Financial Reporting Update 2019 - Nelson CPA · 2019-03-05 · measurement of a financial asset, a...

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© 2013‐2019 Nelson Consulting Limited 1Persepolis @ Iran Stephanie & Nelson © 2013

Financial Reporting Update 2019(with Sample Financial Statements for Year Ended 31 Dec. 2018) 5 March 2019

LAM Chi Yuen Nelson 林智遠CFA® charterholder FCPA(Practising)MBA MSc BBA CPA(US) CTA FCA FCCA FCPA(Aust.) FSCAwww.Facebook.com/NelsonCFA

© 2013‐2019 Nelson Consulting Limited 2Photo taken by Stephanie and Nelson © 2018Petra @ Jordan

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© 2013‐2019 Nelson Consulting Limited 3

Effective for 2018 Dec. Year‐End

• HKFRS 9 (2014) Financial Instruments• Amendments to HKFRS 9 Clarify the Basis for Conclusions• HKFRS 15 Revenue from Contracts with Customers• Amendments to HKFRS 15 Effective Date of HKFRS 15

Revenue from Contracts with Customers• Amendments to HKFRS 15 Clarifications to HKFRS 15

Revenue from Contracts with Customers• Amendments to HKFRS 2 Classification and Measurement of

Share-based Payment Transactions• Amendments to HKFRS 4 Applying HKFRS 9 and HKFRS 4• Amendments to HKAS 40 Transfers of Investment Property• Annual Improvements to HKFRSs 2014-2016 Cycle

(Amendments to HKFRS 1 and HKAS 28) • Hong Kong (IFRIC) Interpretation 22 Foreign Currency

Transactions and Advance Consideration

1 Jan. 2018 Not specified 1 Jan. 2017 1 Jan. 2018

1 Jan. 2018

1 Jan. 2018

1 Jan. 2018 1 Jan. 2018 1 Jan. 2018

1 Jan. 2018

Selected new interpretations and amendments to HKFRSs

Effective for periods beginning on/after

Updated to HKICPA Update No. 228 of February 2019



• HKFRS 16 Leases• Hong Kong (IFRIC) Interpretation 23 Uncertainty over Income

Tax Treatments• Amendments to HKFRS 9 Prepayment Features with Negative

Compensation.• Amendments to HKAS 28 Investments in Associates and Joint

Ventures• Amendments to HKAS 19 Employee Benefits• Annual Improvements to HKFRSs 2015-2017 Cycle

1 Jan. 2019 1 Jan. 2019

1 Jan. 2019

1 Jan. 2019

1 Jan. 2019 1 Jan. 2019




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Effective after 2019 Dec. Year‐End

• Revised Conceptual Framework for Financial Reporting• Amendments to HKFRS 3 Definition of a Business• Amendments to HKAS 1 Amendments to Definition of Material• HKFRS 17 Insurance Contracts • Amendments to HKFRS 10 and HKAS 28 Sale or Contribution

of Assets between an Investor and its Associate or Joint Venture

1 Jan. 2020 1 Jan. 2020 1 Jan. 2020 1 Jan. 2021 1 Jan. 2016 (a date

to be determined by the IASB)



Updated to HKICPA Update No. 223 of December 2018

Selected new interpretations and amendments to SME-FRF & SME-FRS

• Amendments to SME-FRF & SME-FRS (as a consequence of The Companies (Amendment) (No. 2) Ordinance 2018)

1 Feb. 2019



New or Revised HKFRS Effective for 2018

Today’s Agenda


Full Version of the Presentation can be found in:

www.Facebook.com/NelsonCFA

New or Revised HKFRS Effective after 2019

Petra @ Jordan Stephanie & Nelson © 2018

Recap and Update

Real Cases

Examples and Samples

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© 2013‐2019 Nelson Consulting Limited 7Petra @ Jordan Stephanie & Nelson © 2018


Today’s Agenda




New or Revised HKFRS Effective after 2019



Today’s Agenda



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© 2013‐2019 Nelson Consulting Limited 9Photo taken by Stephanie and Nelson © 2015‐18SNAI, Shanghai @ China



• HKFRS 9 (2014) Financial Instruments• Amendments to HKFRS 9 Clarify the Basis for Conclusions• HKFRS 15 Revenue from Contracts with Customers• Amendments to HKFRS 15 Effective Date of HKFRS 15

Revenue from Contracts with Customers• Amendments to HKFRS 15 Clarifications to HKFRS 15

Revenue from Contracts with Customers• Amendments to HKFRS 2 Classification and Measurement of

Share-based Payment Transactions• Amendments to HKFRS 4 Applying HKFRS 9 and HKFRS 4• Amendments to HKAS 40 Transfers of Investment Property• Annual Improvements to HKFRSs 2014-2016 Cycle

(Amendments to HKFRS 1 and HKAS 28) • Hong Kong (IFRIC) Interpretation 22 Foreign Currency

Transactions and Advance Consideration

1 Jan. 2018 Not specified 1 Jan. 2017 1 Jan. 2018

1 Jan. 2018

1 Jan. 2018

1 Jan. 2018 1 Jan. 2018 1 Jan. 2018

1 Jan. 2018




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HKFRS 9 Financial Instruments


Chapter 4.1 Classification of FA

• Unless para. 4.1.5 of HKFRS 9 (so‐called “fair value option”) applies, an entity shall classify financial assets as subsequently measured at either – amortised cost,– fair value through other comprehensive income, or– fair value through profit or losson the basis of both:a) the entity’s business model for managing the financial assets; andb) the contractual cash flow characteristics of the financial asset.

(para. 4.1.1)

Amortised Cost Fair Value Through Other Comprehensive incomeFair Value Through

Profit or Loss

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No



Profit or Loss

Contractual cash flowsare solely principal and

interest?

Determine the category of a financial asset for subsequent

measurement

No

Choose fair value option (designate at fair value through profit or loss)?

No

Yes

Yes

Held within a business model to collect contractual

cash flow?Yes

No Held within a business model to collect contractual cash flow and selling FA?

Contractual cash flowsare solely principal and

interest?

