REG - Worldsec Ld - Annual Report for the year ended 31 December 2014 <Origin Href="QuoteRef">WSL.L</Origin> - Part 2
15/07/2015 14:25
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(Decrease)/increase in other payables and accruals (90) 183
Net cash used inoperating activities (544) (90)
Cash flows from investing activities
Acquisition of property, plant and equipment (69) -
Acquisition of a joint venture (257) -
Purchase of available-for-sale financial asset (800) -
Advance to a joint venture (257) -
Net cash used ininvesting activities (1,383) -
Cash flows from financing activities
Proceeds from issue of new shares - 4,337
Payment for share issue costs - (456)
Net cash from financing activities - 3,881
Net (decrease)/increase in cash and cash equivalents (1,927) 3,791
Cash and cash equivalents at the beginning of the year 4,702 909
Effects of exchange rate changes (6) 2
Cash and cash equivalents at the end of the year 2,769 4,702
The accompanying notes form an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1. GENERAL INFORMATION
Worldsec Limited (the "Company") is a public listed company incorporated in Bermuda and its shares are listed on the Main
Market of the London Stock Exchange. The address of the registered office of the Company is Canon's Court, 22 Victoria
Street, Hamilton HM12, Bermuda. The Company changed its principal place of business address from 6th Floor, New Henry
House, 10 Ice House Street, Central, Hong Kong to Unit 607, 6th Floor, FWD Financial Centre, 308 Des Voeux Road Central,
Sheung Wan, Hong Kong during the year ended 31 December 2014.
The principal activity of the Company is investment holding. The principal activities of the Company's subsidiaries are set
out in note 16 to the consolidated financial statements.
The functional currency of the Company is Hong Kong Dollars ("HK$"). The consolidated financial statements of the Company
and its subsidiaries (collectively referred to as the "Group") are presented in United States Dollars ("US$" or "USD").
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRSs")
2.1 New and revised IFRSs applied with no material effect on the consolidated financial
statements
The following new and revised IFRSs have been applied by the Group in the current year and have affected the presentation
and disclosures set out in these consolidated financial statements. The application of these new and revised IFRSs has not
had any material impact on the amounts reported for the current and prior years.
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
Amendments to IFRS 10, IFRS 12 and IAS 27 (2011) Investment Entities
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
IFRIC 21 Levies
Except as described below, the application of the above new and revised IFRSs in the current year has had no material
impact on the Group's financial performance and position for the current and prior years and/or on the disclosures set out
in these consolidated financial statements.
Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities
The amendments clarify the offsetting requirements by adding appliance guidance to IAS 32 which clarifies when an entity
"currently has a legally enforceable right to set off" and when a gross settlement mechanism is considered equivalent to
net settlement. The amendments are applied retrospectively. The adoption of the amendments has no impact on these financial
statements as the Group does not have any offsetting arrangements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2. Application OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied with no material effect on the consolidated financial
statements (continued)
Amendments to IFRS 10, IFRS 12 and IAS 27 (2011) - Investment Entities
The amendments apply to a particular class of businesses that qualify as investment entities. An investment entity's
business purpose is to invest funds solely for returns from capital appreciation, investment income or both. It evaluates
the performance of its investments on a fair value basis. Investment entities could include private equity organisations,
venture capital organisations, pension funds and investment funds.
The amendments provide an exception to the consolidation requirements in IFRS 10 "Consolidated Financial Statements" and
require investment entities to measure particular subsidiaries at fair value through profit or loss rather than to
consolidate them. The amendments also set out the disclosure requirements for investment entities. The amendments are
applied retrospectively subject to certain transitional provisions.
The adoption of the amendments has no impact on these financial statements as the Company is not an investment entity.
Amendments to IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting
The amendments provide relief from discontinuing hedge accounting when novation of a hedging instrument to a central
counterparty meets specified criteria. The amendments are applied retrospectively. The adoption of the amendments has no
impact on these financial statements as the Group does not apply hedge accounting.
IFRIC 21 - Levies
IFRIC 21 clarifies that an entity recognises a liability to pay a levy imposed by government when the activity that
triggers payment, as identified by the relevant legislation, occurs. The interpretation has been applied retrospectively.
