans 434,137,220.00 321,378,829.28 Total 434,137,220.00 321,378,829.28 7.18 Financial liabilities held for trading
Item Fair value c/f Fair value b/f
Interest rate swaps 296,902.47 7,198,783.59 Total 296,902.47 7,198,783.59 The immature interest rate swaps held by the Company had a principal amount of USD 117,018,877.60 as at the reporting date; bankers confirmed that the reporting date fair value of these interest rate swaps is -296,902.47 (USD -48,697.28).
7.19 Notes payable
Type C/f B/f
Bankers' acceptance 0.00 100,000.00 Commercial acceptance 0.00 0.00 Total 0.00 100,000.00 7.20 Accounts payable
7.20.1 General information
Item C/f B/f
Aircraft maintenance costs 370,702,424.44 253,358,086.69 Fuel cost 281,866,639.72 296,059,868.05 Landing fee 225,666,680.33 194,407,548.18 Aero equipments 81,971,026.18 45,048,851.36 Flight catering 61,129,425.69 53,351,961.08 Computer booking fee 42,333,567.66 58,105,416.36 Lease rental 3,950,584.37 20,551,734.38 Others 64,506,341.86 30,085,312.50
Total 1,132,126,690.25 950,968,778.60 7.20.2 See Note 8.6 Related party balances for accounts payable owed to investors investors holding5% or more of the shares of the Company.
7.20.3 No significant account payable due for more than 1 year as at the reporting date.
7.21 Advance from customers
7.21.1 General information
Item C/f B/f
Ticket clearing 318,907,952.74 191,551,691.08 Advanced payment for tickets 15,493,312.51 15,459,309.56 Others 9,066,787.72 8,096,572.49 Total 343,468,052.97 215,107,573.13 7.21.2 See Note 8.6 Related party balances for advance from customers owed to investors investors holding5% or more of the shares of the Company.
7.21.3 No significant advance from customers due for more than 1 year as at the reporting date.
7.22 Employment benefits payable
Current year Current year
Category B/f C/f
increase decrease
(1) Wages and salaries, bonuses, subsidies
306,610,783.99 1,214,713,527.13 1,210,477,555.28 310,846,755.84 and allowances
(2) Employee benefits 0.00 54,961,766.22 54,961,766.22 0.00 (3) Social insurance 2,930,451.14 153,708,791.26 156,639,242.40 0.00 Within:①Medical insurance 0.00 35,423,544.34 35,423,544.34 0.00②Basic retirement insurance 0.00 68,325,064.96 68,325,064.96 0.00③Annuity fee 2,930,451.14 38,268,275.24 41,198,726.38 0.00④Unemployment fee 0.00 2,833,257.50 2,833,257.50 0.00⑤Work injury insurance 0.00 2,793,774.26 2,793,774.26 0.00⑥Pregnancy insurance 0.00 3,770,453.16 3,770,453.16 0.00⑦Reserved funds for disable
0.00 2,294,421.80 2,294,421.80 0.00 jobseekers
Current year Current year
Category B/f C/f
increase decrease
(4) Housing provident fund 18,808.40 45,480,722.96 45,487,498.96 12,032.40 (5) Labor union fee and employee
34,143,751.18 17,668,385.46 23,803,943.34 28,008,193.30 education fee
(6) Non-monetary benefits 0.00 0.00 0.00 0.00 (7) Redemption of termination of labor
0.00 139,823.46 139,823.46 0.00 contract
(8) Others 0.00 8,815.38 8,815.38 0.00 Total 343,703,794.71 1,486,681,831.87 1,491,518,645.04 338,866,981.54 7.23 Taxes and fees payable
Tax (Fee) C/f B/f
VAT 23,173,422.56 2,889.52 Business tax 517,483.64 21,097,209.73 Urban construction and maintenance tax 1,131,299.11 1,422,656.41 Education surcharge 799,023.02 1,031,247.63 Enterprise income tax 321,144.21 139,026,409.94 Property tax 1,313,944.58 1,225,434.50 Land tax 142,738.11 150,775.11 Personal income tax 5,178,599.23 4,736,473.47 Stamp duty 4,456,114.47 3,651,170.17 Civil aviation development fund 70,197,348.09 59,423,302.82 Provision for income tax deducted at source 1,886,243.81 -3,000,686.74 Sales tax deducted at source 779,876.14 703,487.16 Others 167,200.64 214,108.31 Total 110,064,437.61 229,684,478.03 7.24 Interests payable
Item C/f B/f
Interest on long-term borrowings with repayment by
3,538,461.10 3,939,751.55 installments
Interest on corporate bond 12,035,833.33 12,035,833.33 Interest on short-term borrowings 490,000.00 490,510.37 Total 16,064,294.43 16,466,095.25 7.25 Other payables
7.25.1 General information
Item C/f B/f
Payable for construction projects 19,941,754.75 24,002,111.06 Payable for down payments 68,715,061.67 57,843,473.65 Payables associated with aircraft purchase 3,949,505.02 19,098,882.67 Taxes deducted at source 36,330,461.25 25,039,913.23 Others 64,932,075.65 84,090,633.33 Total 193,868,858.34 210,075,013.94 7.25.2 See Note 8.6 Related party balances for other payables owed to investors investors holding5% or more of the shares of the Company.
7.25.3 Significant other payables due for more than 1 year
Post reporting date Creditor Amount Reason for pending settlement
repayment
Margin deposit to be settled upon expiry of immature
Air China 20,000,000.00 No
wet lease
Total 20,000,000.00
7.25.4 Significant other payables
Creditor C/f Description
Air China 20,000,000.00 Margin deposit for wet lease Total 20,000,000.00
7.26 Non-current liabilities due within one year
7.26.1 General information
Category C/f B/f
Long-term borrowings due within one year (Note 7.27) 443,609,292.12 283,051,698.10
Long-term payables due within one year (Note 7.29) 89,541,366.30 109,521,823.77 Total 533,150,658.42 392,573,521.87 7.26.2 Long-term borrowings due within one year
① General information
Category C/f B/f
Secured loans 283,870,512.12 283,051,698.10 Credit loans 159,738,780.00 0.00 Total 443,609,292.12 283,051,698.10② Top five long-term borrowings due within one year
Creditor Start date Expiry date Currency Creditor#1 2013-10-31 Step repayment USD
Creditor#2 2005-10-19 Step repayment USD
Creditor#3 2013-11-29 Step repayment USD
Creditor#4 2005-4-7 Step repayment CNY
Creditor#5 2008-9-26 Step repayment USD
Total
(Continued)
Creditor C/f B/f
Currency CNY Currency CNY
amount amount Amount amount Creditor#1 17,200,000.00 104,866,680.00 — — Creditor#2 11,200,000.00 68,285,280.00 11,200,000.00 70,397,600.00 Creditor#3 9,000,000.00 54,872,100.00 — — Creditor#4 — 50,000,000.00 — 50,000,000.00 Creditor#5 4,455,150.00 27,162,604.04 4,000,000.00 25,142,000.00 Total 305,186,664.04 145,539,600.00 Notes: Interest rates of the above-mentioned long-term borrowings due within one year range from1.0441% to
6.55%.
7.26.3 Long-term payables due within one year
Creditor Term Principal amount Interestrate(%) CBD-leasing Co., Ltd. 2005.6-2020.6 1,440,000,000.00 6.943 CALC Jian Zhao Limited 2011.8-2026.8 284,290,146.39 7.05 Total 1,724,290,146.39
(Continued)
Creditor Accrued interest C/f Condition
CBD-leasing Co., Ltd. 44,296,895.25 73,629,868.84 Financial lease for aircraft CALC Jian Zhao Limited 15,789,212.15 15,911,497.46 Financial lease for aircraft Total 60,086,107.40 89,541,366.30
7.27 Long-term borrowings
① Disclosure by category
Category C/f B/f
Secured loans (by tangible assets) 3,502,121,710.18 4,137,728,336.13 Credit loans 466,534,788.00 0.00 Less: Long-term borrowings due within one year (Note 7.26) 443,609,292.12 283,051,698.10 Total 3,525,047,206.06 3,854,676,638.03② Top five long-term borrowings
Creditor Start date Expiry date Currency
Creditor#1 2012/5/7 Repayment on expiry USD
Creditor#2 2012/11/30 Repayment on expiry USD
Creditor#3 2012/12/27 Repayment on expiry USD
Creditor#4 2005/12/21 Step repayment USD
Creditor#5 2012/10/9 Step repayment USD
Total
(Continued)
C/f B/f
Creditor Currency CNY Currency CNY
amount amount amount amount
Creditor#1 35,180,000.00 214,488,942.00 50,000,000.00 314,275,000.00 Creditor#2 31,000,000.00 189,003,900.00 31,000,000.00 194,850,500.00 Creditor#3 28,500,000.00 173,761,650.00 28,500,000.00 179,136,750.00 Creditor#4 26,213,260.00 159,819,624.89 26,213,260.00 164,763,445.73 Creditor#5 25,000,000.00 152,422,500.00 25,000,000.00 157,137,500.00 Total 145,893,260.00 889,496,616.89 160,713,260.00 1,010,163,195.73 Notes: Interest rates of the above-mentioned long-term borrowings range from 1.0441% to 5.8950%.