Yes

Yes

No

No

Entitle and elect to present fair value changes in other comprehensive income

Yes

Source: Intermediate Financial Reporting, 3rd (2017) by Nelson Lam & Peter Lau



• Even the common understanding views that there are three categories in HKFRS 9 for the classification and subsequent measurement of a financial asset, a financial asset can be classified into the following five categories or sub‐categories:1. Financial asset at amortised cost;2. Financial asset (not being investment in equity instrument) at fair value

through other comprehensive income;3. Financial asset, being investment in an equity instrument, irrevocable

elected to measure at fair value through other comprehensive income.4. Financial asset at fair value through profit or loss; and5. Option to designate a financial asset at fair value through profit or loss;


Profit or Loss

1 2 3 4 5

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• A financial asset shall be measured at fair value through profit or loss unless it is measured – at amortised cost in accordance with para. 4.1.2 or – at fair value through other comprehensive income in accordance with

parag. 4.1.2A. • However an entity may make

– an irrevocable election at initial recognition for particular investments in equity instruments that would otherwise be measured at fair value through profit or loss to present subsequent changes in fair value in other comprehensive income(see para. 5.7.5–5.7.6). (para. 4.1.4)


Profit or Loss

No


Yes


Chapter 5.7 Gains and Losses• At initial recognition, an entity may make

an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of HKFRS 9 that is neither held for tradingnor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 applies. (para. 5.7.5)

• If an entity makes the above election in para. 5.7.5, it shall recognise in profit or loss dividends from that investment in accordance with para. 5.7.1A. (para. 5.7.7)

For those classified as measured at fair value

Fair value option?

Equity instrument?

Held for trading? and/or contingent consideration?

No

Yes

No

Part of hedging relationship

No

Fair Value Through Other Comprehensive income


Yes

Amortised Cost Fair Value Through Profit or Loss


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Chapter 5.7 Gains and Losses• This election (para. 5.7.5) is made on an

instrument‐by‐instrument (ie share‐by‐share) basis.

• Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss.

• However, the entity may transfer the cumulative gain or loss within equity. (para. B5.7.1)

• The gain or loss that is presented in other comprehensive income in accordance with para. 5.7.5 includes any related foreign exchange component. (para. B5.7.3)

For those classified as measured at fair value

Fair value option?

Equity instrument?

Held for trading? and/or contingent consideration?

No

Yes

No

Part of hedging relationship

No



Yes



HKFRS 9 – Real CaseReal Case

• 2018 Interim Report – HKFRS 9 sets out the requirements for

recognizing and measuring financial assets, financial liabilities, impairment of financial assets and hedge accounting.

– Upon adoption of HKFRS 9, the Group’s available‐for‐sale financial assethave been reclassified to financial asset at fair value through other comprehensive income (“FVOCI”).

– The accounting for FVOCI remains largely the same, except that gains or losses realized upon the disposal of financial asset at FVOCI will no longer be transferred to profit or loss on disposal, but instead reclassified below the line from the FVOCI reserve to retained earnings.

– For the Group’s financial liabilities, there will be no impact, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.

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• Annual Report 2017 – Accounting policy– Financial assets and financial liabilities are recognized

in the statements of financial position when a group entity becomes a party to the contractual provisions of the instrument.

– Financial assets and financial liabilities within the scope of HKFRS 9 are initially measured at fair value and transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.



• Annual Report 2017 – Accounting policy– The Group’s financial assets, including receivables,

time deposits and cash and cash equivalents, are subsequently measured at amortized cost using the effective interest method, less identified impairment charges (see note 2e) as the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

– Financial liabilities include lease liabilities, payables and accruals. All financial liabilities are subsequently measured at amortized cost using the effective interest method, except for lease liabilities as stated in note 2i.

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HKFRS 9 – Selected Sections in SFS

Statement of profit or loss and other comprehensive income (extract)For the year ended 31 December 2018

Example

Sample financial statements (SFS) Page 6

Profit for the year

Other comprehensive income:Items that will not be reclassified subsequently to profit or loss:Equity investments at fair value through other comprehensive income – fair value changes during the year

18‐

Items that may be reclassified subsequently to profit or loss:Available‐for‐sale financial assets 18- Fair value changes during the year ‐- Reclassification adjustments for gain included in profit or loss ‐- Income tax ‐


HKFRS 9 – Selected Sections in SFSi) Investments in equity instruments – after the adoption of HKFRS 9

– An investment in equity instruments is classified as fair value through profit or loss, except for those investments in equity instrument not held for trading and are designated as financial assets at fair value through other comprehensive income. The company makes an irrevocable election at initial recognition for the investment in equity instruments to present subsequent changes in fair value in other comprehensive income. This election is made on an instrument‐by‐instrument (i.e. share‐by‐share) basis. Amounts presented in other comprehensive income for such investment are not be subsequently transferred to profit or loss until the investment is disposed of. At the time of disposal of an investment in equity instruments, the cumulative gain or loss of the investment is transferred from fair value reserves to retained earnings.

ii) Investments in non‐equity instruments – after the adoption of HKFRS 9– An investment in non‐equity instruments is classified as at:

a) Amortised cost – if the investment is held within a business model whose objective is to hold the investment in order to collect contractual cash flows, and the contractual terms of the investment give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Example

SFS Page 14

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HKFRS 9 – Selected Sections in SFSii) Investments in non‐equity instruments – after the adoption of HKFRS 9

– An investment in non‐equity instruments is classified as at:b) Fair value through other comprehensive income – if the investment is held

within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A gain or loss on an investment in non‐equity instruments measured at fair value through other comprehensive income is recognised in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the investment is derecognised. When such investment is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from fair value reserves equity to profit or loss as a reclassification adjustment.

c) Fair value through profit or loss – if the investments are not classified as at amortised cost and at fair value through other comprehensive income.

