72 Airport Authority Hong Kong Annual Report 2004/05 Financial Statements Notes on the Financial Statements (Expressed in Hong Kong dollars) 1. Establishment of the Authority The Airport Authority (“Authority”) is a statutory corporation wholly owned by the Government of the Hong Kong Special Administrative Region (“the Government”). It was formally established on 1 December 1995 when the Airport Authority Ordinance (“the Ordinance”) was brought into effect as a continuation of the Provisional Airport Authority which had been set up in 1990. The Authority’s statutory purpose is to provide, operate, develop and maintain Hong Kong’s airport at Chek Lap Kok, in order to maintain Hong Kong’s status as a centre of international and regional aviation. Pursuant to these purposes, the Authority may also engage in airport-related activities in trade, commerce or industry at Chek Lap Kok and is permitted to engage in or carry out airport-related activities at any place in or outside Hong Kong. The Authority is required under the Ordinance to conduct its business according to commercial principles. Under the Land Grant signed on 1 December 1995, the Government has granted to the Authority up to the year 2047 the legal rights to the entire airport site at Chek Lap Kok together with the rights necessary to develop such site for the purposes of its business. 2. Principal Activities of the Authority The Authority’s principal activities are the management, operation, planning and development of the Hong Kong International Airport at Chek Lap Kok. It also engages in airport-related commercial and industrial activities at Chek Lap Kok. The Authority’s subsidiaries, Aviation Security Company Limited and HKIA Information Services Limited are engaged in the provision of aviation security services at the airport and the provision of airline ticketing information services respectively. 3. Significant Accounting Policies (a) Statement of compliance The financial statements have been prepared in accordance with all applicable Statements of Standard Accounting Practice (“SSAP”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and so as to comply with the disclosure provisions of the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted is set out below. (b) Basis of preparation The measurement basis used in the preparation of the financial statements is historical cost modified by the revaluation of other investments as explained in the relevant accounting policy. The group’s financial statements include the financial statements of the Authority and its subsidiaries made up to the balance sheet date. All material intercompany transactions and balances are eliminated on consolidation. (c) Interests in subsidiaries A subsidiary is a company in which the Authority, directly or indirectly, holds more than half of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. Interests in subsidiaries in the Authority’s balance sheet is stated at cost less any impairment loss. Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.
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72 Airport Authority Hong Kong Annual Report 2004/05
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
1. Establishment of the AuthorityThe Airport Authority (“Authority”) is a statutory corporation wholly owned by the Government of the Hong Kong
Special Administrative Region (“the Government”). It was formally established on 1 December 1995 when the
Airport Authority Ordinance (“the Ordinance”) was brought into effect as a continuation of the Provisional Airport
Authority which had been set up in 1990.
The Authority’s statutory purpose is to provide, operate, develop and maintain Hong Kong’s airport at Chek Lap
Kok, in order to maintain Hong Kong’s status as a centre of international and regional aviation. Pursuant to these
purposes, the Authority may also engage in airport-related activities in trade, commerce or industry at Chek Lap
Kok and is permitted to engage in or carry out airport-related activities at any place in or outside Hong Kong. The
Authority is required under the Ordinance to conduct its business according to commercial principles.
Under the Land Grant signed on 1 December 1995, the Government has granted to the Authority up to the year
2047 the legal rights to the entire airport site at Chek Lap Kok together with the rights necessary to develop such
site for the purposes of its business.
2. Principal Activities of the Authority
The Authority’s principal activities are the management, operation, planning and development of the Hong Kong
International Airport at Chek Lap Kok. It also engages in airport-related commercial and industrial activities at
Chek Lap Kok.
The Authority’s subsidiaries, Aviation Security Company Limited and HKIA Information Services Limited are
engaged in the provision of aviation security services at the airport and the provision of airline ticketing
information services respectively.
3. Significant Accounting Policies(a) Statement of compliance
The financial statements have been prepared in accordance with all applicable Statements of Standard
Accounting Practice (“SSAP”) and Interpretations issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and so as to comply with
the disclosure provisions of the Hong Kong Companies Ordinance. A summary of the significant accounting
policies adopted is set out below.
(b) Basis of preparation
The measurement basis used in the preparation of the financial statements is historical cost modified by the
revaluation of other investments as explained in the relevant accounting policy.