7.28 Bonds payable
Bond Face value Issue date Term Amount issued
Medium-term bond 500,000,000.00 2012/6/12 Three years 500,000,000.00
Total 500,000,000.00 500,000,000.00
(Continued)
Bond Interest payable b/f Interest accrued Interest paid in current Interest payable C/f
in current year year c/f
Medium-term bond 12,035,833.33 21,450,000.00 21,450,000.00 12,035,833.33 500,000,000.0 0
Total 12,035,833.33 21,450,000.00 21,450,000.00 12,035,833.33 500,000,000.0 0
7.29. Long-term payables
7.29.1 Disclosure by category
Category C/f B/f
Financial lease rental payables 890,403,647.93 1,003,581,510.68 Maintenance payables for aircrafts and engines held under operating lease 961,121,308.95 783,480,828.66 Less: Financial lease rental payables due within one year (Note 7.26) 89,541,366.30 109,521,823.77 Less: Maintenance payables for aircrafts and engines held under operating lease
219,467,592.19 123,336,184.53 due within one year (Note 1)
Total 1,542,515,998.39 1,554,204,331.04 Note : Maintenance payables for aircrafts and engines held under operating lease due within one year had been included in accounts payable.
7.29.2 Top five financial lease rental payables
Creditor Term Principal amount Interest rate(%)
CBD-leasing Co., Ltd. 2005.6-2020.6 1,440,000,000.00 6.943 CALC Jian Zhao Limited 2011.8-2026.8 284,290,146.39 7.05 Total 1,724,290,146.39
(Continue)
Creditor Accrued interest C/f Condition
CBD-leasing Co., Ltd. 137,626,412.99 582,970,789.53 Financial lease for aircraft CALC Jian Zhao Limited 93,928,215.18 217,891,492.10 Financial lease for aircraft Total 231,554,628.17 800,862,281.63
7.30 Other non-current liabilities
Item C/f B/f
Designated subsidy for snow disaster 2,988,958.34 3,488,458.34 PhoenixMiles Program 0.00 161,202,734.17 Desigated subsidy for IT construction 0.00 4,709,541.65 Designated subsidy for civil aviation energy-saving program 15,758,566.00 16,735,066.12 Designated subsidy for RNP aircraft equipment modification 6,620,000.00 0.00 Total 25,367,524.34 186,135,800.28 Details of deferred revenue:
Transfer to
Subsidy increased in Other
Item B/f non-operating income C/f curent year movements
in current year
Designated subsidy for snow disaster 3,488,458.34 0.00 499,500.00 0.00 2,988,958.34
Desigated subsidy for IT construction 4,709,541.65 0.00 4,709,541.65 0.00 0.00 Designated subsidy for RNP
0.00 6,620,000.00 0.00 0.00 6,620,000.00 aircraft equipment modification
Designated subsidy for civil aviation
16,735,066.12 0.00 976,500.12 0.00 15,758,566.00 energy-saving program
Total 24,933,066.11 6,620,000.00 6,185,541.77 0.00 25,367,524.34 7.31 Share capital
B/f
Category
Amount %
1. Shares with restriction on disposal
1.1 State-held shares 0.00 0.00 1.2 Shares held by state-owned entities 259,801,000.00 64.95 1.3 Shares held by other domestic investors 199,000.00 0.05 Within: Held by institutional investors 199,000.00 0.05 Held by non-institutional investors 0.00 0.00 1.4 Shares held by foreign investors 0.00 0.00 Within: Held by institutional investors 0.00 0.00 Held by non-institutional investors 0.00 0.00 Subtotal of shares with restriction on disposal 260,000,000.00 65.00 2. Floating shares
2.1 Ordianry shares issued in CNY 0.00 0.00 2.2 Shares issued in domestic stock market in foreign currency 140,000,000.00 35.00 2.3 Shares issued in foreign market in foreign currency 0.00 0.00 2.4 Others 0.00 0.00 Subtotal of floating shares 140,000,000.00 35.00 Total 400,000,000.00 100.00 (Continued)
Category Currency year movement(+, -)
Share issue Bonus issue Coversion from Others Subtotal reserves
1. Shares with restriction on disposal
1.1 State-held shares 0.00 0.00 0.00 0.00 0.00 1.2 Shares held by state-owned entities 0.00 0.00 0.00 0.00 0.00 1.3 Shares held by other domestic investors 0.00 0.00 0.00 0.00 0.00 Within: Held by institutional investors 0.00 0.00 0.00 0.00 0.00 Held by non-institutional investors 0.00 0.00 0.00 0.00 0.00 1.4 Shares held by foreign investors 0.00 0.00 0.00 0.00 0.00 Within: Held by institutional investors 0.00 0.00 0.00 0.00 0.00 Held by non-institutional investors 0.00 0.00 0.00 0.00 0.00 Subtotal of shares with restriction on disposal 0.00 0.00 0.00 0.00 0.00 2. Floating shares
2.1 Ordianry shares issued in CNY 0.00 0.00 0.00 0.00 0.00 2.2 Shares issued in domestic stock market in foreign 0.00 0.00 0.00 0.00 0.00 currency
2.3 Shares issued in foreign market in foreign currency 0.00 0.00 0.00 0.00 0.00 2.4 Others 0.00 0.00 0.00 0.00 0.00 Subtotal of floating shares 0.00 0.00 0.00 0.00 0.00 Total 0.00 0.00 0.00 0.00 0.00 (Continue)
Category C/f
Amount %
1. Shares with restriction on disposal
1.1 State-held shares 0.00 0.00 1.2 Shares held by state-owned entities 259,801,000.00 64.95 1.3 Shares held by other domestic investors 199,000.00 0.05
Category C/f
Amount %
Within: Held by institutional investors 199,000.00 0.05 Held by non-institutional investors 0.00 0.00 1.4 Shares held by foreign investors 0.00 0.00 Within: Held by institutional investors 0.00 0.00 Held by non-institutional investors 0.00 0.00 Subtotal of shares with restriction on disposal 260,000,000.00 65.00 2. Floating shares
2.1 Ordianry shares issued in CNY 0.00 0.00 2.2 Shares issued in domestic stock market in foreign currency 140,000,000.00 35.00 2.3 Shares issued in foreign market in foreign currency 0.00 0.00 2.4 Others 0.00 0.00 Subtotal of floating shares 140,000,000.00 35.00 Total 400,000,000.00 100.00 7.32 Capital reserves
Current year Current year
Category B/f C/f
increase decrease
Share premium 67,618,282.54 0.00 0.00 67,618,282.54 Other capital reserves 7,792,081.16 0.00 0.00 7,792,081.16 Total 75,410,363.70 0.00 0.00 75,410,363.70 7.33 Surplus reserves
Current year Current year
Category B/f C/f
increase decrease
Statutory surplus reserve 257,642,799.31 39,706,786.39 0.00 297,349,585.70 Total 257,642,799.31 39,706,786.39 0.00 297,349,585.70 Notes: according to the Company Law and the Articles of Association,10% of net profit was transferred to statutory surplus reserve.
The company may make allocations to the discretionary common reserve from the after-tax profits after making allocations to the statutory surplus reserve from the after-tax profits. Approved surplus reserves can be
released to recover losses or for conversion into share capital.