Example

SFS Page 14


Chapter 5 Measurement

Initial measurement• Except for trade receivables within the scope of para. 5.1.3, – at initial recognition, an entity shall measure a

financial asset or financial liability • at its fair value• plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. (para. 5.1.1)

• However, if the fair value of the financial asset or financial liability at initial recognition differs from the transaction price, an entity shall apply para. B5.1.2A. (para. 5.1.1A)

Initial MeasurementFair Value

Transaction Cost+

To align HKFRS 15

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Subsequent Measurement of Financial Assets• After initial recognition, an entity shall measure a financial asset in accordance with para. 4.1.1–4.1.5 at:a. amortised cost;b. fair value through other comprehensive income; orc. fair value through profit or loss. (para. 5.2.1)


Profit or Loss



• An entity shall apply the impairment requirements in Section 5.5 – to financial assets that are measured at amortised cost in accordance with

para. 4.1.2 (i.e. under the “hold to collect” business model) and – to financial assets that are measured at fair value through other

comprehensive income in accordance with para. 4.1.2A (i.e. under the “hold to collect and sell” business model). (para. 5.2.2)


Profit or Loss

Subsequent Measurement of Financial Assets

No

Entitle and elect to present fair value changes in other comprehensive incomeYes

Impairment requirements applied to these two categories only (implied that equity instruments are not subject to

impairment requirements)

1 2

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Chapter 5.5 Impairment

• An entity shall recognise a loss allowance for expected credit losses on – a financial asset that is measured in accordance with para. 4.1.2 or 4.1.2A, – a lease receivable,– a contract asset or – a loan commitment and a financial guarantee

contract to which the impairment requirements apply in accordance with para. 2.1(g), 4.2.1(c) or 4.2.1(d). (para. 5.5.1)

Recognition of Expected Credit Losses – General Approach

HKFRS 9 defines expected credit losses as:• The weighted average of credit losses with the

respective risks of a default occurring as the weights.



• To understand and apply these requirements, an entity has to ascertain– the scope of the impairment in HKFRS 9,– the concept of expected credit losses,– the approach in recognition of expected credit losses,– the financial instruments with the scope in recognition of expected credit

losses but not falling within the three‐stage model,– the assessment of the credit risk on a financial instrument since initial

recognition,– the determination of financial instruments being credit‐impaired, and– the three‐stage model in such recognition.

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Chapter 5.5 Impairment• Always recognise a loss

allowance for changes in lifetime expected credit losses, and

• Calculate a credit‐adjusted effective interest rate

Calculate interest revenue on gross carrying amount

Has there been a significant increase in credit risk since

initial recognition?

No

Is simplified approach for trade receivables, contract assets and lease

receivables applicable?No

Yes

No

Is the low credit risk simplification

applied?

Yes

Yes

Is the financial instrument a credit‐impaired financial asset? (Section 16.5.1.6)

Yes

Yes

No

No


YesNo

Calculate interest revenue on amortised cost

Recognise lifetime expected credit lossesRecognise 12‐month expected credit losses

Stage 1 Stage 2 Stage 3

Does the financial instrument have low credit risk at the reporting date?

Is the financial instrument a purchased or originated credit‐impaired financial asset?

Adapted from the flowchart after HKFRS 9.IE102



Approach in Recognition of Expected Credit Losses• To achieve the objective and comply the impairment requirements in HKFRS 9, an entity is required to have the following 3 kinds of assessment:1. “Asset type assessment” – to assess the type of the financial asset and

determine whether it isa) purchased or originated credit‐impaired financial assets;b) trade receivables, contract assets and lease receivables for which the

entity applies simplified approach; orc) other financial assets.

2. “Credit risk assessment” – To assess the credit risk on the financial asset; and

3. “Credit‐impaired assessment” To determine whether the financial asset is credit impaired.

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Asset type assessment

Credit risk assessment

Credit‐impaired assessment




receivables applicable?


applied?





Chapter 5.5 Impairment• Always recognise a loss allowance for changes in lifetime expected credit losses, and

• Calculate a credit‐adjusted effective interest rate



Yes



Yes

No


YesNo

Calculate interest revenue on amortised cost

Recognise lifetime expected credit losses

Stage 2 Stage 3

Adapted from the flowchart after HKFRS 9.IE102

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Example

• Bonnie Corporation is a manufacturer and has a portfolio of trade receivables of $30 million in 2015 and operates only in Singapore. Bonnies determines that:– The customer base consists of a large number of small clients.– The trade receivables are categorised by common risk characteristics that are representative of the customers’ abilities to pay all amounts due in accordance with the contractual terms.

– The trade receivables do not have a significant financing component in accordance with HKFRS 15.





Example

• In accordance with HKFRS 9, the loss allowance for such trade receivables is always measured at an amount equal to lifetime time expected credit losses.

• To determine the expected credit losses for the portfolio, Bonnie uses a provision matrix.

• The provision matrix is based on its historical observed default rates over the expected life of the trade receivables and is adjusted for forward‐looking estimates.

• At every reporting date, the historical observed default rates are updated and changes in the forward‐looking estimates are analysed. In this case, it is forecast that economic conditions will deteriorate over the next year.

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Example

• On that basis, Bonnie estimates the following provision matrix:1–30 days 31–60 days 61–90 days Over 90 days

Current past due past due past due past dueDefault rate 1% 3% 5% 10% 15%

• Trade receivables from the large number of small customers amount to $30 million and are measured using the provision matrix as follows:

Gross carrying Default Lifetime expectedamount rate credit loss allowance

Current $15,000,000 1% $150,0001–30 days past due 7,500,000 3% 225,00031–60 days past due 4,000,000 5% 200,00061–90 days past due 2,500,000 10% 250,000Over 90 days past due 1,000,000 15% 150,000

$30,000,000 $975,000



Credit risk assessment– At each reporting date, for all financial instruments, other than purchased

or originated credit‐impaired financial assets, or financial assets that simplification approach is applied, • an entity is required to assess whether the credit risk on a financial instrument has increased significantly since initial recognition.




applied?


Credit risk assessment

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Credit risk assessment• Risk of Default and Past Due Information

– HKFRS 9 incorporates two rebuttable presumptions in assessing significant increases in credit risk and risk of default:i. 30 Days past due rebuttable resumption in respect of significant increases in credit risk– Regardless of the way in which an entity assesses significant increases in

credit risk, there is a rebuttable presumption that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due (HKFRS 9.5.5.11).

ii. 90 Days past due rebuttable resumption in respect of default occurred– In defining default, there is a rebuttable presumption that default does not

occur later than when a financial asset is 90 days past due unless an entity has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.



