REG - UniVision Eng Ltd - Final Results <Origin Href="QuoteRef">UVEL.L</Origin> - Part 2
29/10/2014 09:27
- Part 2: For the preceding part double click ID:nRSE9910Qa
Other comprehensive loss:
Exchange difference arising on translation of foreign operations - - - - - - (949,990) (949,990) (35,255) (985,245)
Total other comprehensive loss for the year, net of tax - - - - - - (949,990) (949,990) (35,255) (985,245)
Total comprehensive income 2,820,587 - - - (949,990) 1,870,597 48,888 1,919,485
Dividend paid in respect of 2013 year - - (242,558) - - - - (242,558) - (242,558)
Total transactions with owners, recognised directly in equity - - (242,558) - - - - (242,558) - (242,558)
Balance at 31 March 2014 1,697,617 2,192,640 4,927,973 155,876 143,439 7,927 1,670,978 10,796,450 333,269 11,129,719
The currency translation from Hong Kong Dollars ("HK$") to the presentation currency of Sterling Pound ("£") used in the
financial statements has no impact on the available distributable reserves of the Company at 31 March 2014.
Notes:
1. Share premium
The Company may by resolution reduce the share premium account in any manner authorised and subject to any conditions
prescribed by law.
2. Special capital reserve "A"
Pursuant to the Order of the High Court dated 20 November 2004, any future recoveries of the Company's accumulated
provision for obsolete inventories and provision for bad debts amounting to HK$1,935,002 and HK$3,592,540 respectively will
be credited to non-distributable special capital reserve "A" account.
3. Special capital reserve "B"
By a special resolution passed on 30 July 2004 and Order of the High Court dated 20 November 2004, the authorised and
issued capital of the Company was reduced from HK$159,245,000 divided into 31,849 ordinary shares of HK$5,000 each to
HK$16,405,000 divided into 3,281 ordinary shares of HK$5,000 each. The reduction of capital was effected by cancellation of
28,568 ordinary shares of HK$5,000 each in the issued and paid up share capital of the Company. The Company established a
non-distributable special capital reserve "B" account into which HK$2,071,307 was credited as a result of the capital
reduction.
UNIVISION ENGINEERING LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2014
Attributable to equity shareholders of the Company
Sharecapital Sharepremium Accumulatedlosses Specialcapital reserve "A" Specialcapitalreserve "B" Translationreserve Totalequity
£ £ £ £ £ £ £
Balance at 1 April 2012 1,697,617 2,192,640 (2,999,464) 155,876 143,439 499,225 1,689,333
Comprehensive income:
Profit or loss - - 257,598 - - - 257,598
Other comprehensive income:
Exchange difference arising on translation of foreign operations - - - - - 109,254 109,254
Total other comprehensive income for the year, net of tax - - - - - 109,254 109,254
Total comprehensive income - - 257,598 - - 109,254 366,852
Balance at 31 March 2013 1,697,617 2,192,640 (2,741,866) 155,876 143,439 608,479 2,056,185
Comprehensive income:
Profit or loss - - 2,807,923 - - - 2,807,923
Other comprehensive loss:
Exchange difference arising on translation of foreign operations - - - - - (298,739) (298,739)
Total other comprehensive loss for the year, net of tax - - - - - (298,739) (298,739)
Total comprehensive income - - 2,807,923 - - (298,739) 2,509,184
Dividend paid in respect of 2013 year - - (242,558) - - - (242,558)
Total transactions with owners, recognised directly in equity - - (242,558) - - - (242,558)
Balance at 31 March 2014 1,697,617 2,192,640 (176,501) 155,876 143,439 309,740 4,322,811
UNIVISION ENGINEERING LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2014
Notes 2014 2013
£ £
Cash flows from operating activities
Profit before income tax 2,918,229 241,683
Adjustments for:
Interest expense 12 20,787 37,726
Interest income 8 (1,293) (1,516)
Depreciation of plant and equipment 16 49,086 65,904
Allowance for obsolete inventories 19 9,660 27,585
Write-off of inventories 9 47,444 -
Impairment loss recognised on trade and other receivables 9 99,907 188,148
Loss/(gain) on disposal of plant and equipment 9 2,675 (510)
Gain from forgiveness of debt 9, 25(b) (2,496,353) -
650,142 559,020
Changes inoperating assets and liabilities:
Increase in inventories (84,614) (13,029)
Increase in tradeand other receivables (125,309) (506,618)
Increase in trade and other payables 121,747 35,950
Cash generated from operations 561,966 75,323
Income tax paid (13,360) (27,793)
Net cash generated from operating activities 548,606 47,530
Cash flows from investing activities
Interest received 8 1,293 1,516
Purchase of plant and equipment (16,002) (38,548)
Proceeds from disposal of plant and equipment 365 510
Net cash used ininvesting activities (14,344) (36,522)
Cash flows from financing activities
Interest paid 12 (20,787) (37,726)
Dividend paid to shareholders of the Company 15 (242,558) -
Dividend paid to non-controlling interests - (32,648)
Repayment of finance lease liabilities (7,162) (8,175)
Proceed from loan and borrowings - 112,060
Repayment of loan and borrowings (402,126) -
Net cash (used in)/generated fromfinancing activities (672,633) 33,511
Net (decrease)/increase in cash and cash equivalents (138,371) 44,519
Cash and cash equivalents at beginning of year 585,046 504,323
Effect of foreign exchange rate changes (66,815) 36,204
Cash and cash equivalents at end of year 22 379,860 585,046
UNIVISION ENGINEERING LIMITED
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 March 2014
Notes 2014 2013
£ £
Cash flows from operating activities
Profit before income tax 2,807,923 257,598
Adjustments for:
Interest expense 1,164 1,361