The adoption of IFRIC 21 has no impact on these financial statements as the interpretation is consistent with the Group's
previous application of its accounting policies on provisions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2. Application OF NEW AND REVISED IFRSs(CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
IFRSs (Amendments) Annual Improvements 2010-2012 Cycle2
IFRSs (Amendments) Annual Improvements 2011-2013 Cycle1
IFRSs (Amendments) Annual Improvements 2012-2014 Cycle3*
Amendments to IAS 1 Disclosure Initiative3*
Amendments to IAS 27 Equity Method in Separate Financial Statements3
IFRS 9 (2014) Financial Instruments5*
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture3*
IFRS 15 Revenue from Contracts with Customers4*
1 Effective for annual periods beginning on or after 1 July 20142 Effective for annual periods beginning, or transactions occurring, on or after 1 July 20143 Effective for annual periods beginning on or after 1 January 20164 Effective for annual periods beginning on or after 1 January 20175 Effective for annual periods beginning on or after 1 January 2018* Not yet endorsed by the European Union
Annual Improvements 2010-2012 Cycle, 2011-2013 Cycle and 2012-2014 Cycle
The amendments issued under the annual improvements process make small, non-urgent changes to a number of standards where
they are currently unclear.
Amendments to IAS 1 - Disclosure Initiative
The amendments to IAS 1 are designed to further encourage companies to apply professional judgement in determining what
information to disclose in their financial statements. For example, the amendments make clear that materiality applies to
the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial
disclosures, and the amendments clarify that companies should use professional judgement in determining where and in what
order information is presented in the financial disclosures.
Amendments to IAS 27 - Equity Method in Separate Financial Statements
The amendments allow an entity to apply the equity method in accounting for its investments in subsidiaries, joint ventures
and associates in its separate financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2. Application OF NEW AND REVISED IFRSs(CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
IFRS 9 (2014) - Financial Instruments
IFRS 9 introduces new requirements for the classification and measurement of financial assets. Debt instruments that are
held within a business model whose objective is to hold assets in order to collect contractual cash flows (the business
model test) and that have contractual terms that give rise to cash flows that are solely payments of principal and interest
on the principal amount outstanding (the contractual cash flow characteristics test) are generally measured at amortised
cost. Debt instruments that meet the contractual cash flow characteristics test are measured at fair value through other
comprehensive income ("FVTOCI") if the objective of the entity's business model is both to hold and collect the contractual
cash flows and to sell the financial assets. Entities may make an irrevocable election at initial recognition to measure
equity instruments that are not held for trading at FVTOCI. All other debt and equity instruments are measured at fair
value through profit or loss ("FVTPL").
IFRS 9 includes a new expected loss impairment model for all financial assets not measured at FVTPL replacing the incurred
loss model in IAS 39 and new general hedge accounting requirements to allow entities to better reflect their risk
management activities in financial statements.
IFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from IAS 39,
except for financial liabilities designated at FVTPL, where the amount of change in fair value attributable to change in
credit risk of the liability is recognised in other comprehensive income unless that would create or enlarge an accounting
mismatch. In addition, IFRS 9 retains the requirements in IAS 39 for derecognition of financial assets and financial
liabilities.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments clarify the extent of gains or losses to be recognised when an entity sells or contributes assets to its
associate or joint venture. When the transaction involves a business the gain or loss is recognised in full, conversely
when the transaction involves assets that do not constitute a business the gain or loss is recognised only to the extent of
the unrelated investors' interests in the joint venture or associate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2. Application OF NEW AND REVISED IFRSs(CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
IFRS 15 - Revenue from Contracts with Customers
The new standard establishes a single revenue recognition framework. The core principle of the framework is that an entity
should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods and services. IFRS 15 supersedes
existing revenue recognition guidance including IAS 18 "Revenue", IAS 11 "Construction Contracts" and related
interpretations.
IFRS 15 requires the application of a 5- step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to each performance obligation
Step 5: Recognise revenue when each performance obligation is satisfied
IFRS 15 includes specific guidance on particular revenue related topics that may change the current approach taken under
IFRS. The standard also significantly enhances the qualitative and quantitative disclosures related to revenue.