The group’s financial statements include the financial statements of the Authority and its subsidiaries made up to
the balance sheet date. All material intercompany transactions and balances are eliminated on consolidation.
(c) Interests in subsidiaries
A subsidiary is a company in which the Authority, directly or indirectly, holds more than half of the issued share
capital, or controls more than half of the voting power, or controls the composition of the board of directors.
Interests in subsidiaries in the Authority’s balance sheet is stated at cost less any impairment loss.
Minority interests represent the interests of outside shareholders in the operating results and net assets
of subsidiaries.
73Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(d) Other investments
Investments held on a continuing basis for an identified long term purpose are classified as other
investments. Other investments are accounted for in the consolidated financial statements at their fair
values. A gain or loss on valuation on such investments is recognised directly in equity, until they are
disposed of or until they are determined to be impaired, at which time the cumulative gain or loss is included
in the income statement for the period.
(e) Fixed assets
(i) Fixed assets are stated at cost less accumulated depreciation and impairment losses (note 3(g)).
(ii) Subsequent expenditure relating to a fixed asset that has already been recognised is added to the
carrying amount of the asset when it is probable that future economic benefits, in excess of the
originally assessed standard of performance of the existing asset, will flow to the group.
Repairs and maintenance expenditure to restore or maintain the originally assessed standard of
performance of fixed assets is charged to the income statement as and when incurred.
(iii) Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised as
income or expense in the income statement on the date of retirement or disposal.
(iv) Leases of assets under which the group assumes substantially all the risks and benefits of ownership
are classified as finance leases and treated as if the group owned the assets outright. Leases of
assets under which the group has not been transferred all the risk and benefits of ownership are
classified as operating leases.
When the group leases out assets under operating leases, the assets are included in the balance sheet
according to their nature and, where applicable, are depreciated in accordance with the group’s
depreciation policies set out in note 3(f) below. Revenue arising from operating leases is recognised
in accordance with the group’s revenue recognition policies set out in note 3(h) below.
(v) Construction in progress
Assets under construction and capital works for the operating airport are stated at cost. Costs
comprise direct costs of construction, such as materials, staff costs and overheads, as well as net
borrowing costs (note 3(k)) capitalised during the period of construction or installation and testing.
Capitalisation of these costs ceases and the asset concerned is transferred to fixed assets when
substantially all the activities necessary to prepare the asset for its intended use are completed, at
which time it commences to be depreciated in accordance with the policy detailed in note 3(f).
(f) Depreciation
Fixed assets are depreciated on a straight-line basis so as to write off the cost of the assets over their
estimated useful lives.
Following a review undertaken during the year, the estimated useful lives of certain fixed assets were revised
with effect from 1 April 2004, resulting in a net increase in the Authority’s annual depreciation charge of
approximately $106 million.
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
74 Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(f) Depreciation (continued)
The estimated useful lives are:
Leasehold land 100 years
Airfields:
Runways, taxiways, aprons and tunnels 10 – 75 years
Lighting and other airfield facilities 10 – 50 years
Terminal complexes:
Building structure 50 – 75 years
Building services and fit-outs 25 years
Access, utilities, other buildings and support facilities:
Roads and bridges 75 years
Other building and support facilities 50 years
Utility supply equipment 25 years
Systems, installations, plant and equipment 5 – 20 years
Furniture, fixtures and equipment 5 – 10 years
The above useful lives assume that the Land Grant referred to in note 9(c) on the financial statements will be
renewed upon its expiry on 30 June 2047 for a period of at least 50 years (note 3(s)(i)).
(g) Impairment of assets
The carrying amount of fixed assets is reviewed annually in order to determine whether there is any
indication of impairment. If any such indication exists, the recoverable amount is estimated. An impairment
loss is recognised whenever the carrying amount exceeds the recoverable amount. Impairment losses are
recognised as an expense in the income statement.
The recoverable amount of an asset is the greater of its net selling price and value in use.
An impairment loss is reversed if there has been a change in the estimates used to determine the
recoverable amount. A reversal of impairment loss is limited to the assets’ carrying amount that would have
been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are
credited to the income statement in the year in which the reversals are recognised.
