REG - UniVision Eng Ltd - Final Results FY2017 <Origin Href="QuoteRef">UVEL.L</Origin> - Part 3
04/09/2017 17:40
- Part 3: For the preceding part double click ID:nRSD7861Pb
income tax 451,798 171,768
Adjustments for:
Interest expense 117 1,233
Interest income (4,081) (959)
Depreciation of plant and equipment 16 22,821 16,546
Inventory written-off 22,561 -
Gain on disposal of a subsidiary (41,992) -
Impairment loss recognised on amounts due from customers for contracts-in-progress 51,028 21,470
Reversal of provision of doubtful debt (21,201) -
481,051 210,058
Changes in operating assets and liabilities:
(Increase)/decrease in inventories (247,982) 111,894
Increase in trade and other receivables (99,937) (457,008)
Decrease in amounts due from related companies 6,692 8,154
Increase in trade and other payables 269,404 65,846
Net cash generated from/(used in) operating activities 409,228 (61,056)
Cash flows from investing activities
Interest received 4,081 959
Purchase of plant and equipment (23,822) (25,558)
Increase/(decrease) in bank deposit 3,477 (180,842)
Proceeds from disposal of a subsidiary 58,841 -
Net cash generated from /(used in) investing activities 42,577 (205,441)
Cash flows from financing activities
Interest paid (117) (1,233)
Dividend paid to shareholders of the Company (154,269) (128,507)
Repayment of finance lease liabilities (722) (7,588)
Advance from a related company 123,775 -
Net cash used in financing activities (31,333) (137,328)
Net increase/(decrease) in cash and cash equivalents 420,472 (403,825)
Cash and cash equivalents at beginning of year 654,244 1,044,484
Effect of foreign exchange rate changes on cash and cash equivalents 113,552 13,585
Cash and cash equivalents at end of year 21 1,188,268 654,244
1. GENERAL
UniVision Engineering Limited ("the Company") is incorporated in Hong Kong with limited liability and its shares are listed
on the Alternative Investment Market of the London Stock Exchange ("AIM"). The address of the registered office is Unit
1A, 2/F., Sunbeam Centre, 27 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.
The financial statements are presented in Sterling Pound ("£"), which is the presentation currency of the Company.
The Company and its subsidiary (hereinafter collectively referred to as the "Group") are mainly engaged in the supply,
design, installation and maintenance of closed circuit television and surveillance systems and the sale of security system
related products.
On 20 September 2016, the Company disposed of its subsidiary and sold to a related party, Mr. Stephen Sin Mo KOO, the
Executive Chairman of the Company.
The Company's shares were listed on the Alternative Investment Market ("AIM") of London Stock Exchange.
2. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
("IFRSs") as issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements for the year ended 31 March 2017 comprise the Company and its subsidiary. The
measurement basis used in the preparation of the financial statements is the historical cost basis.
The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs that have significant effect on the consolidated financial
statements and major sources of estimation uncertainty are discussed in note 5 to the consolidated financial statements.
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs")
(a) New and revised IFRSs that have been issued and effective
The following standards have been adopted by the Group and the Company for the first time for the year ended 31 March
2017:
- Amendments to IFRS 11 "Accounting for acquisitions of interest in joint operations"
- Amendments to IAS 1 "Disclosure Initiative"
- Amendments to IAS 16 and IAS 38 "Clarification of acceptance methods of depreciation and amortization"
- Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment entities: Applying the consolidation exception"
- Annual improvements to IFRSs 2012-2014 cycle contain amendments to four standards with consequential amendments to
other standards.
No new standards or amendments effective and adopted for the first time have had a material impact to the Group or
Company.
(b) New and revised IFRSs that have been issued but are not yet effective
The following new and revised IFRSs, potentially relevant to the Group's and Company's operations, have been issued and are
mandatory for adoption by the Company for accounting periods beginning on or after 1 January 2017 or later periods.
However, the Group and the Company have not early adopted them.
