Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
HKAS 37.84(a)
Financial statements for the year ended 31 December 2023
31
PROVISIONS
Provision for electronic product warranties255
At 1 January 2023256
HKAS 37.84(b)
HKAS 37.84(c)
Additional provisions made 257
Provisions utilised
HKAS 37.84(a)
At 31 December 2023
Less: amount included under "current liabilities"
HKAS 37.85
HKAS 1.61
$'000
20,661
12,439
(10,100)
23,000
(10,900)
12,100
Under the terms of the group's sales agreements, the group offers warranties for its electronic
products (see note 1(aa)(i)(a)). Provision is therefore made for the best estimate of the expected
settlement under these agreements in respect of sales made within the warranty periods prior to
the end of the reporting period. The amount of provision takes into account the group's recent
claim experience and is only made where a warranty claim is probable. Where the group has the
benefit of product liability insurance, a separate asset is recognised for any expected
reimbursement that would be virtually certain if a warranty claim were to be made. As at the end
of the reporting period $2,158,000 (2022: $1,752,000) is included within trade and other receivables
in current assets in respect of such expected reimbursements (note 21(a)), of which an amount of
$1,200,000 (2022: $960,000) is expected to be recovered after more than one year.
HKFRS 15.B29-B30 255
HKAS 37.84
HKAS 37.84(e)
HKFRS 15 requires an entity to account for a warranty in accordance with HKAS 37 if the warranty is simply a promise to the
customer that the product complies with agreed-upon specifications, and it is a standard promise given to customers, whether they
ask for it or not. Such warranties are common and are often required by consumer protection legislation.
If, on the other hand, the customer has the option of whether or not to purchase the warranty, or the warranty provides the
customer with a distinct service in addition to the assurance that the product complies with the agreed-upon specifications, then
HKFRS 15 requires the warranty service to be accounted for as a separate performance obligation. In such cases, an entity needs to
allocate part of the promised consideration to the warranty service (in accordance with paragraphs 73 to 86 of HKFRS 15) and
recognise the related revenue only when it performs the warranty services, i.e. generally over the warranty period.
In this illustration, the product warranties are simply a promise to the customer that the product complies with agreed-upon
specifications and hence the estimated costs of meeting any obligations under the warranties continue to be accounted for as a
provision in accordance with HKAS 37.
256 Comparative information is not required for the analysis of the movements in the provision, as HKAS 37 gives a specific exemption
in this regard.
257 It is assumed that the provision has not been discounted on the grounds of materiality. If the provision has been discounted, the
increase in the provision arising from the discount unwinding should be separately disclosed.
160
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