(h) Revenue recognition
Provided it is probable that the economic benefits will flow to the group and the revenue and costs, if
applicable, can be measured reliably, revenue is recognised in the income statement as follows:
(i) Airport charges, representing landing charges, parking charges and terminal building charges are
recognised when the airport facilities are utilised.
(ii) Security charges in respect of aviation security services to passengers are recognised when the airport
facilities are utilised.
(iii) Aviation security services revenue from the provision of security services to airlines, franchisees and
licensees is recognised when the services are rendered.
75Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(h) Revenue recognition (continued)
(iv) Franchise revenue from awarded airside support services, retail revenue from awarded retail
licences, other terminal commercial revenue from leasing of check-in counters and airline office
rental and other service revenue and recoveries, are recognised on an accruals basis in accordance
with the related agreements.
(v) Real estate revenue arising from sub-leases of land or property is recognised in the income statement
on a straight-line basis over the periods of the leases. Amounts received in advance in respect of sub-
leases of land granted are accounted for as deferred income and are recognised in the income
statement on a straight line basis over the periods of the respective sub-leases.
(vi) Amounts received in advance in respect of lease-out/lease-back and franchise facility payment
agreements are accounted for as deferred income and are recognised in the income statement over
the period of the respective agreements.
(vii) Interest income is recognised on a time-apportioned basis by reference to the principal outstanding
and at the rate applicable.
(i) Defeasance of long-term lease payments
Where commitments to make long-term lease payments have been defeased by the placement of security
deposits, those commitments and deposits (and income and charges arising therefrom) have been netted
off, in order to reflect the overall commercial substance of the arrangement. Such netting-off has been
effected where the group has the ability to insist on net settlement of the commitments and the deposits.
(j) Stores and spares
Stores and spares are stated at cost, computed on a weighted average basis, less provision for
obsolescence. When stores and spares are consumed, the carrying amount of these stores and spares is
recognised as an expense in the year in which the consumption occurs. Any obsolete and damaged stores
and spares are written off to the income statement.
(k) Interest-bearing borrowings and borrowing costs
Notes issued by the Authority are stated in the balance sheet at their face values. Premiums and discounts
arising from their issuance are amortised to the income statement over the term of the respective notes.
Borrowing costs are expensed in the income statement in the period in which they are incurred except to
the extent that they are capitalised as being directly attributable to the acquisition, construction or
production of an asset which necessarily takes a substantial period of time to get ready for its intended use.
Borrowing costs include interest and finance charges on borrowing, amortisation of discounts net of
premiums relating to borrowing and differences in amounts paid and received on interest rate swap
agreements entered into for hedging purposes.
(l) Translation of foreign currencies
Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates
ruling at the transaction dates. Monetary assets and liabilities in foreign currencies are translated into Hong
Kong dollars at the market rates of exchange ruling at the balance sheet date. Exchange gains and losses
are dealt with in the income statement.
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
76 Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(m) Off-balance sheet financial instruments
Where non-speculative forward exchange contracts are used as hedges of monetary assets or liabilities, the
gains or losses on the contracts are taken to the income statement and the discounts or premiums are
amortised over the periods of the contracts.
Gains or losses arising on interest rate derivatives, which are used as hedges of risks associated with the
interest on floating/fixed rate borrowings are recognised in the income statement over the periods of the
respective instruments.
(n) Provisions and contingent liabilities
Provisions are recognised for liabilities of uncertain timing or amount when there is a legal or constructive
obligation arising as result of a past event, and it is probable that an outflow of economic benefits will be
required to settle the obligations and a reliable estimate can be made. Where the time value of money is
material, provisions are stated at the present value of the expenditure expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of
economic benefits is remote.
(o) Employee benefits
(i) Salaries, performance awards, paid annual leave and the cost to the group of non-monetary benefits
are accrued in the year in which the associated services are rendered by employees of the group.
(ii) Contributions to defined contribution schemes, such as Mandatory Provident Funds as required under
the Hong Kong Mandatory Provident Fund Schemes Ordinance, are recognised as an expense in the
income statement as incurred.