• IFRS 9 (2014) "Financial instruments"
• IFRS 15 "Revenue from contracts with customers"
• IFRS 16 "Leases"
• Amendments to IFRS 10 and IAS 28 "Sale or contribution of assets between an investor and its associate or joint
venture"
• Amendments to IFRS 2 "Clarification and measurement of share-based payment transactions"
• Amendments to IFRS 4 "Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts"
• Amendments to IFRS 10 and IAS 28 "Sale or contribution of assets between an investor and its associate or joint
venture"
• Amendments to IAS 7 "Disclosure initiative"
• Amendments to IAS 12 "Recognition of deferred tax assets for unrealised losses"
The Group and the Company have not applied any new or revised IFRSs that are not yet effective for the year ended 31 March
2017.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which
control is transferred to the Group. They are deconsolidated from the date that control ceases. Inter-company transactions,
balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for
the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Acquisition related costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest
in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net
assets.
Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity
transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated
equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is
recognised.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary,
with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the
date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition
of a financial asset.
During the year ended 31 March 2017, a subsidiary was disposed of and sold to a related party.
(b) Separate financial statements
In the individual Company's statement of financial position, interests in subsidiaries are accounted for at cost less
impairment loss. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by
the Company on the basis of dividend received and receivable.
Impairment testing of the interests in subsidiaries is required upon receiving a dividend from these investments if the
dividend exceeds the total comprehensive income of the subsidiary for the period the dividend is declared or, if the
carrying amount of investment in the separate financial statements exceeds the carrying amount in the consolidated
financial statements, of the investee's net assets including goodwill.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.1 Basis of consolidation (continued)
(c) Non-controlling interests
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and
in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in
the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial
liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value
or at the non-controlling interest's proportionate share of the subsidiary's net identifiable assets.
Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from
equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are
presented on the face of the consolidated statement of profit or loss and other comprehensive income as an allocation of
the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity
shareholders of the Company.
4.2 Segment reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and
incurs expenses, including revenues and expenses that relate to transactions with other components of the Company.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The Company's Executive Director, Mr. Stephen Sin Mo KOO is responsible for allocating resources and
assessing performance of the operating segments.
4.3 Foreign currency
(a) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic
environment in which the entity operates ("the functional currency"). The Consolidated and Company financial statements are
presented in Sterling Pound ("£"), which is the Group's and Company's presentation currency. As the Company is listed on
AIM, the directors consider that this presentation is more useful for its current and potential investors.
The functional currency of the Group and the Company is summarised as follows:
1. UniVision Engineering Limited Hong Kong Dollars ("HK$")
2. T-Com Technology Co. Limited New Taiwan Dollars ("NTD")
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.3 Foreign currency (continued)
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement of profit or loss and other comprehensive income, except
when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Foreign exchange gains and losses that relate to borrowings and cash and bank balances are presented in the statement of
profit or loss and other comprehensive income within "finance income or cost". All other foreign exchange gains and losses
are presented in the statement of comprehensive income within "administrative expense" or "other income".
(c) Group companies
The results and financial position of the Company and its subsidiary (none of which has the currency of a
hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into
the presentation currency as follows:
(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at
the end of the reporting period;
(ii) income and expenses for each statement of profit or loss and other comprehensive income are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of
borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive
income. When a foreign operation is sold, such exchange differences are transferred to the income statement as part of the
gain or loss on sale. When an inter-company loan balance which forms part of the net investment in a foreign entity is
repaid, such exchange differences are transferred to the income statement.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.4 Plant and equipment
Plant and equipment is initially recognised at cost and subsequently carried at cost less accumulated depreciation and
accumulated impairment loss. The cost of an asset comprises its purchase price and any directly attributable costs of
bringing the asset to working condition for its intended use.
On disposal of an item of plant and equipment, the difference between the net disposal proceeds and its carrying amount is
taken to profit or loss.
Depreciation is calculated using the straight-line method to allocate their depreciable amounts over the estimated useful
lives as follows:
Furniture and fixtures 3 - 5 years
Computer equipment 2 - 5 years
Motor vehicles 3 years
Research assets 3 - 5 years
Fully depreciated plant and equipment is retained in the financial statements until the items are no longer in use and no
further charge for depreciation is made in respect of these assets.