None of these new and revised IFRSs, which are effective for periods beginning after 1 January 2014 and which have not been
adopted early, are expected to have a material effect on the consolidated financial statements of the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with all applicable IFRSs issued by the
International Accounting Standards Board ("IASB"). The consolidated financial statements also comply with IFRSs as issued
by the IASB as adopted by the European Union. The differences between IFRSs as adopted by the European Union and IFRS as
issued by the IASB have not had a material impact on the consolidated financial statements for the years presented.
Basis of preparation
The consolidated financial statements have been prepared on a going concern basis using the historical cost convention.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company
transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the
consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of
impairment on the asset transferred, in which case the loss is recognised in profit or loss.
Subsidiaries
A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all
three of the following elements are present: (1) power over the investee, (2) exposure, or rights, to variable returns from
the investee, and (3) the ability to use its power to affect those variable returns. Control is reassessed whenever facts
and circumstances indicate that there may be a change in any of these elements of control.
In the Company's statement of financial position, investments in subsidiaries are stated at cost less impairment loss, if
any. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.
Joint arrangements
The Group is a party to a joint arrangement where there is a contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either:
- Joint ventures: where the Group has rights to only the net assets of the joint arrangement; or
- Joint operations: where the Group has both the rights to assets and obligations for the liabilities of the joint
arrangement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Joint arrangements (Continued)
In assessing the classification of interests in joint arrangements, the Group considers:
- The structure of the joint arrangement;
- The legal form of joint arrangements structured through a separate vehicle;
- The contractual terms of the joint arrangement agreement; and
- Any other facts and circumstances (including any other contractual arrangements).
Joint ventures are accounted for using the equity method whereby they are initially recognised at cost and thereafter,
their carrying amount are adjusted for the Group's share of the post-acquisition change in the joint ventures' net assets
except that losses in excess of the Group's interest in the joint venture are not recognised unless there is a legal and
constructive obligation to make good those losses.
Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of
unrelated investors' interests in the joint ventures. The investor's share in the joint venture's profits and losses
resulting from these transactions is eliminated against the carrying value of the joint venture.
Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in
joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying
amount of the investment is tested for impairment in the same way as other non-financial assets.
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and
expenses in accordance with its contractually conferred rights and obligations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost
of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the
items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, 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. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are
recognised as an expense in profit or loss during the financial period in which they are incurred.
Property, plant and equipment are depreciated so as to write off their cost net of expected residual value over their
estimated useful lives on a straight-line basis. The useful lives, residual value and depreciation method are reviewed, and
adjusted if appropriate, at the end of each reporting period. The useful lives are as follows:
Leasehold improvements over the lease terms
An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset's estimated
recoverable amount.
The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceeds
and its carrying amount, and is recognised in profit or loss on disposal.
Leasing
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.
The Group as lessee
The total rentals payable under the operating leases are recognised in profit or loss on a straight-line basis over the
lease term. Lease incentives received are recognised as an integrated part of the total rental expense, over the term of
the lease.
Revenue recognition
Dividend income is recognised when the right to receive payment is established.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currencies
Transactions entered into by the group entities in currencies other than the currency of the primary economic environment
in which they operate are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the end of reporting period. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised
in profit or loss in the period in which they arise.
On consolidation, income and expense items of foreign operations are translated into the presentation currency of the Group
(i.e. US$) at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in
which case, the rates approximating to those ruling when the transactions took place are used. All assets and liabilities
of foreign operations are translated at the rate ruling at the end of reporting period. Exchange differences arising, if
any, are recognised in other comprehensive income and accumulated in equity as foreign exchange reserve (attributed to
minority interests as appropriate). Exchange differences recognised in profit or loss of group entities' separate
financial statements on the translation of long-term monetary items forming part of the Group's net investment in the
foreign operation concerned are reclassified to other comprehensive income and accumulated in equity as foreign exchange
reserve.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating
to that operation up to the date of disposal are reclassified to profit or loss as part of the profit or loss on disposal.
Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or
after 1 January 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange
prevailing at the end of reporting period. Exchange differences arising are recognised in the foreign currency translation
reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'loss before tax' as
reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's current
tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised
for all deductible temporary differences to the extent that it is probable that taxable profits will be available against
which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised
if the temporary difference arises from initial recognition (other than in a business combination) of assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of
the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions
of the instruments.
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 (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Financial assets
The Group classifies its financial assets at initial recognition, depending on the purpose for which the asset was
acquired. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A
regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of
the asset within the time frame established generally by regulation or convention in the marketplace concerned.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Loans and receivables (including cash and bank balance) are measured at amortised cost using the effective
interest method, less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of
discounting is immaterial.
Available-for-sale financial assets
These assets are non-derivative financial assets that are designated as available-for-sale or are not included in other
categories of financial assets. When the fair value of unlisted equity securities cannot be reliably measured because (a)
the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities
of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities
are stated at cost less any impairment losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Impairment of financial assets
The Group assesses, at the end of each reporting period, whether there is any objective evidence that financial asset is
impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that
has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of
the financial asset that can be reliably estimated.
Evidence of impairment may include:
• significant financial difficulty of the debtor;
• a breach of contract, such as a default or delinquency in interest or principal payments;
• granting concession to a debtor because of debtor's financial difficulty; or
• it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.
For loans and receivables
An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is
measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows
discounted at the original effective interest rate. The carrying amount of a financial asset is reduced through the use of
an allowance account. When any part of a financial asset is determined as uncollectible, it is written off against the
allowance account for the relevant financial asset.
Impairment losses are reversed in subsequent periods when an increase in the asset's recoverable amount can be related
objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of
the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment
not been recognised.
For available-for-sale financial assets
For available-for-sale equity investments that are carried at cost, the amount of impairment loss is measured as the
difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the
current market rate of return for a similar financial asset. Such impairment loss shall not be reversed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Derecognition of financial assets
Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire, or the financial
assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial
assets.
On derecognition of a financial asset, 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 directly in equity is recognised in profit
or loss.
Financial liabilities and equity instruments
Classification as debt or equity
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 instruments
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 other payables and accruals) are subsequently measured at amortised cost using the
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 and points 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.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of other assets
At the end of each reporting period, the Group reviews the carrying amounts of the following assets to determine whether
there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no
longer exists or may have decreased:
• property, plant and equipment; and
• investments in subsidiaries
If the recoverable amount (i.e. the greater of fair value less costs to sell and value in use) of an asset is estimated to
be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset in prior years.
A reversal of an impairment loss is recognised in the consolidated statement of profit or loss immediately.
Related parties
(a) 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 key management personnel of the Group or the Company's parent.
(b) An entity is related to the Group if any of the following conditions apply:
(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 the employees of the Group or an entity related to the Group;
(vi) The entity is
controlled or jointly controlled by a person identified in (a); or
(vii) A person identified in
(a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent
of the entity).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Related parties (Continued)
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 and include:
(i) that person's children and spouse or domestic partner;
(ii) children of that person's spouse or domestic partner; and
(iii) dependents of that person or that person's spouse or domestic partner.
Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to owners of the Company by the weighted
average number of ordinary shares in issue during the year.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are described in note 3, management is required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are
considered to be relevant. 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.
Key sources of estimation uncertainty
In addition to information disclosed elsewhere in these financial statements, other key sources of estimation uncertainty
that has a significant risk of resulting a material adjustment to the carrying amounts of assets and liabilities within
next financial year are as follows:
(i) Depreciation
The Group depreciates property, plant and equipment using straight-line method over the estimated useful lives, starting
from the date on which the assets are placed into use. The estimated useful lives reflect the directors' estimate of the
periods that the Group intends to derive future economic benefits from the use of the property, plant and equipment of the
Group. The carrying amount of property, plant and equipment is disclosed in note 13.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
(ii) Impairment of receivables
The Group maintains an allowance for estimated loss arising from the inability of its debtors to make the required
payments. The Group makes its estimates based on the ageing of its receivable balances, debtors' creditworthiness, and
historical write-off experience. If the financial condition of its debtors was to deteriorate so that the actual
impairment loss might be higher than expected, the Group would be required to revise the basis of making the allowance and
its future results would be affected.