7.34. Retained earnings
Movement of retained earnings
Rate of
Item Current year Prior year
appropriation B/f 1,746,002,689.27 1,374,420,534.36
Total adjustment to retained earnings b/f(+, -) 0.00 0.00
Retained earnings b/f after adjustment 1,746,002,689.27 1,374,420,534.36
Add: Net profit attributable to shareholders of the parent 389,081,811.72 589,810,932.47
Loss recovery by surplus reserves 0.00 0.00
Others 0.00 0.00
Less: Appropriation to statutory surplus reserve 39,706,786.39 58,228,777.56
Appropriation to discretionary surplus reserve 0.00 0.00
Ordinary dividends declared 160,000,000.00 160,000,000.00
Bonus issue 0.00 0.00
C/f 1,935,377,714.60 1,746,002,689.27
7.35 Revenue and operating costs
7.35.1 General information
Category Current year Prior year
Principal operating income 11,293,341,843.56 10,892,489,041.34 Other operating income 133,816,089.59 100,535,873.07 Total 11,427,157,933.15 10,993,024,914.41 Principal operating cost 9,707,677,991.58 8,571,793,581.33 Other operating cost 2,187,655.80 4,478,787.52 Total 9,709,865,647.38 8,576,272,368.85 7.35.2 Disclosure by service line
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost Aero transportation 11,232,141,639.73 9,666,874,791.95 10,845,887,973.75 8,539,879,426.57 Hospitality and catering 30,362,647.64 27,348,610.96 22,119,064.02 19,496,643.53
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost Training 22,194,939.18 6,958,634.48 17,978,025.13 9,187,896.05 Freight logistics 8,642,617.01 6,495,954.19 6,503,978.44 3,229,615.18 Total 11,293,341,843.56 9,707,677,991.58 10,892,489,041.34 8,571,793,581.33 7.35.3 Operating income from top five customers
Year Operating income % of total operating income
2013 681,700,941.89 5.97 2012 701,094,111.08 6.38 7.36 Business tax and surcharges
Item Current year Prior year
Business tax 198,024,183.56 322,040,241.43 Urban maintenance and construction tax 22,330,168.35 22,407,051.10 Education surcharge and others 18,311,185.75 18,845,643.08 Total 238,665,537.66 363,292,935.61 Notes: Applicable rates for business tax and surcharges see Note 5 Taxation.
7.37 Sales expenses
Category Current year Prior year
Agency fees 440,471,809.02 397,328,163.87 Employment benefits 129,956,447.17 178,559,093.77 Computer booking 76,514,767.74 67,118,157.82 Online payment 27,857,792.92 21,600,770.07 Sales expense of annual tickets 27,304,337.80 18,302,127.40 Lease rental 15,777,216.30 14,356,560.06 Advertisement 13,358,997.77 12,104,590.05 Office 7,658,213.49 5,302,142.43 Travel 4,804,272.39 4,094,804.02 System and network 4,457,230.85 4,087,876.50 BSP data processing 2,124,907.23 2,165,963.39
Category Current year Prior year
Depreiciation 1,923,549.14 2,117,377.88 Others 22,994,877.93 18,552,474.76 Total 775,204,419.75 745,690,102.02 7.38 General and administrative expenses
Category Current year Prior year
Employment benefits 116,426,147.20 143,402,835.27 Lease rental 16,265,877.85 14,105,149.76 Entertainment 12,185,173.59 16,891,805.85 Depreiciation 10,294,628.87 7,228,965.52 Taxes and fees 9,157,436.31 6,060,356.49 Office 9,073,671.10 4,846,659.27 Technology development 3,342,852.73 6,064,208.25 Amortisation of intangibles 1,883,759.21 1,434,350.49 Subscription for clearing system 1,684,856.05 3,961,952.36 Others 45,005,544.58 34,419,104.39 Total 225,319,947.49 238,415,387.65 7.39 Financial costs
Category Current year Prior year
Interest expenses 254,190,451.00 247,729,159.28 Less: Interest income 4,362,149.98 2,728,247.92 Exchange difference -109,295,243.48 -8,090,980.43 Bank charges and others 2,286,554.04 6,600,544.73 Total 142,819,611.58 243,510,475.66 7.40 Loss on asset impairment
Category Current year Prior year
Allowance for bad debt -6,976,431.41 2,770,999.67 Impairment allowance for fixed assets 79,114,818.66 191,159,700.00
Category Current year Prior year
Impairment allowance for goodwill 10,220,816.22 0.00 Total 82,359,203.47 193,930,699.67 7.41 Gain from changes in fair value
Source Current year Prior year
Interest rate swaps 6,901,881.12 -5,053,262.49 Total 6,901,881.12 -5,053,262.49 7.42 Investment income
7.42.1 Disclosure by category
Category Current year Prior year
Income from long-term equity investments measured at cost 16,772,701.21 16,247,366.84 Income from holding of financial assets held for trading -2,609,524.71 -1,852,852.05 Total 14,163,176.50 14,394,514.79 7.42.2 Income from long-term equity investments measured at cost
Investee Current year Prior year
China Travelsky Technology Co., Ltd. 1,735,051.50 1,565,460.00 Sichuan Airlines 14,325,586.06 13,730,000.00 Jinan International Airport Co., Ltd. 712,063.65 951,906.84 Total 16,772,701.21 16,247,366.84 7.43 Non-operating income
Included in current Category Current year Prior year year non-recurring profit and loss Gain on non-current asset disposals 78,847,533.50 59,901.02 78,847,533.50 Within: Gain on fixed asset disposals 78,847,533.50 59,901.02 78,847,533.50 Government grants (See details of government grants) 22,465,841.77 52,137,058.47 22,465,841.77 Subsidy for air routes 152,697,442.00 64,962,684.00 152,697,442.00 Others 16,397,152.34 30,027,829.08 16,397,152.34
Included in current Category Current year Prior year year non-recurring profit and loss Total 270,407,969.61 147,187,472.57 270,407,969.61 Details of government grants:
Government assitance Current year Prior year Description
Subsidy for side air routes 1,310,000.00 7,330,000.00 Granted by the CAAC regional office
Designated subsidy for snow disaster 499,500.00 499,500.00 Amortisation of utilised subsidy
Designated subsidy for civil aviation
976,500.12 976,500.12 Amortisation of utilised subsidy
energy-saving program
Subsidy for 12-5 construction of IT
4,709,541.65 5,290,458.35 Subsidy for expenditure on 12-5 construction of IT system system
Subsidy for SMS 0.00 1,000,000.00 Subsidy for expenditure on SMS
Others 14,970,300.00 37,040,600.00 Granted by regional government
Tota 22,465,841.77 52,137,058.47
7.44 Non-operating expenses
Included in current year Category Current year Prior year
non-recurring profit and loss Loss on non-current asset disposals 9,856,591.93 6,908,093.55 9,856,591.93 Within: Loss on fixed asset disposals 9,856,591.93 6,908,093.55 9,856,591.93 Charitable donation 0.00 15,000.00 0.00 Fines 0.00 8,334.71 0.00 Others 3,593,170.47 461,424.44 3,593,170.47 Total 13,449,762.40 7,392,852.70 13,449,762.40 7.45 Income tax expenses
Category Current year Prior year
Current tax calculated in accordance with relevant tax law 130,641,826.52 411,720,977.67 Deferred tax 11,223,192.41 -220,483,093.02
Category Current year Prior year
Total 141,865,018.93 191,237,884.65 7.46 Computation of basic earnings per share and diluted earnings per share
Basic earngings per share is calculated by dividing net profit attributable to shareholders of the parent by the weighted average number of issued shares. The start date of ordinary shares issued in the period for the purpose of calculation of basic earnings per share is the date on which subscription becomes receivable per contract of issuance.
Diluted earnings per share is calculated by dividing the results of adjustment of net profit attributable to shareholders of the parent for the interest expense for the dilutive convertible instruments, the expected gain or expense at the time of conversion and their related income tax implication by the sum of the weighted average number of issued shares for calculation of baisc earnings per shares and the weighted average number of potential shares from convertible instruments.
