REG - Worldsec Ld - Annual Financial Report 2016 <Origin Href="QuoteRef">WSL.L</Origin> - Part 2
28/04/2017 12:37
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the consolidated financial statements give a true and fair view of the consolidated financial position of
the Group as at 31 December 2016 and of its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements"
section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for
Accountants' Code of Ethics for Professional Accountants (the "IESBA Code"), and we have fulfilled our other ethical
responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
impairment review of interest in a joint venture and amount due from a joint venture
Refer to note 16 to the consolidated financial statements
The Group owns 50% in Oasis Education Group Limited ("Oasis Education"), which is accounted for using the equity method and
considered for impairment if there is any indication that the investment may be impaired. The interest in the joint venture
amounted to approximately US$123,000 as at 31 December 2016 and the Group's share of its losses of approximately US$5,000
for the year then ended.
Further, the Group has advanced an amount of approximately US$257,000 to Oasis Education as at 31 December 2016, which is
subject to an impairment assessment.
The impairment review of investment in, and amount due from, Oasis Education is significant to our audit due to the
significance of the carrying amounts subject to impairment review comparing to the Group's net loss, and judgement applied
in determining if an impairment in carrying amounts is necessary.
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Key Audit Matters (Continued)
impairment review of interest in a joint venture and amount due from a joint venture (CONTINUED)
Our response:
Our audit procedures included:
· Understanding Oasis Education's operation and latest development;
· Assessing the financial performance of Oasis Education based on information available to us;
· Evaluating management's considerations of the impairment indicators of the investment in, and the amount due from,
Oasis Education;
· Assessing the appropriateness of the management's assumption concerning the future cash flow to be generated from
the operation of Oasis Education; and
· Assessing reliability of the joint venture's forecast by comparing historical budget to actual performance and
challenging management on any significant variances.
impairment review of available-for-sale financial assets
Refer to note 17 to the consolidated financial statements
The Group owns equity interests in ICBC Specialised Ship Leasing Investment Fund ("ICBC Shipping Fund"), ayondo Holding AG
("Ayondo") and Velocity Mobile Limited ("Velocity"), which are all accounted for as available-for-sale financial assets
totaling approximately US$1,784,000 as at 31 December 2016 carried at cost. The available-for-sale financial assets are
measured at cost less any identified impairment loss, if any. The amount of an impairment loss, if any, 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.
The impairment review of the investments in ICBC Shipping Fund, Ayondo and Velocity are significant to our audit due to the
significance of the carrying amount of the investments, and judgement applied in determining if an impairment in carrying
amount is necessary.
Our response:
Our audit procedures included:
· Understanding the investees' operations and latest development;
· Assessing the financial performance of the investees; and
· Evaluating management's considerations of the impairment indicators of the available-for-sale financial assets
based on our knowledge of the relevant industry and business.
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Other information in the annual report
The directors are responsible for the other information. The other information comprises the information included in the
Company's annual report, but does not include the consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Directors' responsibility for the consolidated financial statements
The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view
in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal
control as the directors determine is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
The directors are also responsible for overseeing the Group's financial reporting process. The audit committee of the Group
(the "Audit Committee") assists the directors in discharging their responsibility in this regard.
Auditor's responsibility for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
This report is made solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act 1981, and for no
other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this
report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism
throughout the audit. We also:
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Auditor's responsibility for the audit of the consolidated financial statements (CONTINUED)
· identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
· obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's
internal control.
· evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
· conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
· evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner
that achieves fair presentation.
· obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of
the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
REPORT ON OTHER REGULATORY REQUIREMENTS
Under the listing rules of the Financial Conduct Authority in the United Kingdom (the "Listing Rules"), we are required to
review the part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK
Corporate Governance Code specified for our review. We have nothing to report arising from our review.
