Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
(a)
Sale of electronics products
HKFRS 15.119(c)
HKFRS 15.126(a)
HKFRS 15.119(b)
HKFRS 15.129
HKFRS 15.119(a)
HKFRS 15.124
HKFRS 15.119(e)
HKFRS 15.119(a)
HKFRS 15.119(b)
HKFRS 15.129
HKFRS 15.119(e).
HKFRS 15.119(d)
HKFRS 15.126(a) &
(b)
HKFRS 15.126(d)
Sales of the group's electronics products are recognised as follows:
Made-to-order manufacturing arrangements
The group classifies contracts as made-to-order manufacturing arrangements when the group
manufactures the products in accordance with the customer's specification and under the
contract the group has the right to be paid for work done to date if the customer was to cancel
the contract before the order was fully completed.
Made-to-order manufacturing arrangements generally involve fixed price contracts. Customers
are required to provide upfront deposits to the group to secure an order, based on 10% of the
agreed consideration, and the amounts are included in contract liabilities. The remainder of the
consideration is payable ratably as and when the products are delivered, or in full if the
customer cancels the contract. The group takes advantage of the practical expedient in
paragraph 63 of HKFRS 15 and does not adjust the consideration for any effects of a significant
financing component as the period of financing is 12 months or less 106.
Revenue arising from made-to-order manufacturing arrangements, and a corresponding
contract asset (see note 1(p)), are recognised progressively over time during the manufacturing
process using the cost-to-cost method. Under the cost-to-cost method, revenue is recognised
based on the proportion of the actual costs incurred relative to the estimated total costs to
provide a faithful depiction of the transfer of those services. The contract asset (either partially
or in full) is reclassified to receivables when the entitlement to payment for that amount has
become unconditional (see note 1(q)).
The
group o offers warranties for its made-to-order products for up to two years from the date of
sale. A related provision is recognised in accordance with note 1(z).
Sales of other electronic products
Revenue is recognised when the customer takes possession of and accepts the products.
Payment terms and conditions vary by customers and are based on the billing schedule
established in the contracts or purchase orders with customers, but the group generally
provides credit terms to customers within six months upon customer acceptance. The group
takes advantage of the practical expedient in paragraph 63 of HKFRS 15 and does not adjust the
consideration for any effects of a significant financing component as the period of financing is
12 months or less 106.
The group offers warranties for its products for up to six months from the date of sale. A related
provision is recognised in accordance with note 1(z).
The group typically offers customers of electronic products that are not made-to-order rights of
return for a period of 14 days upon customer acceptance. It also offers retrospective volume
rebates to certain major customers of electronic products when their purchases reach an
agreed threshold. Such rights of return and volume rebates give rise to variable consideration.
The group uses an expected value approach to estimate variable consideration based on the
group's current and future performance expectations and all information that is reasonably
available. This estimated amount is included in the transaction price to the extent it is highly
probable that a significant reversal of cumulative revenue recognised will not occur when the
uncertainty associated with the variable consideration is resolved. At the time of sale of
electronic products, the group recognises revenue after taking into account adjustment to
transaction price arising from returns and rebates as mentioned above. A refund liability is
recognised for the expected returns and rebates, and is included in other payables (see note
24). A right to recover returned goods (included in inventories, see note 19) and corresponding
adjustment to cost of sales are also recognised for the right to recover products from
customers. This right to recover returned goods is measured at the former carrying amount of
HKFRS 15.63 &129
106
Paragraph 63 of HKFRS 15 gives a practical expedient such that an entity need not adjust the amount of consideration for the effects
of a significant financing component if the entity expects, at contract inception, that the period between the transfer of goods or
services and customer payment will be one year or less. If this practical expedient has been applied, the entity is required to
disclose this fact. In this illustration HK Listco includes the disclosure in its policy note to indicate the practical expedient is applied in
which products or service lines.
70
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