For the purpose of calculation of the weighted average number of potential shares from convertible instruments, the conversion date for dilutive conventible instruments issued in prior period and dilutive convertible instruments issued in the period is the the 1st date of the period and the issue date respectively. 7.46.1 General disclosure
Current year Prior year
Category of earning
Basic EPS Diluted EPS Basic EPS Diluted EPS Net profit attributable to ordinary shareholders 0.97 0.97 1.47 1.47 Recurring profit or loss attributable to ordinary
0.34 0.34 1.23 1.23 shareholders
7.46.2 Calculation
① Net profit attributable for ordinary shareholders for the calculation of basic EPS
Category Current year Prior year
Net profit attributable for ordinary shareholders 389,081,811.72 589,810,932.47 Within: From continuing operation 389,081,811.72 589,810,932.47 From curtailed operation 0.00 0.00 Recurring profit or loss attributable to ordinary shareholders 137,850,318.37 490,146,637.15 Within: From continuing operation 137,850,318.37 490,146,637.15 From curtailed operation 0.00 0.00
②When calculating the basic earnings per share, the denominator is the weighted average number of outstanding ordinary shares, calculated as follows
Category Current year Prior year
Number of ordinary shares issued b/f 400,000,000.00 400,000,000.00 Add: the number of ordinary shares issued this year 0.00 0.00 Less: the number of ordinary shares bought back this year 0.00 0.00 Number of ordinary shares c/f 400,000,000.00 400,000,000.00 7.47 Notes to the consolidated statement of cash flows
7.47.1 Other cash receipts relating to operating activities
Category Current year Prior year
Government assistance 22,900,300.00 52,060,600.00 Interest income on bank deposit 4,362,149.98 2,728,247.92 Cash receiptes from non-operating income 152,647,494.34 73,065,513.08 Cash receiptes from operating balance 118,813,553.50 10,012,593.40 Margin deposit repaid 0.00 500,000.00 Total 298,723,497.82 138,366,954.40 7.47.2 Other cash payments relating to operating activities
Category Current year Prior year Bank charges 30,144,346.96 26,701,314.80 Cash payments for non-operating expenses 3,593,170.47 484,759.15 Cash payments for operating balance 17,260,954.51 62,031,683.41 Cash payments for sales and general and administrative expenses 183,096,421.15 159,255,418.49 Total 234,094,893.09 248,473,175.85 7.47.3 Other cash payments relating to investing activities
Category Current year Prior year
Cash payments of settlement of interest rate swaps 2,609,524.71 1,852,852.05 Total 2,609,524.71 1,852,852.05 7.47.4 Other cash receipts relating to financing activities
Category Current year Prior year
Margin deposit for bankers' acceptance repaid 0.00 7,470,000.00 Cash receipts for disposal of purchase rights on aircrafts (which became
903,064,822.94 0.00 acquired under operating lease instead of purchase)
Total 903,064,822.94 7,470,000.00 7.47.5 Other cash payments relating to financing activities
Category Current year Prior year
Cash payments for aircraft financial lease rental 175,939,104.72 206,213,467.59 Cash payments for issuance of medium-term bonds 0.00 1,500,000.00 Total 175,939,104.72 207,713,467.59 7.48 Supplementary information to the consolidated statement of cash flows
7.48.1 Reconciliation of cash flows from operating activities to net profit
Category Current year Prior year① Reconciliation of cash flows from operating activities to net profit:
Net profit 389,081,811.72 589,810,932.47 Add: Loss on asset impairment 82,359,203.47 193,930,699.67 Depreciation of fixed assets, oil and gas assets, bioogical assets held for
787,573,958.19 726,168,020.56 production
Amortisation of intangible assets 1,883,759.14 1,434,350.49 Amortisation of deferred charges 52,249,182.09 45,703,686.59 Loss on non-current assets disposal (gain presented by "-" prefix) -71,764,546.71 -59,901.02 Loss on scrap of fixed assets (gain presented by "-" prefix) 2,773,605.14 6,908,093.55 Loss on fair value changes (gain presented by "-" prefix) -6,901,881.12 5,053,262.49 Fianncial costs (gain presented by "-" prefix) 148,244,330.64 238,341,003.26 Investment loss (gain presented by "-" prefix) -14,163,176.50 -14,394,514.79 Decrease of deferred tax assets (increase presented by "-" prefix) 11,223,192.41 -220,483,093.02 Increase of deferred tax liabilities (increase presented by "-" prefix) 0.00 0.00 Decrease of inventories (increase presented by "-" prefix) 8,971,440.54 9,195,192.86 Decrease of operating receivables (increase presented by "-" prefix) -114,011,884.25 -67,334,514.13
Category Current year Prior year Increase of operating payables (decrease presented by "-" prefix) 133,667,527.39 212,044,281.77 Others 0.00 0.00 Net cash flows generated from operating activities 1,411,186,522.15 1,726,317,500.75 Significant investing and financing acitivities involve no cash:
Debt-to-capital conversion 0.00 0.00 Convertable loan due within one year 0.00 0.00 Fixed assets acquired under financial lease 0.00 0.00 Movement of cash and cash equivalents:
Cash C/f 444,522,271.21 155,387,742.97 Less: Cash B/f 155,387,742.97 240,185,747.48 Add: Cash equivalents C/f 0.00 0.00 Less: Cash equivalents B/f 0.00 0.00 Net increase of cash and cash equivalents 289,134,528.24 -84,798,004.51 7.48.2 Compostion of cash and cash equivalents
Category Current year Prior year
① Cash 444,522,271.21 155,387,742.97 Including: Cash at hand 348,205.99 349,489.05 Demand bank deposit 444,168,730.31 155,038,253.92 Demand other monetary funds 5,334.91 0.00 Demand deposit in the Central Bank 0.00 0.00 Deposit in peer firms 0.00 0.00 Loan to peer firms 0.00 0.00② Cash equivalents 0.00 0.00 Including: Debt instrument matured within three months 0.00 0.00③ Cash and cash equivalents C/f 444,522,271.21 155,387,742.97 Note 8 Related parties and related party transaction
8.1 Major investors
Relationship to the Legal
Investor Type of incorporation Place of registration Nature of operation Company representative
Investment and Limited liability
SDA Group Largest shareholder Jinan MA, Chongxian management of aero company
transportation WANG,
Air China 2nd largest shareholder Joint stock company Beijing Aero transportation Changshun
(Continued)
Shareholding in the Voting right in the Ultimate
Investor Registered capital Company Company controller of the Institution code(%) (%) Company
SDA Group 580,000,000.00 42.00 42.00 Note 61407164-7 Air China 12,891,954,673.00 22.80 22.80 Note 71787100-6 Note: SDA Group and Air China is the first and second largest shareholder of the Company respectively. Air China is the largest shareholder of SDA Group; AirChina’s shareholding and voting right in SDA Group is49.406% and49.406% respectively.
8.2 Subsidiaries
See Note 6.1 Subsidiaries.
8.3 Associates and joint ventures
See Note 7.8.3.
8.4 Other related parties
Other related party Relationship to the Company Institution code
Taikoo (Shandong) Aircraft Engineering Company Limited Controlled by major investors 70588297-1
Shandong XiangYu Air Technology Co., Ltd. Controlled by major investors 720736454
Shenzhen Airlines Co., Ltd. Controlled by major investors 19221129-0
Air China Cargo Co., Ltd. Controlled by major investors 71093205-6
China National Aviation Finance Co., Ltd. Controlled by major investors 10113699
Sichuan International Aero Engine Maintenance Co., Ltd. Controlled by major investors 71188088-4
Aircraft Maintenance and Engineering Corporation (Ameco
Controlled by major investors 62591162-1
Beijing)
Chengfu FuKai Aircraft Engineering Co., Ltd. Controlled by major investors 72808856-X
8.5 Related party transactions
8.5.1 Purchase of goods and services
Related party Transaction Pricing principle
Taikoo (Shandong) Aircraft Engineering Company
Aircraft maintenance Market price
Limited
SDA Group Office lease rental and catering Market price
Shandong XiangYu Air Technology Co., Ltd. Repairment Market price
Aircraft Maintenance and Engineering Corporation
Repairment Market price
(Ameco Beijing)
Aircraft Maintenance and Engineering Corporation
Ground service Market price
(Ameco Beijing)
Air China Ground service Market price
Air China Repairment Market price
Air China Agency service Market price
Shenzhen Airlines Co., Ltd. Agency service Market price
Air China Cargo Co., Ltd. Ground service Market price
Sichuan International Aero Engine Maintenance Co.,
Repairment Market price
Ltd.
Chengfu FuKai Aircraft Engineering Co., Ltd. Repairment Market price
Total
(Continue)
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the
same category same category
Taikoo (Shandong) Aircraft Engineering Company
83,756,980.25 12.46 79,492,346.10 14.86
Limited
SDA Group 28,893,592.73 34.93 22,369,102.37 36.74
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the
same category same category
Shandong XiangYu Air Technology Co., Ltd. 39,708,456.88 5.44 32,057,124.35 5.99
Aircraft Maintenance and Engineering Corporation
11,178,133.31 1.53 5,572,650.35 1.04
(Ameco Beijing)
Aircraft Maintenance and Engineering Corporation
17,172,871.84 1.50 9,244,562.66 0.93
(Ameco Beijing)
Air China 17,077,551.66 1.50 21,580,926.14 2.16
Air China 38,441,791.87 5.27 767,471.77 0.14
Air China 8,517,578.17 74.09 6,448,583.78 73.61
Shenzhen Airlines Co., Ltd. 726,162.08 6.32 774,279.40 8.84
Air China Cargo Co., Ltd. 2,140,251.90 0.19 2,468,814.84 0.25
Sichuan International Aero Engine Maintenance Co.,
144,373,756.70 19.78 146,045,495.96 27.29
Ltd.
