CHINA SOUTHERN AIRLINES COMPANY LIMITED ANNUAL REPORT 2008(41)

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Prior to the adoption of IFRIC 13, the Group accounted for the accumulated mileages under its frequent flyer award programmes using incremental cost method. The estimated incremental cost to provide free travel was recognised as an expense and accrued as a current liability when members accumulated mileages. When members redeemed awards or their entitlements expired, the incremental cost liability was reduced accordingly to reflect the outstanding obligations.
On adoption of IFRIC 13, revenue received in relation to mileage earning flights is allocated, based on fair value, between the flight and mileages earned by members of the Group’s frequent flyer programmes. The value attributed to the awarded mileages is deferred as a liability until the mileages are ultimately utilised. As members of the programmes redeem mileages for an award, revenue is recorded in profit or loss. Revenue in relation to flight awards is recognised when transportation is provided. Revenue is recognised at the point of redemption when non-flight awards are selected. Further details of the new policy are set out in note 2(v)(ii).
ANNUAL REPORT 2008

 

Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards) (Expressed in Renminbi)

Non-current assets
Deferred tax assets 11 73 84
Current liabilities
Sales in advance of carriage 1,885
6 1,891 Deferred revenue – 168 168 Accrued expenses 7,354 (64) 7,290
Non-current liabilities and deferred items
Deferred revenue – 422 422 Deferred tax liabilities 748 (57) 691
Net assets 14,712 (402) 14,310
Capital and reserves
Reserves 7,872 (383) 7,489
Total equity attributable to equity shareholders of the Company
12,246 (383) 11,863 Minority interests 2,466 (19) 2,447
ANNUAL REPORT 2008

 

Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards) (Expressed in Renminbi)
CHANGES IN ACCOUNTING POLICIES (cont’d)
(b) Estimated effect of changes in accounting policies on the current year
The estimated effect on the Group’s consolidated net loss for the year ended 31 December 2008 and consolidated net assets at 31 December 2008 is a decrease of RMB96 million and an increase of RMB498 million respectively, had the previous policies still been applied in the current year.

4 TURNOVER
Turnover comprises revenues from airline and airline-related business and is stated net of sales tax. An analysis of turnover is as follows:
2008 2007
RMB million RMB million (restated, note 3)
Traffic revenue 
Passenger  50,412  49,499 
Cargo and mail  3,501  3,697 

53,913 53,196
Other operating revenue
Commission income 317 281
General aviation income 133 108
Ground services income 250 241 Air catering income 107 Rental income 120 119
Others 448 375
1,375 1,205
55,288 54,401
Pursuant to various sales tax rules and regulations, the Group is required to pay sales tax (including business tax and other surcharges) to national and local tax authorities at the rate of approximately 3% of the traffic revenue in respect of domestic flights and outbound international, Hong Kong, Macau and Taiwan flights. Pursuant to the “Notice of exemption of business tax on fuel surcharge for airline companies” issued jointly by the PRC Ministry of Finance and the State Administration of Taxation, the Group is exempted from business tax on fuel surcharge income received during the period from 1 January 2008 to 31 December 2010. Sales tax incurred by the Group during the year ended 31 December 2008, netted off against revenue, amounted to RMB1,337 million (2007: RMB1,574 million).
ANNUAL REPORT 2008

 

Notes to the Financial Statements
　
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