The residual values, useful life and depreciation method are reviewed at the end of each reporting period to ensure that
the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of
consumption of the future economic benefits embodied in the items of plant and equipment. The effects of any revision are
recognised in profit or loss when the changes arise.
Subsequent expenditure relating to plant and equipment that has already been recognised is added to the carrying amount of
the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the
Company and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in
profit or loss when incurred.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.5 Impairment of assets
The carrying amounts of non-current assets, such as plant and equipment, are reviewed at the end of each reporting period
to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is
estimated.
Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not
generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest
group of assets that generates cash inflows independently (i.e. a cash-generating unit).
Recognition of impairment losses
An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which
it belongs, exceeds the recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to
reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the
carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable), or
value in use (if determinable).
Reversals of impairment losses
An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable
amount.
A reversal of an impairment loss is limited to the asset's carrying amount that would have been determined had no
impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year
in which the reversals are recognised.
4.6 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method
and comprises design costs, raw materials, direct labour, other direct costs and other costs incurred in bringing the
inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.7 Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions
of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the
fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
4.7.1 Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables and bank
balances and cash) are measured at amortised cost using the effective interest method, less any impairment (see accounting
policy on impairment of loans and receivables below).
Interest income is recognised by applying the effective interest rate, except for short-term receivables where the
recognition of interest would be immaterial.
Type of item Nature and terms of item
1. Loans Unsecured temporary advances to the former subsidiary, which are interest-free and eliminated upon consolidation.
2. Other receivables They include:
a. Retention receivable under warranty provision among certain construction contracts for a period of twelve months
b. Accrued income from maintenance contracts, which are billed or collected within twelve months.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.7 Financial instruments (continued)
4.7.1 Financial assets (continued)
Impairment of loans and receivables
Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables
are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the loans and receivables, the estimated future cash flows of loans and receivables have been
affected.
Objective evidence of impairment could include:
• significant financial difficulty of the issuer or counterparty; or
• breach of contract, such as default or delinquency in interest and principal payments; or
• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of loans and receivables, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Company's past experience of collecting payments, an increase in the number of
delayed payments in the portfolio past the average credit period and observable changes in national or local economic
conditions that correlate with default on receivables.
The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of
the estimated future cash flows discounted at the loans and receivables' original effective interest rate.
The carrying amount of loans and receivables is reduced by the impairment loss directly for all loans and receivables with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes
in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are
credited to profit or loss.
If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss
to the extent that, the carrying amount of the loan and receivable at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been recognised.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.7 Financial instruments (continued)
4.7.2 Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue
costs.
Financial liabilities
Financial liabilities (including trade and other payables and loans and borrowings) are subsequently measured at amortised
cost, using the effective interest method.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments (including all fees paid or received that form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of the financial liability or, where appropriate, a
shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest
basis.
Derecognition
The Group and the Company derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another entity.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of
the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive
income and accumulated in equity is recognised in profit or loss.
The Group and the Company derecognises financial liabilities when, and only when, the Group's and Company's obligations are
discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.7 Financial instruments (continued)
4.7.3 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there
is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or
realise the asset and settle the liability simultaneously.
4.8 Trade and other receivables
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance
for impairment of bad and doubtful debts, except where the receivables are interest-free loans made to related parties
without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are
stated at cost less allowance for impairment of doubtful debts.
4.9 Bank deposits
They represent bank deposits with maturities greater than three months, which are restricted as bank deposits held as
collateral for performance bonds issued by the bank to customers.
4.10 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid
investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown under current
liabilities on the statement of financial position.
4.11 Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently stated at amortised cost unless the effect
of discounting would be immaterial, in which case they are stated at cost.
4.12 Share capital
Ordinary shares are classified as equity.
4.13 Dividend distributions
Dividend distributions to the Company's shareholders are recognised as liabilities in the Company's and the Company's
financial statements in the period in which the dividends are approved by the Company's shareholders or directors, where
appropriate.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.14 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of
services in the ordinary course of activities. Revenue is shown net of business tax, value-added tax, rebates and
discounts, and after eliminating sales within the Group and the Company.