Chengfu FuKai Aircraft Engineering Co., Ltd. 3,970,264.20 0.54 3,292,316.90 0.62
Total 395,957,391.59 330,113,674.62
8.5.2 Sales of goods and vendering of services
Related party Transaction Pricing principle
Air China Flight support By agreement
Air China Ground service Market price
Air China Agency service Market price
Shenzhen Airlines Co., Ltd. Agency service Market price
Shenzhen Airlines Co., Ltd. Ground service Market price
Taikoo (Shandong) Aircraft Engineering Company
Training By agreement
Limited
Total
(Continued)
Current year Prior year
% in total % in total
Related party
Amount transaction of the Amount transaction of the same category same category Air China 6,899,922.00 99.48 10,323,343.20 97.06 Air China 230,332.10 11.92 820,994.80 8.27 Air China 1,783,584.94 36.73 1,954,422.08 41.65 Shenzhen Airlines Co., Ltd. 721,460.00 14.86 827,854.78 17.64 Shenzhen Airlines Co., Ltd. 215,482.08 11.15 308,220.00 3.10 Taikoo (Shandong) Aircraft Engineering Company Limited 0.00 0.00 280,775.00 3.99 Total 9,850,781.12 14,515,609.86
8.5.3 Lease between related parties
The Company as leasee
Lease rental Leasor Leasee Leased asset Start date Expiry date Pricing principle
recognised Air China The Company Engines 2013-1-1 2013-12-31 By agreement 6,771,605.19 Air China The Company Simulators 2013-1-1 2013-12-31 By agreement 855,000.00 8.5.4 Lending between related parties
Related party Amount Start date Expiry date Description
Borrowed from:
China National Aviation Finance 50,000,000.00 2012/3/21 2013/3/21 Repaid Co., Ltd.
China National Aviation Finance 100,000,000.00 2013/6/25 2013/8/12 Repaid Co., Ltd.
China National Aviation Finance 100,000,000.00 2013/11/28 2014/5/27 Outstanding Co., Ltd.
8.5.5 Asset transfer between related parties
Related party Type of transaction Transaction Pricing principle Shandong XiangYu Air Technology Co., Ltd. Sales Aero materials By agreement (Continued)
Current year Prior year
% in total % in total Related party
Amount transaction of the Amount transaction of the same category same category Shandong XiangYu Air Technology Co., Ltd. 102,732.90 7.10 0.00 0.00 8.5.6 Remuneration to key management personel
Range of annual remuneration Current year Prior year
Total 10.1505 million 11.1800 million Within: (Number of management peronnel in each range)
Over 500 thousands 10 Officers 11 Officers 100 thousands to 500 thousands 5 Officers 3 Officers Up to 100 thousands 4 Officers 5 Officers 8.5.7 Other related party transactions
Related party Transaction Pricing principle
Air China Wet lease By agreement
Air China Code sharing By agreement
Air China Cargo Co., Ltd. Code sharing for cargo By agreement
Air China Reward Points Transfer By agreement
Air China Frequent flyer cooperation By agreement
(Continued)
Current year Prior year
Related party
% in total transaction % in total transaction Amount Amount
of the same category of the same category
Current year Prior year
Related party
% in total transaction % in total transaction Amount Amount
of the same category of the same category Air China 601,828,380.56 100.00 643,189,241.11 100.00 Air China -1,538,289.97 100.00 -907,911.39 100.00 Air China Cargo Co., Ltd. 3,098,201.89 100.00 3,576,765.21 100.00 Air China 93,860,000.00 100.00 0.00 0.00 Air China 29,000,000.00 100.00 0.00 0.00 Total 726,248,292.48 645,858,094.93
8.6 Related party balances
8.6.1 Receivables owed by and prepayments to related parties
C/f B/f
Related party
Allowance for bad Allowance for bad Carrying amount Carrying amount
debt debt Accounts receivable
Air China 123,439,238.90 0.00 54,927,044.11 0.00 Shenzhen Airlines Co., Ltd. 3,448,445.83 172,422.29 1,849,400.00 92,470.00 Air China Cargo Co., Ltd. 2,585,423.47 129,271.17 0.00 0.00 Taikoo (Shandong) Aircraft Engineering Company Limited 6,300.00 315.00 11,100.00 555.00 Total 129,479,408.20 302,008.46 56,787,544.11 93,025.00 Prepayments
Chengfu FuKai Aircraft Engineering Co., Ltd. 0.00 0.00 252,000.00 0.00 Total 0.00 0.00 252,000.00 0.00 Other receivables
Air China 13,047,895.61 0.00 9,336,264.20 0.00 Taikoo (Shandong) Aircraft Engineering Company Limited 5,862.79 293.14 0.00 0,.00 Shandong Rainbow Commercial Jet Co., Ltd. 101,551,717.65 101,551,717.65 109,051,717.65 109,051,717.65 Shenzhen Airlines Co., Ltd. 75,900.00 3,795.00 55,400.00 2,770.00 Total 114,681,376.05 101,555,805.79 118,443,381.85 109,054,487.65
8.6.2 Payables owed to and advances received from related parties
Related party C/f B/f
Accounts payable
Aircraft Maintenance and Engineering Corporation 2,415,571.68 1,358,745.52 (Ameco Beijing)
Sichuan International Aero Engine Maintenance Co., 275,714.73 9,189,096.07 Ltd.
Air China 42,636,103.76 4,363,260.34 Taikoo (Shandong) Aircraft Engineering Company 22,893,378.90 15,434,555.99 Limited
Shandong XiangYu Air Technology Co., Ltd. 5,868,612.81 0.00 Air China Cargo Co., Ltd. 2,571.66 211,086.76 Chengfu FuKai Aircraft Engineering Co., Ltd. 460,000.00 631,044.32 Shenzhen Airlines Co., Ltd. 5,360.12 3,360.00 Total 74,557,313.66 31,191,149.00 Notes payable
Shandong XiangYu Air Technology Co., Ltd. 0.00 100,000.00 Total 0.00 100,000.00 Other payables
Air China 20,000,000.00 20,000,000.00 SDA Group 898,021.66 1,967,892.49 Taikoo (Shandong) Aircraft Engineering Company 245,400.00 245,400.00 Limited
Shenzhen Airlines Co., Ltd. 1,850,144.00 1,850,144.00 Total 22,993,565.66 24,063,436.49 Note 9 Contingencies
No contingency is subject to disclosure as at the reporting date.
Note 10 Commitments
10.1 Signifcant commitments
10.1.1 Capital commitment
CNY Item C/f B/f
Firm contracts not recognised in the financial statements
- Commitment to acquire non-current assets 4,362,887,276.54 6,381,289,558.12 Total 4,362,887,276.54 6,381,289,558.12 10.1.2 Operating lease
Information of irrevocable operating lease contracts as at the reporting date:
CNY Item C/f B/f
Minimum lease rental for irrevocable operating lease contracts
Within one year from the reporting date 1,072,181,014.56 766,080,155.32 Within two years from the reporting date 1,059,880,518.81 764,243,425.08 Within three years from the reporting date 1,059,880,518.81 763,137,177.08 Subsequent years 5,552,796,027.63 3,734,609,417.85 Total 8,744,738,079.81 6,028,070,175.33 Note 11 Post balance sheet date events
11.1 Post balance sheet date profit appropriation
The Proposal for Profit Appropriation for the Year ended 31 December 2013 proposing cash dividend amounting to CNY 2.50 (gross) per 10 shares for the 400 million shares outstanding as at the reporting date which in total amounts to CNY 100 million was approved by the 5th Meeting of the 5th Term of Board of Directors of the Company held on 20 March 2014; the Proposal was pending the approval of the General Meeting of the Company.
11.2 Impact of the accounting standards published or revised by the Ministry of Finance which are to be adopted as from 1 July 2014
Caikuai[2014]No.6,Caikuai[2014]No.7,Caikuai[2014]No.8,Caikuai[2014]No.10 andCaikuai[2014]No.11 were issued by the Ministry of Finance in early 2014 for CAS No. 39 - Fair Value Measurement, CAS No.30 -
Presentation of Financial Statement (revised in 2014), CAS No.9 - Employee benefits (revised in 2014), CAS No. 33 - Consolidated Financial Statements (revised in 2014) and CAS No. 40 - Joint Arrangements respectively. The standards issued thereupon shall be adopted as from 1 July 2013 by the entities adopting CASs; though early adoption by entities with oversea listing is encouraged.
The Company is going to adopt the said standards as from 1 July 2014 and the accounting policies are to be revised accordingly.
11.2.1 The Enterprise Accounting Standards No.9 - Employee benefits (revised in 2014) stipulates comprehensive accounting treatments for post-employment benefits by distinguishing such benefits into Defined Contribution Plan (hereafter, DCP) and Defined Benefit Plan (hereafter, DBP). Under a DCP, the employer is not responsible for payment for post-employment benefits once it makes fixed payment to the independent fund(s). A DBP is any post-employment benefit plan that is not a DCP. For a DCP, the payable calculated per the plan shall be recognised as a liability and an equal amount is either charged to the profit or loss for the relevant period or capitalised in the relevant assets. For a DBP, the obligation for the plan shall be calculated based on appropriate actuarial assumptions using the estimated cumulative number of beneficiary units; the calculated obligation shall be allocated over the periods in which services are obtained from employees using the formula applicable to the plan; any gain or loss arising from re-measurement of the net assets or net liabilities of the plan shall be recognised in other comprehensive income for the relevant period. The revised standard stipulates comprehensive accounting treatments for employment benefits by the introduction of enhanced accounting treatments for short-term employment benefits, enhanced accounting treatments for dismissal beneifts, and other long-term employment benefits.