Interest income (986) (1,275)
Depreciation of plant and equipment 16 16,494 15,081
Dividend income received from a subsidiary - (35,631)
Write-off of inventories 9 47,444 -
Loss on disposal of plant and equipment 9 2,675 -
Gain from forgiveness of debt 9, 25(b) (2,496,353) -
378,361 237,134
Changes in operating assets and liabilities:
Increase in inventories (61,579) (2,359)
Increase in trade and other receivables (587,051) (87,899)
Decrease/(increase) in amounts due from subsidiaries 50,213 (111,362)
Increase/(decrease) in trade and other payables 208,025 (43,944)
Net cash used in operating activities (12,031) (8,430)
Cash flows from investing activities
Interest received 986 1,275
Purchase of plant and equipment (5,715) (9,894)
Dividend income received from a subsidiary - 35,631
Proceeds from disposal of plant and equipment 365 -
Net cash (used in)/generated from investing activities (4,364) 27,012
Cash flows from financing activities
Interest paid (1,164) (1,361)
Dividend paid to shareholders of the Company (242,558) -
Repayment of finance lease liabilities (7,162) (8,175)
Repayment of loan and borrowings - (16,316)
Net cash used in financing activities (250,884) (25,852)
Net decrease in cash and cash equivalents (267,279) (7,270)
Cash and cash equivalents at beginning of year 456,758 432,672
Effect of foreign exchange rate changes (29,269) 31,356
Cash and cash equivalents at end of year 22 160,210 456,758
UNIVISION ENGINEERING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2014
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 8/F
Lever Tech Centre, 69-71 King 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 acts as an investment holding company. The Company and its subsidiaries (hereinafter collectively referred to
as the "Group") are engaged in the supply, design, installation and maintenance of closed circuit television and
surveillance systems, the sale of security system related products and provision for electronic and mechanical services.
The principal activities of its subsidiaries are set out in note 18 to the financial statements.
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as
issued by the International Accounting Standards Board ("IASB").
The financial statements have been prepared under the historical cost convention basis, as modified by the revaluation of
financial assets and liabilities at fair value through profit or loss.
The preparation of 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 financial statements and
major sources of estimation uncertainty are discussed in note 4 in the 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 current financialperiod.
Of these, the following developments are relevant to the Group and the Company's financial statements:
- Amendments to IAS 1, "Financial statement presentation" regarding other comprehensive income. The main change
resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' on
the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustment). The
presentation of other comprehensive income in the financial statements has been modified accordingly.
- IAS 19 "Employment Benefits" eliminate the option to defer the recognition of gains and losses, known as the
"corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans,
including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements
for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks
that entities are exposed to through participation in those plans.
- IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as
the determining factor in whether an entity should be included within the consolidated financial statements of the parent
company. The standard provides additional guidance to assist in the determination of control where this is difficult to
assess. The directors of the Company have assessed the control in respect of its investees under the new definition in IFRS
10 and concluded that the application of this standard would have no material impact on the Group as all subsidiaries
within the Group satisfy the requirement of control under IFRS 10 as at 1 April 2013.
- IFRS 11 "Joint Arrangements" provides for a more realistic reflection of joint arrangements by focusing on the
rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses
inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly
controlled entities. The Group and the Company concluded that there were no joint arrangements within the Group and the
adoption of this standard does not have any material impact on the financial position and the result of the Group and the
Company.
- IFRS 12 "Disclosure of Interests in Other Entities" is a new and comprehensive standard on disclosure requirements
for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other
off balance sheet vehicles. In general, the application of IFRS 12 has resulted in more extensive disclosures in the
consolidated financial statements (please see note 18).
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs") (CONTINUED)
(a) New and revised IFRSs that have been issued and effective (continued)
- IFRS 13 "Fair Value Measurement" improves consistency and reduces complexity by providing, for the first time, a
precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across
IFRSs. It does not extend the use of fair value accounting, but provides guidance on how it should be applied where its
use is already required or permitted by other standards. Other than the additional disclosures, the application of HKFRS
13 has not had any material impact on the amounts recognised in the consolidated financial statements.