• Annual Report 2017– The Group recognizes loss allowances for expected credit

loss on the financial instruments that are not measured at fair value through surplus or deficit.

– The Group considers the probability of default upon initial recognition of financial assets and assesses whether there has been a significant increase in credit risk on an ongoing basis.

– The Group considers the credit risk on a financial instrument is low if • the financial instrument has a low risk of default, • the debtor has a strong capacity to meet its contractual cash flow

obligations in the near term and • adverse changes in economic and business conditions in the longer term

may, but will not necessarily, reduce the ability of the debtor to fulfill its contractual cash flow obligations.

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• Annual Report 2017– The carrying amount of the receivables is reduced through

the use of the receivable impairment charges account. – Changes in the carrying amount of the receivable impairment charges

account are recognized in surplus or deficit. – The receivable is written off against the receivable impairment charges

account when the Group has no reasonable expectations of recovering the receivable.

– If, in a subsequent period, the amount of expected credit losses decreases, the reversal would be adjusted to the receivable impairment charges account at the reporting date.

– The amount of any reversal is recognized in surplus or deficit.



• Interim Report 2018– HKFRS 9 replaces the “incurred loss” impairment model in HKAS 39 with a

forward‐looking “expected credit loss” (“ECL”) model. – It is no longer necessary for a loss event to occur before an impairment loss

is recognised under the new model. – Under the new expected loss approach, the Group assesses on a forward

looking basis the expected credit losses associated with its financial assets. – The impairment methodology applied depends on whether there has been

a significant increase in credit risk.– The new impairment model applies to

• debt instruments measured at amortised cost and at FVOCI, • contract assets under HKFRS 15, • lease receivables, • loan commitments and • certain financial guarantee contracts.

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• Interim Report 2018– The Group applies the simplified approach to recognise lifetime expected

losses for trade receivables, due from customers and contract assets. – As regards lease receivables, loan commitments, financial guarantee

contracts, and certain other financial assets (which are presented under Liquid funds and other listed investments, and other unlisted investments) the Group considers that they have low credit risk and hence recognises 12‐month expected credit losses for such items.

– The application of this new guidance represents a change in accounting policy.

– The Group was required to revise its impairment methodology under HKFRS 9 for these classes of assets.

– The results of the revision at 1 January 2018 have not resulted in any material change in impairment provision or any material impact on the carrying amount of the Group’s financial assets.



• 2016 Annual Report – The Group has early adopted the complete version

of HKFRS 9, Financial Instruments (“HKFRS 9”) in the consolidated financial statements for the year ended 31 December 2016.

– Other than the changes mentioned below, the adoption of HKFRS 9 has no significant impact on the Group’s financial statements.

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• 2016 Annual Report – HKFRS 9 introduces

• new classification and measurement requirements for financial assets on the basis of – the Group’s business model for managing the financial assets and – the contractual cash flow characteristics of the financial assets,

• a new expected credit loss model that replaces the incurred loss impairment model used in HKAS 39, Financial Instruments: Recognition and Measurement (“HKAS 39”), with the result that a loss event will no longer need to occur before an impairment allowance is recognised, and

• a new hedge accounting model where the hedged ratio is required to be the same as the one used by an entity’s management for risk management purposes.



• 2016 Annual Report – As at 1 January 2016, the Directors of the Company

have reviewed and reassessed the Group’s financial assets on that date and the results for the period.

– The initial application of HKFRS 9 has had impacts on the following financial assets and results of the Group:(i) investments in equity securities (not held for trading) of HK$5,723 million

that were previously classified as available‐for‐sale investments and measured at fair value at each reporting date under HKAS 39 have been designated as equity investments measured at fair value through other comprehensive income (“FVTOCI”). Group profit for the year has been reduced by HK$14 million, representing the gain on disposal of equity securities recognised through other comprehensive income instead of the income statement as previously accounted for (2015: HK$178 million profit).

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• 2016 Annual Report (ii) impairment based on expected credit loss model

on the Group’s rental, sales and trade receivables have no significant financial impacts.


HKFRS 9 – Selected Sections in SFSvi) Impairment of investments and other financial assets

– The company recognises loss allowances for expected credit loss on the financial instruments that are not measured at fair value through profit or loss. The company considers the probability of default upon initial recognition of financial assets and assesses whether there has been a significant increase in credit risk on an ongoing basis.

– The company considers the credit risk on a financial instrument is low if the financial instrument has a low risk of default, the debtor has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the debtor to fulfil its contractual cash flow obligations.

– The carrying amount of the receivables is reduced through the use of the receivable impairment charges account. Changes in the carrying amount of the receivable impairment charges account are recognised in profit or loss. The receivable is written off against the receivable impairment charges account when the company has no reasonable expectations of recovering the receivable.

– If, in a subsequent period, the amount of expected credit losses decreases, the reversal would be adjusted to the receivable impairment charges account at the reporting date. The amount of any reversal is recognised in profit or loss.

Example

SFS Page 15

HKFRS 15

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Chapter 7 Effective Date and Transition

• An entity shall apply HKFRS 9 for annual periods beginning on or after 1 January 2018.– Earlier application is permitted. (HKFRS 9.7.1)– With some restrictions, an entity may elect to early apply some

requirements only. (HKFRS 9.7.1.2)

• An entity shall apply HKFRS 9 retrospectively, in accordance with HKAS 8, except as specified in para. 7.2.4–7.2.26 and 7.2.28. – HKFRS 9 shall not be applied to items that have already been derecognised

at the date of initial application. (HKFRS 9.7.2.1)



• For the purposes of the transition provisions in para. 7.2.1, 7.2.3–7.2.28 and 7.3.2, the date of initial application is – the date when an entity first applies those requirements of HKFRS 9 and

must be the beginning of a reporting period after the issue of HKFRS 9.