11.2.2 The Enterprise Accounting Standards No.30 - Presentation of Financial Statements (revised in 2014) provides enhanced standardisation on presentation of financia statements; improves requirements for going concern assessment, normal operation cycle, and note disclosure; and stipulates that it is mandatory to present supplementary information to the income statement in the form of presentation expenses by nature. The standard also stipulates that other comprehensive income presented on the face of the income statement shall be distinguished into 1) other comprehensive income not reclassifiable to profit or loss in subsequent periods and 2) other comprehensive income reclassifiable to profit or loss in subsequent periods upon satisfaction of relevant conditions.
11.2.3 The Enterprise Accounting Standards No.33 - Consolidated Financial Statements (revised in 2014) stipulates that the scope of consolidation shall be determined on the basis of control presence. The standard provides the single model for control presence assessment. For an investor's control over an investee to be present, the following criteria must be satisfied:
a. the investor has power over the investee; and
b. the investor is able to obtain variable economic return through participation in the investee's activities; and
c. the investor has the ability to affect the economic return from the investee through the application of its power of the investee.
The standard also provides more comprehensive guidance for determination of control presence in comparison with the previous version. In accordance with the standard, management of the Company shall exercise significant amount of judgement in the assessment of control presence over investees.
11.2.4 As represented in the the Enterprise Accounting Standards No. 40 - Joint Arrangements , the classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have the rights to the net assets of the arrangement. The equity method shall be used in accounting for investments in joint ventures. As for joint operation, a joint operator shall recognize in relation to its interest in a joint operation: (1) its assets, including its share of any assets held jointly; (2) its liabilities, including its share of any liabilities incurred jointly; (3) its revenue from the sale of its share of the output arising from the joint operation; (4) its expenses, including its share of any expenses incurred jointly.
11.2.5 The Enterprise Accounting Standards No. 39 - Fair Value Measurement standardise the definition of fair value, stipulates measurement of fair value by distinguishing fair value measurement into three hierarchies with reference for inputs used, and stipulates disclosure requirements for information relevant to measurement of fair value. The standard, however, does not amend the provisions of other CASs as to the circumstances when fair value measurement is applicable.
Note 12 Other significant events
12.1 Assets and liabilities measured by fair value
Cumulative fair value
Current year fair value Current year
Item B/f movement recognised in C/f movement impairment
equity
Financial liabilities
Derivative financial liabilities 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47 Total 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47 12.2 Financial assets and liabilities denominated in foreign currencies
Cumulative fair
Current year fair value movement Current year
Item B/f C/f
value movement recognised in impairment
equity
Financial liabilities
Derivative financial liabilities 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47 Total 7,198,783.59 -6,901,881.12 0.00 0.00 296,902.47 Note 13 Notes to the separate financial statements
13.1 Accounts receivable
13.1.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance and
179,936,813.57 73.02 0.00 0.00 subject to individual impairment assessment
Accounts receivable subject to impairment
assessment by portfolio
Portfolio by nature 52,977,940.37 21.50 2,648,897.02 5.00 Subtotal 52,977,940.37 21.50 2,648,897.02 5.00 Accounts receivable of individual insignificance
13,501,734.26 5.48 0.00 0.00 but subject to individual impairment assessment
Total 246,416,488.20 100.00 2,648,897.02 1.07 (Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Accounts receivable of individual significance and
137,210,577.33 76.05 0.00 0.00 subject to individual impairment assessment
Accounts receivable subject to impairment
assessment by portfolio
Portfolio by nature 36,015,985.80 19.96 1,800,778.94 5.00 Subtotal 36,015,985.80 19.96 1,800,778.94 5.00 Accounts receivable of individual insignificance
7,197,683.67 3.99 0.00 0.00 but subject to individual impairment assessment
Total 180,424,246.80 100.00 1,800,778.94 1.00 13.1.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 246,299,519.24 99.95 180,029,268.67 99.78 1 to 2 years 25,803.14 0.01 252,427.26 0.14 2 to 3 years 13,173.40 0.01 107,775.05 0.06 Over 3 years 77,992.42 0.03 34,775.82 0.02 Total 246,416,488.20 100.00 180,424,246.80 100.00 13.1.3 Allowance for bad debt
① Accounts receivable of individual significance and subject to individual impairment assessment
Allowance for bad Rate of allowance
Debtor Carrying amount Reason for allowance debt (%)
No indication of impairment Air China 123,439,238.90 0.00 0.00
upon individual assessment No indication of impairment BSP-CHINA 56,497,574.67 0.00 0.00
upon individual assessment Total 179,936,813.57
② Accounts receivable subject to impairment assessment by portfolio
Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance(%) Allowance for bad debt Portfolio by nature 52,977,940.37 5.00 2,648,897.02 Total 52,977,940.37 5.00 2,648,897.02
③ Accounts receivable of individual insignificance but subject to individual impairment assessment
Allowance for bad Rate of
Debtor Carrying amount Reason for allowance debt allowance(%)
BSP-JAPAN No indication of impairment upon 320,905.02 0.00 0.00
individual assessment
BSP-TAIWAN No indication of impairment upon 2,149,104.94 0.00 0.00
individual assessment
UATP No indication of impairment upon 1,770,413.66 0.00 0.00
individual assessment
Accounting Center of China Aviation No indication of impairment upon 9,261,310.64 0.00 0.00
Limited Company individual assessment
Total 13,501,734.26 0.00 0.00
13.1.4 Accounts receivable owed by investors holding5% or more of the shares of the Company
Investor C/f B/f
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt Air China 123,439,238.90 0.00 54,927,044.11 0.00 Total 123,439,238.90 0.00 54,927,044.11 0.00 13.1.5 Top five accounts receivable
Relationship to the % of total accounts Debtor Amount Age
Company receivable Air China Related party 123,439,238.90 Within 1 year 50.09 BSP-CHINA Third party 56,497,574.67 Within 1 year 22.93 Accounting Center of China Aviation
Third party 9,261,310.64 Within 1 year 3.76 Limited Company
Air China Cargo Co., Ltd. Related party 2,585,423.47 Within 1 year 1.05 Hainan Airlines Company Limited Third party 2,360,400.00 Within 1 year 0.96 Total 194,143,947.68 78.79 13.1.6 Related party balances
Debtor Relationship to the Company Amount % of total
accounts receivable Air China Major investor 123,439,238.90 50.09 Shenzhen Airlines Co., Ltd. Controlled by the main investor 1,599,045.83 0.65 Qingdao International Air Logistics
The subsidiary of the company 1,479,640.16 0.60 Centre Co., Ltd
Air China Cargo Co., Ltd. Controlled by the main investor 2,585,423.47 1.05 Taikoo (Shandong) Aircraft Engineering