(iii) The group’s net obligation in respect of defined benefit retirement plans is calculated by estimating the
amount of future benefit that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine the present value, and the fair value of any plan assets
is deducted. The discount rate is the yield at the balance sheet date on high quality corporate bonds
that have maturity dates approximating the terms of the group’s obligations. If there is no deep market
in such bonds, the market yield in government bonds would be used. The calculation is performed by
a qualified actuary using the projected unit credit method.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service
by employees is recognised as an expense in the income statement on a straight-line basis over the
average period over which the benefits are vested. To the extent that the benefits vest immediately,
the expense is recognised immediately in the income statement.
In calculating the group’s obligation in respect of a plan, to the extent that any cumulative
unrecognised actuarial gain or loss exceeds ten percent of the greater of the present value of the
defined benefit obligation and the fair value of plan assets, that portion is recognised in the income
statement over the expected average remaining working lives of the employees participating in the
plan. Otherwise, the actuarial gain or loss is not recognised.
77Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(o) Employee benefits (continued)
(iii) (continued)
Where the calculation of the group’s net obligation results in a negative amount, the asset recognised is
limited to the net amount of the present value of any future refunds from the plan or reductions in future
contributions to the plan less any cumulative unrecognised net actuarial losses and past service costs.
(p) Income tax
(i) Income tax for the year comprises current tax and movements in deferred tax assets and liabilities.
Current tax and movements in deferred tax assets and liabilities are recognised in the income
statement except to the extent that they relate to items recognised directly in equity, in which case
they are recognised in equity.
(ii) Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of
previous years.
(iii) Deferred tax assets and liabilities arise from deductible and taxable temporary differences
respectively, being the differences between the carrying amounts of assets and liabilities for financial
reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and
unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent
that it is probable that future taxable profits will be available against which the asset can be utilised,
are recognised.
The amount of deferred tax recognised is measured based on the expected manner of realisation or
settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at the balance sheet date and is reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow the related
tax benefit to be utilised. Any such reduction is reversed to the extent that it become probable that
sufficient taxable profit will be available.
Current tax balances and deferred tax balances, and movements therein, are presented separately
from each other and are not offset. Current tax assets are offset against current tax liabilities, and
deferred tax assets against deferred tax liabilities if, and only if, the company or the group has the
legally enforceable right to set off current tax assets against current tax liabilities and the following
additional conditions are met:
– in the case of current tax assets and liabilities, the Authority or the group intends either to settle
on a net basis, or to realise the asset and settle the liability simultaneously; or
– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same
taxation authority on the same taxable entity or different taxable entities, which, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled
or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net
basis or realise and settle simultaneously.
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
78 Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(q) Related parties
For the purposes of these financial statements, parties are considered to be related to the group if the group
has the ability, directly or indirectly, to control the party or exercise significant influence over the party in
making financial and operating decisions, or vice versa, or where the group and the party are subject to
common control or common significant influence. Related parties may be individuals or other entities.
(r) Cash equivalents
Cash equivalents are short-term, highly liquid investments which are readily convertible into known amounts
of cash without notice and which were within three months of maturity when acquired. For the purposes of
the cash flow statement, cash equivalents also includes overdrafts and advances from banks which are
repayable on demand and form an integral part of the group’s cash management.
(s) Recently issued accounting standards
The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong
Kong Accounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or
after 1 January 2005. The group has not early adopted these new HKFRSs in its financial statements for the
year ended 31 March 2005. However, the group has been carrying out an assessment of the impact of
these new HKFRSs and so far considers that the adoption of the revised standards may have a significant
impact to its financial statements as described below:
(i) Hong Kong Accounting Standard 17 (“HKAS 17”) on leases
The adoption of HKAS 17 would require operating leasehold land to be classified as leasehold land
and the lease premium for land to be recognised as an expense on a straight-line basis or other
systemic basis over the lease term.
Draft Interpretation 25 on “Leases-Determination of the Length of Lease Term in respect of Hong Kong
Land Leases” issued for consultation on 17 March 2005 by the HKICPA provides guidance on the
determination of the length of lease term of a Hong Kong land lease for the purpose of applying the
depreciation requirements under HKAS 16 on “Property, plant and equipment” and HKAS 17. The
Draft Interpretation does not allow lessees to take the assumption that Hong Kong land leases will be
extended for another 50 years, or any other period, upon expiry, while the Government retains the sole
discretion as to whether to renew.