BDO Limited
Certified Public Accountants
Alfred Lee
Practising Certificate Number P04960
Hong Kong, 28 April 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Year ended 31 December
Notes 2016 2015
US$'000 US$'000
Revenue 7 96 96
Other income 9 99 -
Staff costs 10 (385) (225)
Other expenses (319) (462)
Share of losses of a joint venture 16 (5) (53)
Loss before income tax expense 11 (514) (644)
Income tax expense 12 - -
Loss for the year (514) (644)
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:Exchange differences on translating foreign operations (1) (3)
Release of foreign currency translation reserveupon dissolution of subsidiaries 24 12 -
Share of other comprehensive loss of a joint venture 16 (9) (19)
Other comprehensive income/(loss) for the year, net of income tax 2 (22)
Total comprehensive loss for the year (512) (666)
Loss for the year attributable to:
Owners of the Company (514) (644)
Total comprehensive loss for the yearattributable to:
Owners of the Company (512) (666)
Year ended 31 December
Notes 2016 2015
Loss per share - basic and diluted 13 US (0.91) cent US (1.14) cents
The accompanying notes form an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Notes 2016 2015
US$'000 US$'000
Non-current assets
Property, plant and equipment 15 21 44
Interest in a joint venture 16 123 137
Available-for-sale financial assets 17 1,784 1,125
1,928 1,306
Current assets
Other receivables 8 -
Deposits 22 21
Amount due from a joint venture 16 257 257
Cash and cash equivalents 19 848 1,988
1,135 2,266
Current liabilities
Other payables and accruals 20 125 441
Net current assets 1,010 1,825
Net assets 2,938 3,131
Capital and reserves
Share capital 21 57 57
Reserves 22 2,881 3,074
Total equity 2,938 3,131
The consolidated financial statements on pages 21 to 58 were approved and authorised for issue by the Board of Directors on
28 April 2017 and signed on its behalf by:
Alastair Gunn-Forbes Director Henry Ying Chew CheongDirector
The accompanying notes form an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2016
Equity attributable to owners of the Company
Foreign
Contri- Share currency
Share Share buted option translation Special Accumulated
capital premium surplus reserve reserve reserve losses Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(note 21) (note 22) (note 22) (note 22) (note 22) (note 22) (note 22)
Balance at 1 January 2015 57 3,837 9,646 - (8) 625 (10,394) 3,763
Loss for the year - - - - - - (644) (644)
Other comprehensive income for the year
Exchange differences on translating foreign operations - - - - (3) - - (3)
Share of other comprehensive loss of a joint venture (note 16) - - - - (19) - - (19)
Total comprehensive loss for the year - - - - (22) - (644) (666)
Recognition of share-based payments (note 23) - - - 34 - - - 34
Balance at 31 December 2015 and 1 January 2016 57 3,837 9,646 34 (30) 625 (11,038) 3,131
Loss for the year - - - - - - (514) (514)
Other comprehensive income for the year
Exchange differences on translating foreign operations - - - - (1) - - (1)
Release of foreign currency translation reserve upon dissolution of subsidiaries (note 24) - - - - 12 - - 12
Share of other comprehensive loss of a joint venture (note 16) - - - - (9) - - (9)
Total comprehensive loss for the year - - - - 2 - (514) (512)
Recognition of share-based payments (note 23) - - - 172 - - - 172
Unclaimed dividends forfeited (note 20) - - - - - - 147 147
Transactions with owners - - - 172 - - 147 319
Balance at 31 December 2016 57 3,837 9,646 206 (28) 625 (11,405) 2,938
The accompanying notes form an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Year ended 31 December
2016 2015
US$'000 US$'000
Cash flows from operating activities
Loss for the year (514) (644)
Adjustments for:
Depreciation of property, plant and equipment 23 23
Share of losses of a joint venture 5 53
Share-based payment expenses 172 34
Loss on dissolution of subsidiaries 12 -
Other payables written back (99) -
Operating loss before working capital changes (401) (534)
(Increase)/decreasein other receivables (8) 8
Increase in deposits (1) -
(Decrease)/increase in other payables and accruals (70) 73
Net cash used inoperating activities (480) (453)
Cash flows from investing activities
Purchase of available-for-sale financial assets (659) (325)
Net cash used ininvesting activities (659) (325)
Net decrease in cash and cash equivalents (1,139) (778)
Cash and cash equivalents at the beginning of the year 1,988 2,769
Effects of exchange rate changes (1) (3)
Cash and cash equivalents at the end of the year 848 1,988
The accompanying notes form an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1. GENERAL INFORMATION
Worldsec Limited (the "Company") is a public listed company incorporated in Bermuda and its shares are listed on the Main
Market of the London Stock Exchange. The address of the registered office of the Company is Canon's Court, 22 Victoria
Street, Hamilton HM12, Bermuda. Its principal place of business address is Unit 607, 6th Floor, FWD Financial Centre, 308
Des Voeux Road Central, Sheung Wan, Hong Kong.
The principal activity of the Company is investment holding. The principal activities of the Company's subsidiaries are set
out in note 18 to the consolidated financial statements.
The functional currency of the Company is Hong Kong Dollars ("HK$"). 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").
The consolidated financial statements have been prepared in accordance with all applicable International Financial
Reporting Standards ("IFRS"), International Accounting Standards ("IAS") and Interpretations adopted by the European
Union ("EU") (collectively referred to as the "IFRSs").
2. APPLICATION OF NEW AND REVISED 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.
IFRSs (Amendments) Annual Improvements 2010-2012 Cycle
IFRSs (Amendments) Annual Improvements 2012-2014 Cycle
Amendments to IAS 1 Disclosure Initiative
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
Amendments to IAS 27 Equity Method in Separate Financial Statements
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations
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 financial position for the current and prior years and/or on the disclosures set out in these consolidated
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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. Certain new
or revised IFRSs have yet been endorsed by the EU.