Controlled by the main investor 6,300.00 0.00 Company Limited
Total 129,109,648.36 52.39 13.2 Other receivables
13.2.1 Disclosure by category
C/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
185,011,727.43 47.99 101,551,717.65 54.89 subject to individual impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 112,409,411.93 29.16 5,620,470.60 5.00 Subtotal 112,409,411.93 29.16 5,620,470.60 5.00 Other receivables of individual insignificance but
88,116,339.86 22.86 0.00 0.00 subject to individual impairment assessment
Total 385,537,479.22 100.00 107,172,188.25 27.80 (Continued)
B/f
Category Carrying amount Allowance for bad debt
Amount % Amount %
Other receivables of individual significance and
150,406,280.93 37.25 109,051,717.65 72.50 subject to individual impairment assessment
Other receivables subject to impairment
assessment by portfolio
Portfolio by nature 154,689,466.21 38.31 7,734,473.31 5.00 Subtotal 154,689,466.21 38.31 7,734,473.31 5.00 Other receivables of individual insignificance but
98,701,440.00 24.44 0.00 0.00 subject to individual impairment assessment
Total 403,797,187.14 100.00 116,786,190.96 28.92 13.2.2 Disclosure by age
C/f B/f
Age
Amount % Amount %
Within 1 year 145,558,853.12 37.76 181,310,421.00 44.90 1 to 2 years 47,973,303.18 12.44 21,442,689.76 5.31 2 to 3 years 16,699,480.03 4.33 15,259,329.67 3.78 Over 3 years 175,305,842.89 45.47 185,784,746.71 46.01 Total 385,537,479.22 100.00 403,797,187.14 100.00 13.2.3 Allowance for bad debt
① Other receivables of individual significance and subject to individual impairment assessment
Rate of
Allowance for bad
Debtor Carrying amount allowance Reason for allowance debt
(%)
Impaired collectibility
Shandong Rainbow Commercial Jet Co., Ltd. 101,551,717.65 101,551,717.65 100.00 identified upon individual assessment
Qingdao International Air Logistics Centre No indication of impairment 42,105,446.50 0.00 0.00
Co., Ltd upon individual assessment No indication of impairment CBD-leasing Co., Ltd. 41,354,563.28 0.00 0.00
upon individual assessment
Rate of
Allowance for bad
Debtor Carrying amount allowance Reason for allowance debt
(%)
Total 185,011,727.43 101,551,717.65 54.89
② Other receivables subject to impairment assessment by portfolio
A. Allowance by percentage of remaining balance
Portfolio Carrying amount Rate of allowance(%) Allowance for bad debt Portfolio by nature 112,409,411.93 5.00 5,620,470.60 Total 112,409,411.93 5.00 5,620,470.60③ Other receivables of individual insignificance but subject to individual impairment assessment
Allowance for Rate of allowance
Debtor Carrying amount Reason for allowance bad debt (%)
No indication of impairment Air China 13,047,895.61 0.00 0.00
upon individual assessment No indication of impairment Debtor#1 17,901,423.94 0.00 0.00
upon individual assessment No indication of impairment Debtor#2 17,300,360.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#3 185,361.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#4 166,824.90 0.00 0.00
upon individual assessment No indication of impairment Debtor#5 469,581.20 0.00 0.00
upon individual assessment No indication of impairment Debtor#6 490,736.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#7 617,870.00 0.00 0.00
upon individual assessment No indication of impairment Debtor#8 4,942,960.00 0.00 0.00
upon individual assessment
Allowance for Rate of allowance
Debtor Carrying amount Reason for allowance bad debt (%)
No indication of impairment Debtor#9 3,262,353.60 0.00 0.00
upon individual assessment No indication of impairment Debtor#10 4,238,588.20 0.00 0.00
upon individual assessment No indication of impairment Ji'nan Customs 11,472,711.51 0.00 0.00
upon individual assessment No indication of impairment Capital Airport Customs 14,019,673.90 0.00 0.00
upon individual assessment Total 88,116,339.86 0.00 0.00
13.2.4 Other receivables owed by investors holding5% or more of the shares of the Company
C/f B/f
Investor
Carrying amount Allowance for bad debt Carrying amount Allowance for bad debt Air China 13,047,895.61 0.00 9,336,264.20 0.00 Total 13,047,895.61 0.00 9,336,264.20 0.00 13.2.5 Top five other receivables
Relationship to the % of total other Debtor Amount Age
Company receivables Shandong Rainbow Commercial Jet Co., Ltd. Related party 101,551,717.65 Over 3 years 26.34 Debtor#1 Third party 61,213,069.70 Within 1 year 15.88 Qingdao International Air Logistics Centre
Related party 42,105,446.50 Within 3 year 10.92 Co., Ltd
CBD-leasing Co., Ltd. Third party 41,354,563.28 Over 3 years 10.73 Debtor#2 Third party 17,901,423.94 Over 3 years 4.64
Total 264,126,221.07 68.51 13.2.6 Related party balances
% of total other Debtor Relationship to the Company Amount
receivables Shandong Rainbow Commercial Jet Co.,
Associate 101,551,717.65 26.34 Ltd.
Qingdao Logistics Wholly owned subsidiary 42,105,446.50 10.92 Air China Major investor 13,047,895.61 3.38 Qingdao Feisheng Wholly owned subsidiary 1,503,226.70 0.39 Shenzhen Airlines Co., Ltd. Controlled by major investor 75,900.00 0.02 Total 158,284,186.46 41.05 13.2.7 Other receivables denominated in foreign currencies and the relevant rate for translation
C/f B/f
Currency
Currency Exchange CNY Currency Exchange CNY
amount rate amount amount rate amount USD 20,080,940.89 6.0969 122,431,488.54 13,821,767.06 6.2855 86,876,716.86 13.3 Long-term equity investments
13.3.1 Disclosure by category
Current year Current year
Category B/f C/f increase decrease
Investment in subsidiaries 106,000,685.43 0.00 0.00 106,000,685.43 Investment in associates 22,500,000.00 0.00 0.00 22,500,000.00 Other equity investments 88,352,100.00 0.00 0.00 88,352,100.00 Less: Impairment allowance 22,500,000.00 0.00 0.00 22,500,000.00 Total 194,352,785.43 0.00 0.00 194,352,785.43 13.3.2 Details of long-term equity investments
Measurement Cost of Current year
Investee B/f C/f
method investment movement
China Travelsky Technology Co., Ltd. Cost method 6,690,000.00 6,690,000.00 0.00 6,690,000.00 Sichuan Airlines Cost method 35,000,000.00 35,000,000.00 0.00 35,000,000.00 Jinan International Airport Co., Ltd. Cost method 46,662,100.00 46,662,100.00 0.00 46,662,100.00
Measurement Cost of Current year
Investee B/f C/f
method investment movement
Qingdao Losgistics Cost method 48,323,205.97 48,323,205.97 0.00 48,323,205.97 Qingdao Feisheng Cost method 57,677,479.46 57,677,479.46 0.00 57,677,479.46 Shandong Rainbow Commercial Jet Co., Ltd. Equity method 22,500,000.00 22,500,000.00 0.00 22,500,000.00 Total 216,852,785.43 216,852,785.43 0.00 216,852,785.43 (Continued)
Reason for
Impairment
disagreement
Shareholding Voting right Impairment allowance Cash dividend in Investee between
(%) (%) allowance recognised in current year shareholding and
current year
voting right
China Travelsky Technology Co.,
0.45 0.45 In agreement 0.00 0.00 1,735,051.50 Ltd.
Sichuan Airlines 10.00 10.00 In agreement 0.00 0.00 14,325,586.06 Jinan International Airport Co., Ltd. 2.53 2.53 In agreement 0.00 0.00 712,063.65 Qingdao Losgistics 100.00 100.00 In agreement 0.00 0.00 0.00 Qingdao Feisheng 100.00 100.00 In agreement 0.00 0.00 0.00 Shandong Rainbow Commercial
45.00 45.00 In agreement 22,500,000.00 0.00 0.00 Jet Co., Ltd.
Total 22,500,000.00 0.00 16,772,701.21 13.3.3 Details of impairment allowance for long-term equity investments
Current year Current year
Investee B/f C/f
increase decrease
Investment in associates
Shandong Rainbow Commercial Jet Co.,
22,500,000.00 0.00 0.00 22,500,000.00 Ltd.