If the Draft Interpretation is adopted by the HKICPA in its current form, the Authority’s current practice
of assuming the Land Grant will be renewed upon its expiry on 30 June 2047 for a period of at least 50
years will not be permitted. Accordingly, the current depreciation policy of 100 years for leasehold
land and 75 years for certain building, airfield and access assets would require to be revised. The
potential effect of this change would be an annual increase in depreciation of approximately $200
million commencing 2005/06.
The Authority is currently in discussion with the Government with regard to the Land Grant and the
arrangements upon its expiry.
79Airport Authority Hong Kong Annual Report 2004/05
3. Significant Accounting Policies (continued)
(s) Recently issued accounting standards (continued)
(ii) Hong Kong Accounting Standards 32 & 39 (“HKASs 32 & 39”) on financial instruments
The adoption of HKASs 32 and 39 would require all financial instruments which the group is using to
hedge the interest rate and currency risks of its borrowings to be marked to market, with change in
their fair values recognised in the income statement directly. The standard allows the application of
hedge accounting, that is, to use the change in fair value of the underlying hedged items to offset this
impact. Should there be inefficiency in the hedging relationship to the extent that the opposing
impacts do not cancel each other out, there will be a net residual impact to the income statement.
Given that hedge efficiency is affected by a number of factors including the nature of the hedging
relationship, direction of interest rates and changes in foreign exchange rates, it is difficult to forecast
and control this residual impact.
It should be noted, however, that these accounting changes are non-cash items and hence do not affect
cashflow.
The group will continue to assess the impact of other new HKFRSs and other changes may be identified as
a result. However, it is not currently expected that these will have a significant impact on the group’s
financial statements.
4. Operating Profit Before Interest and Finance ChargesOperating profit before interest and finance charges of the group and the Authority are after charging:
The group The Authority
2005 2004 2005 2004$ million $ million $ million $ million
Auditors’ remuneration 2 2 2 2
Stores and spares expensed 53 65 53 65
Loss on disposal of fixed assets 124 91 124 91
Auditors’ remuneration includes charges for audit services only. Auditors’ remuneration with respect to non audit
services is immaterial for 2004 and 2005.
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
80 Airport Authority Hong Kong Annual Report 2004/05
5. Members of the Board and Executive Directors’ Remuneration(a) The remuneration of the Members of the Board and the Executive Directors are as
follows:
2005 2004$ million $ million
Fees paid to non-executive Members of the Board 1 1
Remuneration of Chief Executive Officer and Executive Directors
– base salaries, allowances and other benefits in kind 17 18
– performance-related compensation paid 3 4
– retirement scheme contributions 1 1
– gratuities in lieu of retirement scheme contributions 1 1
22 24
(i) The fees disclosed include those payable in respect of Members who are public officers which are
paid directly to the Government rather than to the individuals concerned.
(ii) For purposes of meaningful comparison, gratuities in lieu of retirement scheme contributions are
disclosed on an accruals basis, notwithstanding the contractual entitlement and date of payment.
(b) The remuneration of the Members of the Board and Executive Directors are within thefollowing bands:
2005 2004Number Number
$0 – $250,000 12 13
$1,000,001 – $1,500,000 1 –
$2,500,001 – $3,000,000 1 1
$3,000,001 – $3,500,000 – 2
$3,500,001 – $4,000,000 3 2
$6,500,001 – $7,000,000 1 –
$7,000,001 – $7,500,000 – 1
18 19
The information shown in the above table includes the five highest paid employees. Remuneration paid to
non-executive Members of the Board is included in the first remuneration band.
81Airport Authority Hong Kong Annual Report 2004/05
5. Members of the Board and Executive Directors’ Remuneration (continued)
(c) The remuneration details of the Chief Executive Officer and Executive Directors areshown below:
Base salaries, Retirementallowances Performance- contributions/
and benefits related gratuitiesin kind compensation in lieu Total
$ million $ million $ million $ million
2005
Chief Executive Officer 4.7 1.5 0.6 6.8
Commercial Director 3.0 0.4 0.3 3.7
Finance Director 3.0 0.4 0.3 3.7
Airport Management Director 2.9 0.4 0.3 3.6
Human Resources and
Administration Director* 1.0 0.4 0.1 1.5
Legal Director and Secretary 2.3 0.2 0.2 2.7
16.9 3.3 1.8 22.0
2004
Chief Executive Officer 4.7 1.9 0.5 7.1
Commercial Director 3.0 0.4 0.3 3.7
Finance Director 3.0 0.4 0.3 3.7
Airport Management Director 2.7 0.4 0.3 3.4
Human Resources and
Administration Director 2.6 0.5 0.2 3.3
Legal Director 2.3 0.2 0.2 2.7
18.3 3.8 1.8 23.9
* Left office in August 2004 and not replaced.
