Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
(ii)
Classification of interests in leasehold land and buildings held for own use
In accordance with HKAS 16, Property, plant and equipment, the group chooses to apply either the
cost model or the revaluation model as its accounting policy for items of property, plant and
equipment held for own use on a class-by-class basis. In applying this policy, the group has concluded
that its registered ownership interests in leasehold properties and the right to use other properties
leased under tenancy agreements are two separate groupings of assets which differ significantly in
their nature and use. Accordingly, they are regarded by the group as separate classes of asset for
subsequent measurement policies in accordance with notes 1(k) and (m). Specifically, registered
ownership interests are carried under the revaluation model, while rights to use properties under
tenancy agreements are carried at depreciated cost.
In making this judgement, the group has taken into account that, as the registered owner of a
leasehold property, the group is able to benefit fully from any changes in the valuation of these
properties whether as holding gains or by selling the property interest to others, as well as being able
to use the properties in its operation free of paying market rents. In contrast, the shorter term
tenancy agreements are typically for periods of no more than 10 years and are subject to other
restrictions, in particular on transferability of the group's tenancy rights to others. These shorter term
tenancy agreements are executed in order to retain operational flexibility and to reduce the group's
exposure to the property market fluctuation. They may contain termination or extension clauses,
and/or variable rental payment clauses linked to the level of sales generated by the group's use of the
premises, and are typically subject to market rent reviews every [•] to [•] years.
HKAS 1.125
(b)
Sources of estimation uncertainty¹¹²
(i)
Notes 11(b), 13, 28(b), 28(c), 29 and 33 contain information about the assumptions and their risk
factors relating to valuation of investment property, goodwill impairment, ORSO plans liabilities, long
service payment liabilities, fair value of share options granted and financial instruments. Other
significant sources of estimation uncertainty are as follows:
Revenue recognition
As explained in policy note 1(aa)(i), revenue from sales of electronic products manufactured under
made-to-order arrangements and from construction contracts are recognised over time. Such revenue
and profit recognition on uncompleted projects is dependent on estimating the total outcome of the
contract, as well as the work done to date.
Based on the group's recent experience and the nature of the manufacturing and construction
activities undertaken by the group, the group has made estimates of the point at which it considered
the work was sufficiently advanced such that the outcome of the contract can be reasonably
measured. Until this point is reached the related contract assets disclosed in note 20 do not include
profit which the group might eventually realise from the work done to date. In addition, actual
outcomes in terms of total cost or revenue may be higher or lower than estimated at the end of the
reporting period, which would affect the revenue and profit recognised in future years as an
adjustment to the amounts recorded to date.
HKAS 1.125-133
112
HKAS 1 requires an entity to disclose in the notes information about the assumptions concerning the future, and other major sources
of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes shall
include details of:
(a) their nature; and
(b) their carrying amount as at the end of the reporting period.
This disclosure can, and often will, be made in amongst other information disclosed relating to those assets and liabilities. For
example, disclosures in respect of contingent liabilities relate to possible losses that may occur in the future. Where such disclosure
has not been made elsewhere, a separate note on sources of estimation uncertainty would be presented. Further guidance can be
found in paragraphs 126 to 133 of HKAS 1.
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