• Depending on the entity’s chosen approach to applying HKFRS 9, the transition can involve one or more than one date of initial application for different requirements. (HKFRS 9.7.2.2)

• HKFRS 9 provides further transition arrangements for– Classification and measurement– Impairment– Hedge accounting

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– At the date of initial application, • an entity shall assess whether a financial asset meets the condition in para. 4.1.2(a) (i.e. “hold to collect” business model) or 4.1.2A(a) (i.e. “hold to collect and sell” business model) on the basis of the facts and circumstances that exist at that date.

– The resulting classification shall be applied retrospectively irrespective of the entity’s business model in prior reporting periods. (HKFRS 9.7.2.3)

Amortised Cost Fair Value Through Other Comprehensive income

1 2

• Classification and measurement



– At the date of initial application• an entity may designate:

a. a financial asset as measured at fair value through profit or loss in accordance with paragraph 4.1.5; or

b. an investment in an equity instrument as at fair value through other comprehensive income in accordance with paragraph 5.7.5.

– Such a designation shall be made on the basis of the facts and circumstances that exist at the date of initial application.

– That classification shall be applied retrospectively. (HKFRS 9.7.2.8)


Fair Value Through Profit or Loss

3 5


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– If an entity previously accounted at cost (in accordance with HKAS 39), for an investment in an equity instrument that does not have a quoted price in an active market for an identical instrument (ie a Level 1 input) (or for a derivative asset that is linked to and must be settled by delivery of such an equity instrument) it shall measure that instrument at fair value at the date of initial application.

– Any difference between the previous carrying amount and the fair value shall be recognised in the opening retained earnings (or other component of equity, as appropriate) of the reporting period thatincludes the date of initial application. (HKFRS 9.7.2.12)



3

Fair Value Through Profit or Loss

4 5



– An entity shall apply the impairment requirements in Section 5.5 retrospectively in accordance with HKAS 8 subject to para. 7.2.15 and 7.2.18–7.2.20. (HKFRS 9.7.2.17)

– At the date of initial application, an entity shall use reasonable and supportable information that is available without undue cost or effort to • determine the credit risk at the date that a financial instrument was initially recognised (or for loan commitments and financial guarantee contracts at the date that the entity became a party to the irrevocable commitment in accordance with para. 5.5.6) and

• compare that to the credit risk at the date of initial application of HKFRS 9. (HKFRS 9.7.2.18)

• Impairment

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– When determining whether there has been a significant increase in credit risk since initial recognition, an entity may apply:a. the requirements in para. 5.5.10 and B5.5.22–B5.5.24; andb. the rebuttable presumption in para. 5.5.11 for contractual payments that are more than 30 days past due if an entity will apply the impairment requirements by identifying significant increases in credit risk since initial recognition for those financial instruments on the basis of past due information. (HKFRS 9.7.2.19)

– If, at the date of initial application, determining whether there has been a significant increase in credit risk since initial recognitionwould require undue cost or effort,• an entity shall recognise a loss allowance at an amount

equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognised (unless that financial instrument is low credit risk at a reporting date, in which case para. 7.2.19(a) applies). (HKFRS 9.7.2.20)

• Impairment


HKFRS 9 – Selected Sections in SFSChanges in accounting policies– Before 2018,

• the company applied HKAS 39, Financial instruments: recognition and measurement and its investments were classified as trading securities and available‐for‐sale financial assets, and impairment losses on financial assets, except for trading securities, were recognised in profit or loss when there was objective evidence that an impairment loss had been incurred at the end of each reporting period. Fair value changes on available‐for‐sale financial assets was recognised directly in equity.

– From 2018, • after the adoption of HKFRS 9, which replaces HKAS 39, the company’s available‐for‐sale financial assets of HK$[ ] have been reclassified to financial asset at fair value through other comprehensive income. The accounting for financial asset at fair value through other comprehensive income remains largely the same, except that gains or losses realised upon the disposal of financial asset at fair value through other comprehensive income will no longer be transferred to profit or loss upon disposal, but instead reclassified from fair value reserves to retained earnings.

Example

Sample Financial Statements (SFS) Page 21

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HKFRS 9 – Selected Sections in SFSChanges in accounting policies– For impairment losses on

[trade and other receivables, contract assets and financial guarantee contracts], • HKFRS 9 introduces a new “expected credit loss” model that replaces the “incurred

loss” impairment model in HKAS 39, with the result that a loss event will no longer need to occur before an impairment allowance is recognised.

– Under the new “expected credit loss” model, it is no longer necessary for a credit event to have occurred before credit losses are recognised. Instead, the company always accounts for expected credit losses, and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition and, consequently, more timely information is provided about expected credit losses.

– The adoption of HKFRS 9 has resulted in changes in accounting policies. • The company has applied HKFRS 9 retrospectively and taken the transitional

provisions in HKFRS 9 not to restate comparative information with respect to classification and measurement (including impairment) requirements. The adoption of HKFRS 9 [does not have any material effects on the company’s financial performance and positions].

Example



Disclosures of financial instruments sets out in

HKFRS 7

HKFRS 7 – Fin. Instruments: DisclosuresInvestments in equity instruments designated at fair value through OCI– If an entity has designated investments in equity instruments to be measured at fair value through other comprehensive income (OCI), as permitted by para. 5.7.5 of HKFRS 9, it shall disclose:(a) which investments in equity instruments have been designated to be measured

at fair value through other comprehensive income.(b) the reasons for using this presentation alternative.(c) the fair value of each such investment at the end of the reporting period.(d) dividends recognised during the period, showing separately those related to

investments derecognised during the reporting period and those related to investments held at the end of the reporting period.

(e) any transfers of the cumulative gain or loss within equity during the period including the reason for such transfers. (HKFRS 7.11A)

– If an entity derecognised investments in equity instruments measured at fair value through other comprehensive income during the reporting period, it shall disclose:(a) the reasons for disposing of the investments.(b) the fair value of the investments at the date of derecognition.(c) the cumulative gain or loss on disposal. (HKFRS 7.11B)

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HKFRS 7 – Fin. Instruments: Disclosures

18. Non‐current financial assets

Example

2018 2017HK$ HK$

Financial assets measured at fair value through profit or loss‐ Listed equity securities in Hong KongEquity securities designated at fair value through other comprehensive income:‐ Unlisted equity securities ‐‐ Listed equity securities outside Hong Kong ‐

• Unlisted equity securities are investments in equity securities issued by DEF Limited, incorporated in Hong Kong and listed equity securities are investments in equity securities issued by GHI Limited, incorporated and listed in the United States.