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
82 Airport Authority Hong Kong Annual Report 2004/05
6. Staff Costs and Related Expenses
The group The Authority
2005 2004 2005 2004$ million $ million $ million $ million
Costs for defined contribution plan 28 26 10 9
Costs for defined benefit plan (note 12(a)) 30 29 30 29
Retirement costs 58 55 40 38
Salaries, wages and other benefits 868 848 482 463
926 903 522 501
7. Finance Costs
The group The Authority
2005 2004 2005 2004$ million $ million $ million $ million
Interest on bank loans repayable within five years 16 20 16 20
Interest on notes issued 266 229 266 229
Other borrowing costs 12 6 12 6
294 255 294 255
Less: Borrowing costs capitalised into
construction in progress (8) – (8) –
286 255 286 255
The borrowing costs have been capitalised at the average cost of funds to the group calculated on a monthly
basis. The average interest rate for the year was 2.3% per annum.
8. Taxation(a) Taxation in the consolidated income statement represents:
The group The Authority
2005 2004 2005 2004$ million $ million $ million $ million
Current tax – Provision for Hong Kong
profits tax for the year (note 8(c)) 2 – – –
Deferred taxation (note 8(d))
– Net increase in temporary differences 320 102 320 102
322 102 320 102
83Airport Authority Hong Kong Annual Report 2004/05
8. Taxation (continued)
(b) Reconciliation between tax expense and accounting profit at applicable tax rate:
The group The Authority
2005 2004 2005 2004$ million $ million $ million $ million
Profit before tax 1,736 488 1,732 490
Notional tax on profit before tax 304 86 303 86Tax effect of non-deductible expenses 18 17 17 17Tax effect of non-taxable revenue – (1) – (1)
Actual tax expense 322 102 320 102
(c) Taxation in the balance sheets represents:
The group The Authority
2005 2004 2005 2004$ million $ million $ million $ million
Provision for Hong Kong profits taxfor the year (note 8(a)) 2 – – –
Provisional profits tax paid (1) – – –
1 – – –
No provision for Hong Kong profits tax has been made in the financial statements in respect of the Authority
as the current year taxable income has been offset against carried forward tax losses. Provision for Hong
Kong profits tax is in respect of a subsidiary calculated at 17.5% of its estimated assessable profits.
(d) Deferred tax assets and liabilities recognised:
The components of deferred tax (assets)/liabilities of the Authority and the group recognised in the balance
sheet and the movements during the year are as follows:
Depreciationallowances
in excessof related Deferred Estimated
depreciation income tax losses Total$ million $ million $ million $ million
Deferred tax arising from:At 1 April 2003 2,796 (463) (2,210) 123Charged/(credited) to consolidated
income statement 415 (233) (80) 102
At 31 March 2004 3,211 (696) (2,290) 225
At 1 April 2004 3,211 (696) (2,290) 225Charged/(credited) to consolidated
income statement (21) (13) 354 320
At 31 March 2005 3,190 (709) (1,936) 545
There is no significant deferred taxation not provided for at the balance sheet date.
Financial Statements
Notes on the Financial Statements(Expressed in Hong Kong dollars)
84 Airport Authority Hong Kong Annual Report 2004/05
9. Fixed Assets(a) The group
Access,Utilities,
Other Systems,Buildings Installations, Furniture,
Leasehold Terminal & Support Plant & Fixtures & ConstructionLand Airfields Complexes Facilities Equipment Equipment in Progress Total
$ million $ million $ million $ million $ million $ million $ million $ million
Cost
At 1 April 2004 11,571 6,726 20,376 11,790 6,810 1,142 236 58,651