(iii) Impairment of non-financial assets
The Group assesses whether there are any indications of impairment for all non-financial assets at each reporting date.
Other non-financial assets are tested for impairment when there are indications that the carrying amounts may not be
recoverable.
(iv) Impairment of available-for-sale financial assets
The directors review available-for-sale investments at the end of each reporting period to assess whether they are
impaired. The Group records impairment charges on available-for-sale equity investments when there is objective evidence
that an impairment indicator exists. The determination of whether the impairment indicator exists requires judgement. In
making this judgement, management of the Group takes into account factors such as significant changes with an adverse
effect that has taken place in technological, market, economic or legal environment in which the investee operates, and
that indicates that the cost of the investment in the equity instrument may not be recovered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5. FINANCIAL instruments
(a) Categories of financial instruments
2014 2013
The Group US$'000 US$'000
Financial assets
Loans and receivables 3,055 4,702
Available-for-sale financial asset 800 -
3,855 4,702
Financial liabilities
Financial liabilities measured at amortised cost 368 458
2014 2013
The Company US$'000 US$'000
Financial assets
Loans and receivables 4,096 4,640
Financial liabilities
Financial liabilities measured at amortised cost 2,570 2,702
(b) Financial risk management objectives
Management monitors and manages the financial risks relating to the operations of the Group through internal risk reports
which analyse exposures by degree and magnitude of risks. These risks include market risks (including foreign currency
risk, interest rate risk and price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are
set out below. The Group does not enter into or trade derivative financial instruments for speculative purposes.
Market risks
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest
rates and price risk.
There has been no change to the Group's exposure to market risks or the manner in which these risks are managed and
measured.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk
Certain financial assets and financial liabilities of the Group are denominated in foreign currencies other than the
functional currency of the relevant group entities, which exposes the Group to foreign currency risk. The Group currently
does not have a foreign currency hedging policy. However, management monitors foreign exchange exposure and will consider
hedging significant foreign currency exposure should the need arise. Under the Linked Exchange Rate System in Hong Kong,
HK$ is currently pegged to the USD within a narrow range, the directors therefore consider that there are no significant
foreign exchange risk with respect to the USD.
The currencies giving rise to this risk are primarily Euro ("EUR") and British Pound Sterling ("GBP"). The carrying amounts
of the Group's foreign currency denominated monetary assets and monetary liabilities at the end of reporting period were as
follows:
Liabilities Assets
2014 2013 2014 2013
US$'000 US$'000 US$'000 US$'000
EUR 2 9 18 26
GBP 88 219 9 10
The following table details the Group's sensitivity to a 10% (2013: 10%) increase and decrease in USD against the relevant
foreign currencies. 10% 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 its translation as
at year end for a 10% (2013: 10%) change in the relevant foreign currencies rates. A positive number below indicates a
decrease in loss for the year where USD strengthens 10% (2013: 10%) against the relevant foreign currency. For a 10% (2013:
10%) weakening of USD against the relevant foreign currencies there would be an equal and opposite impact on the loss for
the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk (Continued)
2014 2013
US$'000 US$'000
Change in post-tax loss for the year
EUR impact (2) (2)
GBP impact 8 21
(ii) Interest rate risk
The Group's exposure to changes in interest rates is mainly attributable to its bank deposits at variable interest rates.
Bank deposits at variable rates expose the Group to cash flow interest rate risk.
The directors consider that the exposure to cash flow interest rate risk was insignificant. Hence, no sensitivity analysis
on the exposure to the Group's cash flow interest rate risk is presented.
(iii) Price risk
Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices
(other than those arising from foreign currency risk), whether caused by factors specific to an individual investment or
its issuer, or factors affecting all instruments.
At 31 December 2014, the Company was not exposed to any significant price risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Credit risk
The Group's maximum exposure to credit risk which could cause a financial loss to the Group due to failure to discharge an
obligation by the counterparties arises from the carrying amount of the respective recognised financial assets as stated in
the consolidated statement of financial position.
The credit risk on liquid funds is limited because the major counterparties are banks with high credit ratings assigned by
international credit-rating agencies. Other than concentration of credit risk on liquid funds which are deposited with
banks with a high credit rating, the Group does not have any other significant concentration of credit risk.
