Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
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ACCOUNTING JUDGEMENTS AND ESTIMATES
HKAS 1.122
(a)
Critical accounting judgements in applying the group's accounting policies 111
(i)
In the process of applying the group's accounting policies, management has made the following
accounting judgements:
Determining the lease term
As explained in policy note 1(m), the lease liability is initially recognised at the present value of the
lease payments payable over the lease term. In determining the lease term at the commencement
date for leases that include renewal options exercisable by the group, the group evaluates the
likelihood of exercising the renewal options taking into account all relevant facts and circumstances
that create an economic incentive for the group to exercise the option, including favourable terms,
leasehold improvements undertaken and the importance of that underlying asset to the group's
operation. The lease term is reassessed when there is a significant event or significant change in
circumstance that is within the group's control. Any increase or decrease in the lease term would
affect the amount of lease liabilities and right-of-use assets recognised in future years.
HKAS 1.122-
124
HKFRS 12.7-9
HKFRS
15.123-126
HKFRS 16.35
111 HKAS 1 requires an entity to disclose, in the material accounting policy information or other notes, the judgements, apart from those
involving estimations (see footnote 112), that management has made in the process of applying the entity's accounting policies and
that have the most significant effect on the amounts recognised in the financial statements. As illustrated here, this disclosure
extends the more generic policy descriptions that are found in note 1 to explain, how, in particular circumstances, those policies were
applied during the period. Management will need to exercise judgement in determining which such circumstances warrant additional
disclosure as being those "that have the most significant effect on the amounts recognised in the financial statements" and may need
to update the disclosure from one year to the next. Further examples, depending on the significance to the entity, might include
decisions made during the period as to whether or not certain circumstances during the period indicated that it was appropriate to
suspend interest capitalisation on a development project that had been delayed or whether the entity was acting as an agent or a
principal in an arrangement.
In addition to the above general disclosure requirement about significant judgements in HKAS 1, HKFRS 12 requires an entity to
disclose information about significant judgements and assumptions it has made (and changes to those judgements and assumptions) in
determining:
that it has control of another entity;
⚫that it has joint control of an arrangement or significant influence over another entity; and
⚫ the type of joint arrangement (i.e. joint operation or joint venture) when the arrangement has been structured through a separate
vehicle.
To comply with the above, an entity should disclose, for example, significant judgements and assumptions made in determining that:
⚫ it does not control another entity even though it holds more than half of the voting rights of the other entity;
⚫it controls another entity even though it holds less than half of the voting rights of the other entity;
⚫ it is an agent or a principal;
⚫ it does not have significant influence even though it holds 20% or more of the voting rights of another entity; and
•
it has significant influence even though it holds less than 20% of the voting rights of another entity.
HKFRS 15 also contains extensive disclosure requirements about significant judgements and assumptions an entity has made (and
changes to those judgements and assumptions) in determining:
⚫the timing of satisfaction of performance obligations; and
⚫ the transaction price and the amounts allocated to performance obligations.
Where a particular matter has involved both accounting estimates and other judgements in the application of policies, the reader may
find it easier to understand the information being presented if the disclosures to be made under paragraph 122 of HKAS 1 (concerning
other judgements made in the application of policies) and paragraph 125 of HKAS 1 (concerning accounting estimates) were combined
in one note or cross-referenced to each other.
The accounting judgement illustrated here arises from the requirement in paragraph 35 of HKFRS 16 which states that if right-of-use
assets relate to a class of property, plant and equipment to which the lessee applies the revaluation model in HKAS 16, a lessee may
elect to apply that revaluation model to all of the right-of-use assets that relate to that class of property, plant and equipment. A "class
of asset" is defined in paragraph 37 of HKAS 16 as a grouping of assets of a similar nature and use in an entity's operations.
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