• All these investments are designated as at fair value through other comprehensive income because they are held for strategic purposes.

• No dividend were received on these investments during the year.



HKFRS 7 – Fin. Instruments: DisclosuresExtended disclosures required on credit risk – From HKFRS 7.35A to 35N– For trade receivables, contract assets and lease receivables to which an entity applies paragraph 5.5.15 of HKFRS 9, the information provided in accordance with paragraph 35M may be based on a provision matrix (see paragraph B5.5.35 of HKFRS 9). (HKFRS 7.35N)

Example

The following table provides information about the company’s exposure to credit riskand expected credit losses for trade receivables and contract assets as at 31 Dec. 2018:

Expected loss Gross carrying Lossloss rate amount allowance

HK$’000 HK$’000Past due up to:- 30 days- 31 to 60 days- 61 to 90 days- Over 90 days


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HKFRS 7 – Fin. Instruments: DisclosuresExample

Movement in loss allowance account in respect of trade receivables andcontract assets during the year is as follows:

2018 2017HK$’000 HK$’000

Balance at 31 December under HKAS 39Impact on initial application of HKFRS 9 ‐Adjusted balance at 1 JanuaryAmount written off during the yearImpairment losses recognised during the yearBalance at 31 December


Photo taken by Stephanie and Nelson © 2012Seville @ Spain


HKFRS 15 Revenue from Contracts with Customers

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HKFRS 15 Issued in 2014

• HKFRS 15 establishes a comprehensive framework for determining • when to recognise revenue and• how much revenue to recognise.

• The core principle is that an entity recognises 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 or services

• Under HKFRS 15, an entity applies a 5‐step approach in recognising revenue

Step 5: Recognise

revenue when or as performance obligation is satisfied

Step 4: Allocate the transaction

price

Step 3: Determine

the transaction

price

Step 2: Identify the performance obligations

Step 1: Identify the

contract with a customer



• Effective Date– An entity shall apply HKFRS 15 for annual reporting periods beginning on or after 1 January 2017 2018. (HKICPA Update No. 174)

– Earlier application is permitted. – If an entity applies HKFRS 15, it shall disclose that fact.

Step 5: Recognise



price

Step 3: Determine

the transaction

price




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• HKFRS 15 supersedes the following Standards:a. HKAS 11 Construction Contractsb. HKAS 18 Revenuec. HK(IFRIC)‐Int 13 Customer Loyalty Programmesd. HK(IFRIC)‐Int 15 Agreements for the

Construction of Real Estatee. HK(IFRIC)‐Int 18 Transfers of Assets from Customersf. HK(SIC)‐Int 31 Revenue — Barter Transactions

Involving Advertising Services

Step 5: Recognise



price

Step 3: Determine

the transaction

price






• 2018 Interim Report – HKFRS 15 replaces HKAS 18 which

covers contracts for goods and services and HKAS 11 which covers construction contracts.

– The new standard is based on the principle that revenue is recognized when control of a good or service transfers to a customer.

– The Group has adopted HKFRS 15 Revenue from Contracts with Customers from January 1, 2018.

– The adoption on HKFRS 15 has no significant impact on the Group.

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© 2013‐2019 Nelson Consulting Limited 65Source: Intermediate Financial Reporting 3rd (2017) by Nelson Lam and Peter Lau

Scope

Yes

No

For a contract within HKFRS 15, there are one or more components within

other HKFRSs?

Other HKFRSs specify how to separate and/or initially measure one or more

part if the contract?

Apply the requirements in HKFRS 15

• Exclude from transaction price the amount measured by other HKFRSs as above

• Apply HKFRS 15 on the remaining part

No

Yes

Is the contract within HKFRS 15?

Yes

Apply other HKFRSsNo

First apply other HKFRSs (the separation and/or measurement requirements of

other HKFRSs)


Step 1: Identify the Contract(s)Step 5:

Recognise revenue when or as performance obligation is satisfied


price

Step 3: Determine

the transaction

price




• Step 1: Identifying the Contract(s)– A contract is an agreement between two or more parties that creates

enforceable rights and obligations. – The requirements of HKFRS 15 apply to each contract that has been agreed

upon with a customer and meets specified criteria. • In some cases, HKFRS 15 requires an entity to combine contracts and

account for them as one contract. • HKFRS 15 also provides requirements for the accounting for contract

modifications. (HKFRS 15.IN7)

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Step 1: Identify the Contract(s)

• An entity shall account for a contract with a customer that is within the scope of HKFRS 15 only when all of the following criteria (i.e. contract criteria) are met:a. the parties to the contract have approved the contract (in writing, orally

or in accordance with other customary business practices) and are committed to perform their respective obligations;

b. the entity can identify each party’s rights regarding the goods or services to be transferred;

c. the entity can identify the payment terms for the goods or services to be transferred;

d. the contract has commercial substance(i.e. the risk, timing or amount of the entity’sfuture cash flows is expected to change as a result of the contract); and


Step 1: Identify the Contract(s)

• An entity shall account for a contract with a customer that is within the scope of HKFRS 15 only when all of the following criteria (i.e. contract criteria) are met:e. it is probable that the entity will collect the consideration to which it will

be entitled in exchange for the goods or services that will be transferred to the customer. • In evaluating whether collectability of an amount of consideration is

probable, an entity shall consider only the customer’s ability and intention to pay that amount of consideration when it is due.

• The amount of consideration to which the entity will be entitled may be less than the price stated in the contract if the consideration is variable because the entity may offer the customer a price concession (see HKFRS 15.52) (HKFRS 15.9)

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Step 2: Identify Performance Obligations

• Step 2: Identifying the Performance Obligations in the Contract– A contract includes promises to transfer goods or services to a customer. – If those goods or services are distinct, the promises

• are performance obligations and are accounted for separately– A good or service is distinct if

• the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer and

• the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. (HKFRS 15.IN7)

Step 5: Recognise



price

Step 3: Determine

the transaction

price






• At contract inception, an entity shall– assess the goods or services promised in a contract with a customer, and – identify as a performance obligation each promise to transfer to the

customer either:a. a good or service (or a bundle of goods or services) that is distinct; orb. a series of distinct goods or services that are substantially the same

and that have the same pattern of transfer to the customer (see HKFRS 15.23) (HKFRS 15.22)

Performance obligationsHKFRS 15 defines performance obligation as:A promise in a contract with a customer to transfer to the customer either:

a. a good or service (or a bundle of goods or services) that is distinct; orb. a series of distinct goods or services that are substantially the same

and that have the same pattern of transfer to the customer.