At the end of the reporting period, the maximum exposure to credit risk in respect of amounts due from subsidiaries of the
Company is set out in Note 17.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an
appropriate liquidity risk management framework to meet the Group's short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate reserves, by regularly monitoring
forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
Liquidity table
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilitieswith
agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group can be required to pay.
On demand or
less than 1 year
2014 2013
US$'000 US$'000
Other payables and accruals 368 458
(c) Fair value of financial instruments
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the
consolidated financial statements approximated their fair values.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
6. Capital risk management
The Group's objective of managing capital is to safeguard the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
cost of capital.
In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or
sell assets to reduce debts.
The capital structure of the Group consists of equity attributable to owners of the Company only, comprising share capital
and reserves.
7. REVENUE
The Group's revenue represents dividend income from available-for-sale financial asset for the year ended 31 December 2014
(2013: nil). No other source of income contributed to the Group's revenue for 2014 and 2013.
8. SEGMENTInformation
An operating segment is a component of the Group that is engaged in business activities from which the Group may earn
revenue and incur expenses, and is identified on the basis of the internal management reporting information that is
provided to and regularly reviewed by the Group's chief operating decision maker in order to allocate resources and assess
performance of the segment. For the years ended 31 December 2014 and 2013, the executive directors, who were the chief
operating decision makers for the purpose of resource allocation and assessment of performance, have determined that the
Group had only one single business component / reportable segment as the Group was only engaged in investment holding. The
executive directors allocated resources and assessed performance on an aggregated basis. Accordingly, no operating segment
is presented.
The major operations and the revenue of the Group arise from Hong Kong. The Board of Directors considers that most of the
assets of the Group are located in Hong Kong.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
9. STAFF COSTS
The aggregate staff costs of the Group were as follows:
Year ended 31 December
2014 2013
US$'000 US$'000
Wages and salaries (including directors' remuneration) 75 45
Directors' remuneration was as follows:
Year ended 31 December
2014 2013
US$'000 US$'000
Fees 75 45
Other remuneration including
contributions to pension and provident fund - -
75 45
10. LOSS BEFORE INCOME TAX EXPENSE
Loss before income tax expense has been arrived at after charging:
Year ended 31 December
2014 2013
US$'000 US$'000
Auditor's remuneration
- Current year 36 41
- Under provision in prior year 15 -
51 41
Depreciation of property, plant and equipment 2 -
Foreign exchange loss 7 1
Operating lease rental expenses in respect of office premises and warehouse 25 10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
11. INCOME TAX EXPENSE
No provision for taxation has been made as the Group did not generate any assessable profits for United Kingdom Corporation
Tax, Hong Kong Profits Tax and tax in other jurisdictions.
The tax charge for 2014 and 2013 can be reconciled to the loss before income tax expense per the consolidated statement of
profit or loss and other comprehensive income as follows:
Year ended 31 December
2014 2013
US$'000 US$'000
Loss before income tax expense 475 273
Loss before tax calculated at 16.5% (2013:16.5%) 78 45
Tax effect of estimated tax losses not recognised (78) (45)
Tax charge for the year - -
The tax losses of US$9,000 (2013: nil) can be carried forward indefinitely. No deferred tax asset has been recognised in
respect of the unused tax losses due to the unpredictability of future profit streams. No deferred tax has been recognised
in the financial statements as the Group and the Company did not have material temporary difference arising between the tax
bases of assets and liabilities and their carrying amounts as at 31 December 2014 and 2013.
12. LOSS PER SHARE
The loss and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share were as
follows.
Year ended 31 December
2014 2013
Loss for the year attributable to owners of theCompany (US$'000) 475 273
Weighted average number of ordinary shares forthe purposes of basic and diluted loss per share 56,734,580 27,387,400
Loss per share - basic and diluted (0.84) cent (1.00) cent
In 2013, the weighted average number of ordinary shares for the purpose of basic loss per share had been adjusted for the
open offer and placing in September 2013 (note 20).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
13. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
US$'000
Cost
At 1 January 2013, 31 December 2013 and 1 January 2014 -
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