- IAS 27 "Separate Financial Statements" replaces the current version of IAS 27 "Consolidated and Separate Financial
Statements" as a result of the issue of IFRS 10 (see above).
(b) New and revised IFRSs that have been issued but are not yet effective
The following new and revised IFRSs, potentially relevant to the Company's operations, have been issued and are mandatory
for adoption by the Company for accounting periods beginning on or after 1 January 2014 or later periods. However, the
Company has not early adopted them.
• IFRS 9 "Financial instruments"
• Amendments to IAS 32 "Offsetting Financial Assets and Financial Liabilities"
• Amendments to IAS 36 "Recoverable amount disclosures for non-financial assets"
• Amendments to IAS 39 "Novation of derivatives and continuation of hedge accounting"
The Company has not applied any new or revised IFRSs that are not yet effective for the current accounting period.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group hascontrol. 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. Acquisitions 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.
Acquisition-related costs are expensed as incurred.
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.
(b) Separate financial statements
In the individual Company's statement of financial position, interests in subsidiaries are accounted for at cost less
impairment loss, or measured at fair value through profit or 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 of the period the dividend 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 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 Group 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 Group. Operating
segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker 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 each of the Group's entities 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 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's entity is summarised as follows:
1. UniVision Engineering Limited Hong Kong Dollars ("HK$")
2. T-Com Technology Co. Limited New Taiwan Dollars ("NTD")
3. Leader Smart Engineering Limited Hong Kong Dollars ("HK$")
4. Leader Smart Engineering (Shanghai) Limited ("LSSH") Renminbi Yuan ("RMB")
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 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
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".
Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are
analysed between translation differences resulting from changes in the amortised cost of the security and other changes in
the carrying amount of the security. Translation differences in respect of changes in amortised cost are recognised in
profit or loss, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit
or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary
financial assets, such as equities classified as available for sale, are included in other comprehensive income.
(c) Group companies
The results and financial position of all the group entities (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 date of that statement of financial position;
(ii) income and expenses for each statement of 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 operations, and of
loan and borrowings and other currency instruments designated as hedges of such investments, are taken to other
comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in
equity are recognised in the statement of comprehensive income as part of the gain or loss on sale. Goodwill and fair value
adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.4 Plant and equipment
Plant and equipment are 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 are retained in the financial statements until they 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 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 cost
of the item can be measured reliably. All other repair and maintenance expenses are recognised in profit or loss when
incurred.
4.5 Goodwill
Goodwill represents the excess of:
(a) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the Group's previously held equity interest in the acquiree; over
(b) the net fair value of the acquiree's identifiable assets and liabilities measured as at the acquisition date.
When (b) is greater than (a), then this excess is recognised immediately in profit or loss as a gain on a bargain
purchase.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to
each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the
combination and is tested annually for impairment. On disposal of a cash generating unit during the year, any attributable
amount of purchased goodwill is included in the calculation of the profit or loss on disposal.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.6 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. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication
of impairment.
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
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the
estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed (including
those provided during the interim financial reporting).
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.
4.7 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted averagemethod
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)
4.8 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.
4.8.1 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. Bills receivable Certain customers pay accounts receivable with bills receivable from Taiwan banks with maturities less than twelve months. These are also referred to as "bankers" acceptances, which are unsecured, interest-free and to be matured in twelve months.
2. Loans Unsecured temporary advances to the subsidiaries, which are interest-free and eliminated upon consolidation.
3. 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)
4.8 Financial instruments (continued)
4.8.1 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 Group's past experience of collecting payments, an increase in the number of
delayed payments in the portfolio past the average credit period, 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 profi t or 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)
4.8 Financial instruments (continued)
4.8.2 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 Group are recognised at the proceeds received, net of direct issue
costs.
Financial liabilities
Financial liabilities (including trade and other payables and loan 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 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 derecognises financial liabilities when, and only when, the Group'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.
4.8.3 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.9 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 bad and doubtful debts.
4.10 Bank deposits
Bank deposits are restricted deposits held at bank with maturities greater than three months, as collateral for performance
bond issued by the bank to Company's customer in construction contracts.
4.11 Cash and cash equivalents
In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other
short-term highly liquid investments with original maturities of three months or less.
4.12 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.
4.13 Interest-bearing borrowings
Interest-bearing borrowings are initially recognised at fair value less transaction costs. Subsequent to initial
recognition, the interest-bearing borrowings are stated at amortised cost with any difference between the amount initially
recognised and redemption value being recognised in the consolidated statement of comprehensive income over the period of
the borrowings together with any interest and fees payable using the effective interest method.
4.14 Share capital
Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.15 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 the Group's activities. Revenue is shown net of business tax, value-added tax, rebates
and discounts, and after eliminating sales within the Group.
The Group recognises 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 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 bases its 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 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.
(v) Dividend income
Dividend income from investments is recognised when the shareholder's right to receive payment has been established
(provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured
reliably).
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.16 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 balance sheet date. 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 balance sheet date are recorded in the statement of financial position at the net amount
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