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• A good or service that is promised to a customer is distinct if bothof the following criteria are met:a. the customer can benefit from the good or service either on its own or

together with other resources that are readily available to the customer (i.e. the good or service is capable of being distinct); and

b. the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract(i.e. the good or service is distinct within the context of the contract). (HKFRS 15.27)

Performance obligations


Step 3: Determine Transaction Price

• Step 3: Determining the Transaction Prices– The transaction price

• is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer

• can be a fixed amount of customer consideration, but it may sometimes include– variable consideration or – consideration in a form other than cash

• is also adjusted for the effects of the time value of money if the contract includes a significant financing component and for any consideration payable to the customer. (HKFRS 15.IN7)

Step 5: Recognise



price

Step 3: Determine

the transaction

price




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• Step 3: Determining the Transaction Prices– If the consideration is variable, an entity estimates the amount of

consideration to which it will be entitled in exchange for the promised goods or services.

– The estimated amount of variable consideration will be included in the transaction price • only to the extent that it is highly probable that a significant reversal in the

amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. (HKFRS 15.IN7)

Step 5: Recognise



price

Step 3: Determine

the transaction

price






• The nature, timing and amount of consideration promised by a customer affect the estimate ofthe transaction price.

• When determining the transaction price, anentity shall consider the effects of all of thefollowing:a. variable consideration (see HKFRS 15.50–55 and 59);b. constraining estimates of variable consideration

(see HKFRS 15.56–58);c. the existence of a significant financing component

in the contract (see HKFRS 15.60–65);d. non‐cash consideration (see HKFRS 15.66–69); ande. consideration payable to a customer

(see HKFRS 15.70–72). (HKFRS 15.48)

Variable Consideration

Constraining Estimates of Variable Con.

Significant Financing ComponentNon‐cash

ConsiderationConsideration Payable

to Customer

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Yes

Is there any variable consideration?

Choose one of the two methods to estimate the variable

consideration (depending on which can better predict the

consideration entitled)

The most likely amount method (may be appropriate for

the contract with only two possible outcomes)

The expected value method(may be appropriate for large number of contracts with similar characteristics)

Variable Consideration

Source: Intermediate Financial Reporting 3rd (2017) by Nelson Lam and Peter Lau



• 2018 Interim Report – HKFRS 15 requires an entity to adjust the transaction

price for the time value of money when a contract contains a significant financing component, regardless of whether the payments from customers are received significantly in advance or in arrears.

– Previously, the Group did not apply such a policy when payments were received in advance.

– Advance payments are not common in the Group’s arrangements with its customers, with the exception of when residential properties are marketed by the Group while the property is still under construction.

– In this situation, the Group may collect the balance of the purchase price early.

Significant Financing Component

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• 2018 Interim Report – In assessing whether such advance payments

schemes include a significant financing component, the Group has considered the length of time between the payment date and the completion date of legal assignment based on typical arrangements entered into with customers.

– Where such advance payment schemes include a significant financing component, the transaction price will need to be adjusted to separately account for this component.

– Such adjustment will result in interest expense being recognised to reflect the effect of the financing benefits obtained from the customers during the period between the payment date and the completion date of legal assignment, with a corresponding increase to revenue on sale of properties recognised when control of the completed property is transferred to the customers.

Significant Financing Component


Step 4: Allocate Transaction Price to PO

• Step 4: Allocating the Transaction Price to Performance Obligations– An entity typically allocates the transaction price to each performance

obligation on the basis of the relative stand‐alone selling prices of each distinct good or service promised in the contract. • If a stand‐alone selling price is not observable, an entity estimates it.

– HKFRS 15 specify when an entity allocates the discount or variable consideration to one or more, but not all, performance obligations (or distinct goods or services) in the contract. (HKFRS 15.IN7)

Step 5: Recognise



price

Step 3: Determine

the transaction

price




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• The objective when allocating the transaction price is – for an entity to allocate the transaction price to

each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange fortransferring the promised goods or services to the customer. (HKFRS 15.73)

Based on Stand‐alone Selling Price (SASP)Allocation of a

DiscountAllocation of Variable

Consideration



• To meet the allocation objective, an entity shall allocate the transaction price to each performance obligation identified in the contract on a relative stand‐alone selling price basis in accordance with HKFRS 15.76–80, except as specified in– HKFRS 15.81–83 (for allocating discounts) and– HKFRS 15.84–86 (for allocating

consideration that includes variable amounts). (HKFRS 15.74)

Based on Stand‐alone Selling Price (SASP)Allocation of a

DiscountAllocation of Variable

Consideration

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• Suitable methods for estimating SASP of a good or service include (not limited to):a. Adjusted market assessment approachb. Expected cost plus a margin approachc. Residual approachd. Combination of the above

Based on Stand‐alone Selling Price (SASP)


Step 5: Satisfy Performance Obligations

• Step 5: Satisfaction of performance obligations– A an entity recognises revenue when (or as) it satisfies a performance

obligation by transferring a promised good or service to a customer• which is when the customer obtains control of that good or service.

– The amount of revenue recognised is the amount allocated to the satisfied performance obligation. (HKFRS 15.IN7)

Step 5: Recognise



price

Step 3: Determine

the transaction

price




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• Step 5: Satisfaction of performance obligations– A performance obligation may be satisfied

• at a point in time (typically for promises to transfer goods to a customer) or

• over time (typically for promises to transfer services to a customer). – For performance obligations satisfied over time, an entity recognises

revenue over time by selecting an appropriate method for measuring the entity’s progress towards complete satisfaction of that performance obligation. (HKFRS 15.IN7)

Step 5: Recognise



price

Step 3: Determine

the transaction

price






• An entity shall recognise revenue– when (or as) the entity satisfies a performance obligation by transferring a

promised good or service (i.e. an asset) to a customer.