Total 22,500,000.00 0.00 0.00 22,500,000.00 13.4 Revenue and operating costs
13.4.1 General information
Category Current year Prior year
Principal operating income 11,278,078,297.98 10,875,044,743.90 Other operating income 133,816,089.59 100,535,873.07 Total 11,411,894,387.57 10,975,580,616.97 Principal operating cost 9,699,224,738.43 8,566,066,767.30 Other operating cost 2,187,655.80 4,478,787.52 Total 9,701,412,394.23 8,570,545,554.82 13.4.2 Disclosure by service line
Current year Prior year
Service line
Operating income Operating cost Operating income Operating cost Aero transportation 11,232,141,639.73 9,666,874,791.95 10,845,887,973.75 8,543,555,576.57 Hospitality and catering 30,362,647.64 27,348,610.96 22,119,064.02 19,496,643.53 Training 15,574,010.61 5,001,335.52 7,037,706.13 3,014,547.20 Total 11,278,078,297.98 9,699,224,738.43 10,875,044,743.90 8,566,066,767.30 13.4.3 Operating income from top five customers
Year Operating income % of total operating income
2013 681,700,941.89 5.97 2012 701,094,111.08 6.39 13.5 Investment income
13.5.1 Disclosure by category
Category Current year Prior year
Income from long-term equity investments measured at cost 16,772,701.21 16,247,366.84
Category Current year Prior year
Income from holding of financial assets held for trading -2,609,524.71 -1,852,852.05 Total 14,163,176.50 14,394,514.79 13.5.2 Income from long-term equity investments measured at cost
Investee Current year Prior year
China Travelsky Technology Co., Ltd. 1,735,051.50 1,565,460.00 Sichuan Airlines 14,325,586.06 13,730,000.00 Jinan International Airport Co., Ltd. 712,063.65 951,906.84 Total 16,772,701.21 16,247,366.84 13.6 Supplementary information to the statement of cash flows
Category Current year Prior year① Reconciliation of cash flows from operating activities to net profit:
Net profit 397,067,863.95 582,287,775.57 Add: Loss on asset impairment 70,348,934.03 194,946,539.59 Depreciation of fixed assets, oil and gas assets, bioogical assets held for
780,197,846.67 720,279,551.90 production
Amortisation of intangible assets 1,849,103.36 1,399,694.64 Amortisation of deferred charges 52,123,842.15 45,593,508.02 Loss on non-current assets disposal (gain presented by "-" prefix) -71,758,688.71 -53,988.17 Loss on scrap of fixed assets (gain presented by "-" prefix) 2,758,941.77 6,905,518.55 Loss on fair value changes (gain presented by "-" prefix) -6,901,881.12 5,053,262.49 Fianncial costs (gain presented by "-" prefix) 148,244,330.64 238,341,003.26 Investment loss (gain presented by "-" prefix) -14,163,176.50 -14,394,514.79 Decrease of deferred tax assets (increase presented by "-" prefix) 11,761,387.65 -220,886,871.11 Increase of deferred tax liabilities (increase presented by "-" prefix) 0.00 0.00 Decrease of inventories (increase presented by "-" prefix) 8,972,490.54 9,195,192.86 Decrease of operating receivables (increase presented by "-" prefix) -120,338,644.44 -86,813,804.28 Increase of operating payables (decrease presented by "-" prefix) 123,929,491.48 212,075,973.25 Others 0.00 0.00 Net cash flows generated from operating activities 1,384,091,841.47 1,693,928,841.78
Category Current year Prior year② Significant investing and financing acitivities involve no cash:
Debt-to-capital conversion 0.00 0.00 Convertable loan due within one year 0.00 0.00 Fixed assets acquired under financial lease 0.00 0.00③ Movement of cash and cash equivalents:
Cash C/f 421,826,370.62 143,212,750.59 Less: Cash B/f 143,212,750.59 235,921,301.34 Add: Cash equivalents C/f 0.00 0.00 Less: Cash equivalents B/f 0.00 0.00 Net increase of cash and cash equivalents 278,613,620.03 -92,708,550.75 Note 14 Supplementary information
14.1 Non-recurring profit and loss
Category Current year Prior year
Gains from disposals of non-current assets after expending impairment
68,990,941.57 -6,848,192.53 provisions
Exceeded-authority approved, non-official approved or accidental tax
0.00 0.00 repayment and relief
Government grants recognised through profit or loss for the current reporting
period, excluding grants which are closely related to theCompany’s operating
22,465,841.77 52,137,058.47 activities and of which the quota or approval is eligible for automatic renewal in
accordance with relevant regulations
Financial resource usage fees charged on non-financial institution recognised
0.00 0.00 through profit or loss for the current reporting period
Gains arising from bargain purchase in business combination and investments
0.00 0.00 in associates and joint ventures
Non-monetary asset exchange 0.00 0.00 Consigned investment and asset management 0.00 0.00 Impairment provision resulting from force majeure, eg. natural desasters 0.00 0.00 Reorganisation 0.00 0.00
Category Current year Prior year
Reorganisation expenditure 0.00 0.00 Unfair transactions 0.00 0.00 Net profits or losses achieved by an acquired under-common-control entity
0.00 0.00 during the period from the start of the period to the acquisition date
Gains or losses arising from contingent events unconnected with the
0.00 0.00Company’s daily operating activities
Fair value changes of tradable financial assets and tradable financial liabilities
held and gains or losses arising from disposals of tradable financial assets, tradable
4,292,356.41 -6,906,114.54 financial liabilities and available-for-sale financial assets, excluding hedging contracts
relevant to theCompany’s daily operating activities
Reversal of impairment provision for accounts receivables eligible for individual
7,500,000.00 0.00 impairment assessment
Gains or losses arising from consigned borrowings 0.00 0.00 Fair value changes of property investments subsequently measured at fair
0.00 0.00 value
One-off adjustment of profit or loss for the current reporting period in
0.00 0.00 accordance with tax and accounting laws and regulations
Consignment income arising from consigned operations 0.00 0.00 Income and expenses other than items listed above 165,501,423.87 94,505,753.93 Other gains or losses satisfying the definition of extraordinary gains or losses 67,342,734.17 0.00 Subtotal 336,093,297.79 132,888,505.33 Less: Impact of income tax 84,861,804.44 33,224,210.01 Less: Impact on non-controlling interest 0.00 0.00 Total 251,231,493.35 99,664,295.32 Note: Positive amounts and negative amounts in non-recurring categories mean income and expense or loss respectively.
The Company recognised non-recurring categories of activities in accodance with the Explanatory Announcement regarding Information Disclosure by Publicly Listed Company No. 1 - Non-recurring Profit and Loss (Zhengjianhui Gonggao[2008] No.43).
14.2 Rate of return on net assets and earnings per share
Weighted average rate
Earnings per share (CNY/share) Profit catetory
of RONA
Basic EPS Diluted EPS Net profit attributable to ordinary shareholders 15.08% 0.97 0.97 Recurring profit or loss attributable to ordinary shareholders 5.34% 0.34 0.34 Notes: Computation of basic earnings per share and diluted earnings per share Note 7.46.
14.3 Significant change of major element of the consolidated financial statements
14.3.1 Elements of the consolidated statement of financial position
① Monetary funds amounting to 444,522,271.21 as at the reporting date:186.02% increase from
last year mainly resulted from other cash receipts relating to financing activities.
② Accounts receivables amounting to 250,524,757.67 as at the reporting date:34.63% increase
from last year mainly resulted from incrase of wet lease receivables as from Air China
③ Prepayments amounting to 88,182,040.98 as at the reporting date:54.90% increase from last year mainly resulted from increase of prepaid aircraft lease rental due to increased number of leased aircrafts.
④ Goodwill amounting to 0.00 as at the reporting date100.00% decrease from last year mainly resulted from recognition of goodwill impairment.
⑤ Short-term borrowings amounting to 434,137,220.00 as at the reporting date:35.09% increase from last year mainly resulted from short-term borrowings obtained in the current year were yet to expire as at the reporting date.
⑥ Financial liabilities held for trading amounting to 296,902.47 as at the reporting date:95.88% decrease from last year mainly resulted from changes of fair value of interest rate swaps held.
⑦ Advances from customers amounting to 343,468,052.97 as at the reporting date:59.67% increase from last year mainly resulted from increase of air ticket sold in advance.
⑧ Taxes and fees payable amounting to 110,064,437.61 as at the reporting date:52.08% decrease from last year mainly resulted from decrease in enterprise income tax due to the payment of prior year income tax liability and decrease of taxable profit in the current year.
⑨ Non-current liabilities due within one year amounting to 533,150,658.42 as at the reporting date:35.81% increase from last year mainly resulted from increase of long-term borrowings due in next year.
⑩ Other non-current liabilities amounting to 25,367,524.34 as at the reporting date:86.37% decrease from last year mainly resulted from dispose of accumulated reward points
14.3.2 Elements of the consolidated statement comprehensive income
① Business tax and surcharges amounting to 238,665,537.66 for the period:34.30% decrease from
last year mainly resulted from business-tax-to-value-added-tax conversion as from August 2013.
② Financial costs amounting to 142,819,611.58 for the period:41.35% decrease from last year mainly resulted from increased gain from exchange difference due to CNY's appreciation against USD.
③ Loss on asset impairment amounting to 82,359,203.47 for the period:57.53% decrease from last year mainly resulted from reversal of allowance for bad debts and decrease in impairment provisions for fixed assets.
④ Changes in the fair value of derivatives amounting to 6,901,881.12 for the period (2012 comparative: -5,053,262.49) mainly resulted from changes of fair value of interest rate swaps held
⑤ Non-operating income amounting to 270,407,969.61 for the period:83.72% increase from last year mainly resulted from gain on disposal of fixed assets and increase in receipts of air route subsidy.
① Non-operating expenses amounting to 13,449,762.40 for the period:81.93% increase from last year mainly resulted from loss on disposal of fixed assets.
14.3.3 Elements of the statement of cash flows
① Other cash receipts relating to operating activities amounting to 298,723,497.82 for the period:115.89% increase from last year mainly resulted from increase in receipts of air route subsidy and current accounts.② Cash received from investment income amounting to 2,447,115.15 for the period:84.94% decrease from last year mainly resulted from the pending accounts dividend receivable from Sichuan Airlines.
③ The net cash receipt from disposal of fixed assets, intangible assets and other long-term assets amounting to 174,681,542.77 for the period: 2,110.57 times increase from last year mainly resulted from increase in receipts of aircraft assets disposal.
④ Other cash payments relating to investing activities amounting to 2,609,524.71 for the period:40.84% increase from last year mainly resulted from decrease in Income from holding of financial assets held for trading
⑤ Cash received from issuing bonds amounting to 0.00 for the period100.00% decrease from last year mainly resulted from no bond issue in the current year.
⑥ Other cash receipts relating to financing activities amounting to 903,064,822.94 for the period 119.89 times increase from last year mainly resulted from receipt of consideration for disposed purchase rights on aircraft which became acquired under operating lease.
⑦ The cash payments relating to debt redemption amounting to 1,664,222,540.40 for the period
33.83% increase from last year mainly resulted from the increased amount of debt repayment.