The Group and the Company recognise revenue when the amount of revenue and related cost can be reliably measured, it is
probable that future economic will flow to the entity and when specific criteria have been met for each of the Group's and
Company's activities as described below. The amount of revenue is not considered to be reliably measurable until all
contingencies relating to the sale have been resolved. The Group and the Company base the best estimates on historical
results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
(i) Construction contracts
Revenue from construction contracts is recognised when the outcome of a construction contract can be estimated reliably:
§ revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to
the percentage of contract costs incurred to date to the estimated total contract costs for the contract; and
§ revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an
appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the
estimated total costs of the contract.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of
contract costs incurred that it is probable will be recoverable.
(ii) Maintenance contracts
Revenue from maintenance contracts is recognised on a straight line basis over the term of the maintenance contract.
(iii) Product sales
Revenue from product sales is recognised on the transfer of risks and rewards of ownership, which generally coincides with
the delivery of goods to customers and the passing of title to customers.
(iv) Interest income
Interest income is recognised as it accrues using the effective interest method.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.15 Construction contracts
When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by
reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total
contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the
outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period
in which they are incurred.
Contracts in progress at the end of the reporting period are recorded in the statement of financial position at the net
amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented under the
caption of "Trade and other receivables" or "Trade and other payables" in the statement of financial position as the
"Amounts due from customers for contracts-in-progress" (as an asset) or the "Amounts due to customers for
contracts-in-progress" (as a liability), as applicable. Progress billings not yet paid by the customer are included in the
statement of financial position. Amounts received before the related work is performed are included in the statement of
financial position, as a liability, as "Advances received".
4.16 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. In the event that
lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate
benefit of incentives is recognised as a reduction of rental expense on a straight-line basis.
4.17 Employee benefit
These comprise short term employee benefits and contributions to defined contribution retirement plans.
Short-term employee benefits, including salaries, annual bonuses, paid annual leave, leave passage, contributions to
defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated
services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts
are stated at their present values.
Contributions to the defined contribution scheme are charged to profit or loss when incurred.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.18 Income tax
Income tax expense for the year comprises current and deferred tax. Tax is recognised in the statement of profit or loss
and other comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for
deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Company and
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
4.19 Provisions and contingent liabilities
Provisions are recognised for other liabilities of uncertain timing or amount when the Group and the Company has a legal or
constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be
required to settle the obligation 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.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.20 Events after the reporting period
Events after the reporting period that provide additional information about the Group and the Company at the end of the
reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are
reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the
notes to the financial statements when material.
4.21 Related parties
(1) A person, or a close member of that person's family, is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or the Group's parent
(2) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow
subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of
a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related
to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (1).
(vii) A person identified in (1)(i) has significant influence over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the
Group or to the Group's parent.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by,
that person in their dealings with the entity.
5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Critical judgements in applying accounting policies
In the process of applying the accounting policies, Management has made the following judgements that have the most
significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are
dealt with below).
(i) Estimation of contract costs
Estimated costs to complete contracts are judged by the Directors through the application of their experience and knowledge
of the industry in which the Group and the Company operates. However, contract performance can be difficult to predict
accurately. The Directors believe that contract budgets do not deviate materially from actual costs incurred due to a
strong cost control system with regular reviews of budgets which highlight any incidences that could affect estimated costs
to completion.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting
period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
(i) Impairment of trade and other receivables
The estimation of impairment of trade and other receivables includes an assessment of recoverability of individual account
balances and a review of ageing analysis of trade and other receivables by the Directors. The Directors will also review
the credit history of customers in assessing the recoverability of trade and other receivables. When any indication comes
to their attention that a trade and other receivable might not be recovered in full, impairment will be made and recognised
as an expense in the statement of comprehensive income. As at 31 March 2017, the total carrying amount of the Group's
trade and other receivables was £6,517,809 (2016: £5,525,191).
(ii) Income taxes
The Group and the Company are subject to income tax in different jurisdiction in Hong Kong, and Taiwan. Significant
estimates are required in determining the provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
As at 31 March 2017, the Company has unused tax losses of £4,808,854 (2016: £4,657,046) available for offset against future
profits. A deferred tax asset of £793,461 (2016: £768,413) has not been recognised in respect of the unused tax losses. In
cases where there are future profits generated to utilise the tax losses, a material deferred tax asset may arise, which
would be recognised in the statement of profit or loss and other comprehensive income for the period in which such future
profits are recorded.
6. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
2017 2016
£ £
Financial assets:
Loans and receivables
- Amounts due from related companies 3,613,896 3,064,336
- Trade and other receivables 2,903,913 2,460,855
- Bank deposits 511,642 448,056
- Cash and bank balances 1,188,268 654,244
Financial liabilities:
- Amount due to a related company 123,775 -
- Trade and other payables 3,165,379 2,505,939
- Obligation under finance lease - 660
(b) Financial risk management objectives and policies
The Group's major financial instruments include amounts due from related parties, bank and cash, trade and other
receivables and trade and other payables. Details of these financial instruments are disclosed in the respective notes. The
risks associated with these financial instruments include currency risk, interest rate risk, credit risk and liquidity
risk. The policies on how these risks are mitigated are set out below. Management manages and monitors these exposures to
ensure appropriate measures are implemented in a timely and effective manner.
(i) Market risk
(1) Currency risk
Certain entities in the Group have foreign currency transactions and have foreign currency denominated monetary assets and
liabilities, which expose the Group to foreign currency risk. The Company has foreign currency transactions, which expose
the Company to foreign currency risk.
The carrying amounts of the Group's and the Company's foreign currency denominated monetary assets and monetary
liabilities, mainly represented by trade and other receivables, cash and bank balances, trade and other payables and loan
and borrowings, at the end of the reporting period are as follows:
The Group The Company
Assets Liabilities Assets Liabilities
2017 2016 2017 2016 2017 2016 2017 2016
RMB 264,486 53,775 593,114 541,544 264,486 53,775 593,114 541,544
USD 83,104 40,506 3,057 2,732 83,104 40,506 3,057 2,732
HK$ 4,137,190 3,230,940 2,636,560 1,832,885 4,137,190 3,230,940 ` 2,636,560 1,832,885
The Group and the Company currently do not have any policy on hedges of foreign currency risk. However, Management
monitors the foreign currency risk exposure and will consider hedging significant foreign currency risk should the need
arise.
6. FINANCIAL INSTRUMENTS (CONTINUED)
(b) Financial risk management objectives and policies (continued)
(i) Market risk (continued)
(1) Currency risk (continued)
Sensitivity analysis
The following table details the Group's sensitivity to a 5% increase and decrease in Sterling against the relevant foreign
currencies and all other variables were held constant. 5% (2016: 5%) is the sensitivity rate used when reporting foreign
currency risk internally to key management personnel and represents management's assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary
items and adjusts their translation at the end of the reporting period for a 5% (2016: 5%) change in foreign currency
rates. A positive/(negative) number indicates a decrease/(increase) in post-tax profit/(loss) for the year when Sterling
strengthens 5% (2016: 5%) against the relevant foreign currencies. For a 5% (2016: 5%) weakening of Sterling against the
relevant currency, there would be an equal but opposite impact on the post-tax profit/(loss) for the year.
2017 2016
£ £
RMB
Post-tax (loss)/profit for the year (17,296) (25,672)
USD
Post-tax profit for the year 4,213 1,988
HK$
Post-tax profit for the year 78,981 73,582
(2) Interest rate risk
The Group and the Company are exposed to fair value interest rate risk in relation to fixed rate bank deposits at fixed
rates. The Group and the Company is exposed to cash flow interest rate risk due to fluctuation of the prevailing market
interest rate on certain bank borrowings which carry at prevailing market interest rates as shown in note 25. The Group
and the Company currently do not have an interest rate hedging policy. However, Management monitors interest rate exposure
and will consider hedging significant interest rate exposure should the need arises.
The Group's and the Company's exposures to interest rates on financial liabilities are detailed in the liquidity risk
management section of this note.
