1975-1976 — Page 27

Notes on the Operating and Profit & Loss Accounts

The Kowloon-Canton Railway is owned by the Hong Kong Government whose policy is to avoid cash transactions between its departments. However, in order to determine profitability and reflect the action of management the Railway's annual accounts are based on commercial principles and it is necessary, therefore, to include in such accounts the market value of all services rendered to Government departments, the renting to them of railway property and the loss of revenue caused by Government action. A principal item is the considerable difference between actual income derived from the sale of tickets to students and the amount which they would have paid if normal fares were charged and is in effect a subsidy to students. The situation is the same as in the case of the bus and tramway companies which are compensated for the concessionary fares charged to students by the payment by Government.

In order that the Railway accounts can reflect income which is part of the normal revenue of non-Government owned railways, the following notional credits were included in these accounts :

Subsidy for Scholar Tickets

Value of tickets issued free of charge

to Government employees travelling on duty

$3,817,768

401,593

Conveyance of mail to China

1,523,765

Compensation for loss of advertising

space

108,000

Rent for Railway land occupied by

Government Departments

823,541

$6,674,667

Conversely, notional debits were also shown in the accounts. They consist of :

Contribution in lieu of rates

$ 707,595

Contribution in lieu of duty on

diesel oil used in locomotives

$ 911,506

Annual rent charge for use of

Government land

$ 820,000

Furthermore, the salaries of staff include an element for

the cost of fringe benefits, such as medical and dental treatment, pensions, etc.