• An asset is transferred– when (or as) the customer obtains control of that asset (HKFRS 15.31)

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• For each performance obligation identified in accordance with HKFRS 15.22–30, – an entity shall determine at contract inception whether it

• satisfies the performance obligation over time(in accordance with HKFRS 15.35–37) or

• satisfies the performance obligation at a point in time (in accordance with HKFRS 15.38). – If an entity does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time. (HKFRS 15.32)

Over Time

At a Point in Time



• Goods and services are assets, even if only momentarily, when they are received and used (as in the case of many services).

• Control of an asset– refers to the ability to direct the use of, and obtain

substantially all of the remaining benefits from, the asset.

– includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset.

• When evaluating whether a customer obtains control of an asset, – an entity shall consider any agreement

to repurchase the asset (see HKFRS 15.B64–B76). (HKFRS 15.33)

Over Time

At a Point in Time

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• An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:a. the customer simultaneously receives and consumes

the benefits provided by the entity’s performance as the entity performs (see HKFRS 15.B3–B4);

b. the entity’s performance creates or enhances an asset (e.g. work in progress) that the customer controls as the asset is created or enhanced (see HKFRS 15.B5); or

c. the entity’s performance does not create an asset with an alternative use to the entity (see HKFRS 15.36) and the entity has an enforceable right to payment for performance completed to date (see HKFRS 15.37). (HKFRS 15.35)

Over Time



No

No

Does the customer receive and consume the benefits provided by the entity as the entity performs?

Does the customer control the asset being created or enhanced by the entity?

Does the entity’s performance create an asset with an alternative use to the entity?

Yes

Performance obligationssatisfied at a point in time

Performance obligationsatisfied over time

Does the entity have an enforceable right to payment for performance completed to date?

No

Yes

YesNo

Yes

Measuring progress towards complete satisfaction of that performance

• Determine at contract inception

Source: Intermediate Financial Reporting 3rd (2017) by Nelson Lam and Peter Lau

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Step 5: Satisfy Performance ObligationsReal Case

• 2018 Interim Report – The new revenue standard does not have significant

impact on how it recognises revenue from rental income from investment properties and income from logistics and hotels operation of the Group.

– However, revenue recognition for sales of development properties is affected.

– The Group’s property development activities are carried out in Hong Kong and Mainland China.

– Taking into account the contract terms, the Group’s business practice and the legal and regulatory environment of Hong Kong and Mainland China, the Group assessed that its property sales contracts do not meet the criteria for recognising revenue over time and therefore revenue from property sales is recognised at a point in time.


Step 5: Satisfy Performance ObligationsReal Case

• 2018 Interim Report – Previously the Group recognised revenue from

property sales upon the later of the signing of the sale and purchase agreement and the completion of the property development, which was taken to be the point in time when the risks and rewards of ownership of the property have been transferred to the customer.

– Under the transfer‐of‐control approach in the current standard, revenue from property sales is recognised when the legal assignment is completed, which is the point in time when the customer has the ability to direct the use of the property and obtain substantially all of the remaining benefits of the property.

– This would result in revenue being recognised later than the time recognised under the previous standard.

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Methods for Measuring Progress– Appropriate methods of measuring progress include

output methods and input methods (HKFRS 15.B14–B19 provide guidance)

– In determining the appropriate method for measuring progress, an entity shall consider the nature of the good or service that the entity promised to transfer to the customer. (HKFRS 15.41)

– When applying a method for measuring progress, an entity shall exclude from the measure of progress any goods or services for which the entity does not transfer control to a customer.

– Conversely, an entity shall include in the measure of progress any goods or services for which the entity does transfer control to a customer when satisfying that performance obligation. (HKFRS 15.42)

Over Time

Measuring Progress



• If a performance obligation is not satisfied over time in accordance with HKFRS 15.35–37, an entity satisfies the performance obligation at a point in time.

• To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, – the entity shall consider the requirements for

control in HKFRS 15.31–34. (HKFRS 15.38)

At a Point in Time

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• In addition, an entity shall consider indicators of the transfer of control, which include, but are not limited to, the following:a. The entity has a present right to payment for the assetb. The customer has legal title to the assetc. The entity has transferred physical possession of the assetd. The customer has the significant risks and

rewards of ownership of the assete. The customer has accepted the asset

At a Point in Time


5 Steps: Recognition and Measurement

• When (or as) a performance obligation is satisfied, – an entity shall recognise as revenue

• the amount of the transaction price (which excludes estimates of variable consideration that are constrained in accordance with HKFRS 15.56–58) that is allocated to that performance obligation. (HKFRS 15.46)

Step 5: Recognise



price

Step 3: Determine

the transaction

price




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• Annual Report 2017– The recognition of revenue from contracts with customers

is based on the performance obligations identified in the contracts.

– Revenue is recognized when (or as) the Group satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer who obtains the control of the asset:(i) Annual subscription fees are recognized over time on a straight‐line

basis over the subscription period as the customers simultaneously receive and consume the benefits of goods or services provided by the Group.



• Annual Report 2017(ii) First registration fees are recognized at a point in time

on completion of assessment services by granting the qualification and status to the applicants.

(iii) Income from examinations is recognized over time based on the cost‐to‐cost method as the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

(iv) Income from seminars and courses, member and student activities is recognized over time as the services are rendered.

(v) Accreditation income is recognized at a point in time on completion of services.

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HKFRS 15 – Selected Sections in SFSn. Revenue and other

income recognition • After the adoption of HKFRS 15, the company recognises revenue from contracts

with customers when (or as) the company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset. When (or as) a performance obligation is satisfied, the company recognises as revenue the amount of the transaction price (which excludes estimates of variable consideration that are constrained in accordance with HKFRS 15) that is allocated to that performance obligation. Further details of the company’s revenue and other income recognition policies are as follows:i) Sales of goods

» Revenue from the sales of good is recognised when the customer takes poss

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