Amendments to IFRSs Annual Improvements 2014-2016 Cycle1,2*
IFRS 9 Financial instruments2
IFRS 15 Revenue from Contracts with Customers2
IFRS 16 Leases3*
Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions2*
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts2*
Amendments to IFRS 15 Revenue From Contracts with Customers (Clarification to IFRS 15)2*
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 Initiative1*
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses1*
Amendments to IAS 40 Transfer of Investment Property2*
IFRIC 22 Foreign Currency Transactions and Advance Consideration2*
1 Effective for annual periods beginning on or after 1 January 2017
2 Effective for annual periods beginning on or after 1 January 2018
3 Effective for annual periods beginning on or after 1 January 2019
# The amendments were originally intended to be effective for annual periods beginning on or after 1 January 2016. The effective date has now been deferred/removed. Early application of the amendments continues to be permitted.
* Not yet endorsed by the EU
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
IFRS 9 - 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 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 fair value through other comprehensive income. All other debt and equity
instruments are measured at fair value through profit or loss.
IFRS 9 includes a new expected loss impairment model for all financial assets not measured at fair value through profit or
loss 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 fair value through profit or loss, 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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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 (Continued)
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.
Amendments to IFRS 15 - Revenue from Contracts with Customers (Clarifications to IFRS 15)
The amendments to IFRS 15 included clarifications on identification of performance obligations; application of principal
versus agent; licenses of intellectual property; and transition requirements.
IFRS 16 - Leases
IFRS 16, which upon the effective date will supersede IAS 17 "Leases" and related interpretations, introduces a single
lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more 12
months, unless the underlying asset is of low value. Specifically, under IFRS 16, a lessee is required to recognise a
right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its
obligation to make lease payments. Accordingly, a lessee should recognise depreciation of the right-of-use asset and
interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an
interest portion and presents them in the statement of cash flows. Also, the right-of-use asset and the lease liability are
initially measured on a present value basis. The measurement includes non-cancellable lease payments and also includes
payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or
to exercise an option to terminate the lease. This accounting treatment is significantly different from the lessee
accounting for leases that are classified as operating leases under the predecessor standard, IAS 17.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
IFRS 16 - Leases (Continued)
In respect of the lessor accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.
Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two
types of leases differently.
The Group has already commenced an assessment of the impact of adopting the above standards and amendments to existing
standards to the Group. The Group is not yet in a position to state whether these new pronouncements will result in
substantial changes to the accounting policies and consolidated financial statements of the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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 as adopted by the EU.
Basis of preparation
The consolidated financial statements have been prepared under the historical cost basis.
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.
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 venture: where the Group has rights to only the net assets of the joint arrangement; or
- Joint operation: 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 2016
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 the joint arrangement 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 investors' share in a joint venture's profits and losses
resulting from such 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 the
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 2016
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 their 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 2016
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 the 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 the reporting period. Exchange differences arising,
if any, are recognised in other comprehensive income and accumulated in equity as foreign currency translation 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
currency translation reserve.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign currency translation
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 the reporting period. Exchange differences arising are recognised in the foreign currency
translation reserve.
Share-based payments
The Group operates equity-settled share-based compensation plans and the share options are awarded to employees and
directors providing services to the Group.
All services received in exchange for the grant of any share-based compensation are measured at their fair values. These
are indirectly determined by reference to the equity instruments awarded. Their value is appraised at the grant date and
excludes the impact of any non-market vesting conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share-based payments (Continued)
All share-based compensation is recognised as an expense in profit or loss over the vesting period if vesting conditions
apply, or recognised as an expense in full at the grant date when the equity instruments granted vest immediately unless
the compensation qualifies for recognition as an asset, with a corresponding increase in the share option reserve in
equity. If vesting conditions apply, the expense is recognised over the vesting period, based on the best available
estimate of the number of equity instruments expected to vest. Non-market vesting conditions are included in assumptions
about the number of equity instruments that are expected to vest. Estimates are subsequently revised, if there is any
indication that the number of equity instruments expected to vest differs from previous estimates.
At the time when the share options are exercised, the amount previously recognised in share option reserve will be
transferred to share premium. After the vesting date, when the vested share options are forfeited or are still not
exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to retained
profits.
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 income tax
expense' 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Taxation (Continued)
Deferred tax (Continued)
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.
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.
Cash and cash equivalents
For the purposes of the consolidated statement of cash flows, cash and cash equivalents included cash on hand and in
banks.
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 2016
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 assets were
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.
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