6. FINANCIAL INSTRUMENTS (CONTINUED)
(b) Financial risk management objectives and policies (continued)
(i) Market risk (continued)
(2) Interest rate risk (continued)
Sensitivity analysis
The sensitivity analysis below has been determined based on the change in interest rates and the exposure to interest rates
for the non-derivative financial liabilities at the end of the reporting period and on the assumption that the amount
outstanding at the end of the reporting period was outstanding for the whole year and held constant throughout the
financial year. The 25 basis points increase or decrease represents Management's assessment of a reasonably possible
change in interest rates over the period until the next fiscal year. The analysis is performed on the same basis for
2016.
For the year ended 31 March 2017, if interest rates had been 25 basis points higher/lower, with all other variables held
constant, the Group's post-tax profit for the year would increase/decrease by approximately £0 (2016: £0).
(ii) Credit risk
At 31 March 2017, the Group's and the Company's maximum exposure to credit risk in the event of the counterparties' failure
to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those
assets as stated in the statements of financial position.
The Group's and Company's credit risk are primarily attributable to its trade and other receivables. In order to minimise
the credit risk, Management has a credit policy in place and the exposures to these credit risks are monitored on an
ongoing basis. Credit evaluations of its customers' financial position and condition are performed on each and every major
customer periodically. These evaluations focus on the customer's past history of making payments when due and current
ability to pay, and take into account information specific to the customer as well as pertaining to the economic
environment in which the customer operates. Debts are usually due within 90 days from the date of billing. Exposure to
credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and
country in which customers operate also has an influence on credit risk. At the end of the reporting period, the Group and
the Company had no significant concentrations of credit risk where individual trade and other receivables balance exceed
10% of the total trade and other receivables at the end of the reporting period.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies. Also, the Group and the Company has no significant concentration of credit risk, with
exposure spread over a number of counterparties and customers.
Further quantitative disclosures in respect of the Group's and the Company's exposure to credit risk arising from trade and
other receivables are set out in note 20.
6. FINANCIAL INSTRUMENTS (CONTINUED)
(b) Financial risk management objectives and policies (continued)
(iii) Liquidity risk
In managing liquidity risk, the Group's and Company's policy are to regularly monitor and maintain an adequate level of
cash and cash equivalents determined by Management to finance the operations. Management also needs to ensure the
continuity of funding for both the short and long terms, and to mitigate the effects of cash flow fluctuation. At 31 March
2017, the Group and the Company had no banking facilities (2016: £438,574.
The following table details the contractual maturities of the Group's and the Company's financial liabilities at the end of
the reporting period, which is based on the undiscounted cash flows and the earliest date on which the Group and the
Company can be required to pay. The table includes both interest and principal cash flows.
The Group
2017
Weighted Within More than More than Carrying
average 1 year 1 year but 2 years but Total amount
effective or on less than less than undiscounted at 31
interest rate Demand 2 years 5 years cash flow March 2017
% £ £ £ £ £
Non-derivative financial liabilities:
Trade and other payables Nil 3,165,379 - - 3,165,379 3,165,379
Amount due to a related company Nil - 123,775 - 123,775 123,775
3,165,379 123,775 - 3,289,154 3,289,154
6. FINANCIAL INSTRUMENTS (CONTINUED)
(b) Financial risk management objectives and policies (continued)
(iii) Liquidity risk (continued)
The Group
2016
Weighted Within More than More than Carrying
average 1 year 1 year but 2 years but Total amount
effective or on less than less than undiscounted at 31
interest rate Demand 2 years 5 years cash flow March 2016
% £ £ £ £ £
Non-derivative financial liabilities:
Trade and other payables Nil 2,505,939 - - 2,505,939 2,505,939
Obligations under finance lease 3.25% 768 - - 768 768
2,506,707 - - 2,506,707 2,506,707
The Company
2017
Weighted Within More than More than Carrying
average 1 year 1 year but 2 years but Total amount
effective or on less than less than undiscounted at 31
interest rate Demand 2 years 5 years cash flow March 2017
% £ £ £ £ £
Non-derivative financial liabilities:
Trade and other payables Nil 3,165,379 - - 3,165,379 3,165,379
Amount due to a related company Nil - 123,775 - 123,775 123,775
3,165,379 123,775 - 3,289,154 3,289,154
6. FINANCIAL INSTRUMENTS (CONTINUED)
(b) Financial risk
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