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Investor Presentaiton

HKAS 1.51(a) HKAS 1.49 HK Listco Ltd Financial statements for the year ended 31 December 2023 19 INVENTORIES AND OTHER CONTRACT COSTS 2023 $'000 2022 $'000 Inventories Electronic products HKAS 2.36(b) - Raw materials - Work in progress - Finished goods - Goods in transit 41,555 44,008 33,675 23,253 43,727 32,166 9,658 3,323 - Right to recover returned goods 1,345 1,125 129,960 103,875 Property development - Land held for future development for sale - Property under development for sale 12,025 10,340 115,943 103,344 127,968 113,684 HKAS 2.36(d) (a) Other contract costs 201 716 514 258,644 218,073 The analysis of the amount of inventories recognised as an expense and included in profit or loss is as follows: Carrying amount of inventories sold HKAS 2.36(e) HKAS 2.36(f) Write down of inventories Reversal of write-down of inventories HKAS 2.36(g) HKAS 1.29, 60, 66 201 2023 $'000 2022 $'000 774,748 708,796 12,794 10,574 (1,500) 786,042 719,370 The reversal of write-down of inventories made in prior years arose due to an increase in the estimated net realisable value of certain electronic goods as a result of a change in consumer preferences. HKFRS 15 requires entities to separately recognise contract costs as assets provided that the capitalisation criteria in paragraphs 91 or 95 of HKFRS 15 are met, but does not specify where such assets should be presented in the statement of financial position. Given this, the general HKAS 1 principles should be followed in respect of the current/non-current distinction (paragraph 66 of HKAS 1) and materiality and aggregation (paragraphs 29 to 31 of HKAS 1). In this illustration, HK Listco has presented the capitalised costs as current assets, aggregated in the same line item as inventories on the face of the statement of financial position, with separate analysis in the notes. The capitalised contract costs satisfy the criteria set out in paragraph 66 of HKAS 1 for classification as a current asset, as HK Listco's capitalised costs relate to the sale of specific properties to be recognised during HK Listco's normal operating cycle. The costs are aggregated with inventories, as in both cases the assets represent costs which are expected to be recognised in future periods in the statement of profit and loss as expenses, as and when revenue from the sale of the related goods or services is recognised. Alternatively, the costs could be presented as a separate line item on the face of the statement of financial position within current assets. We would expect that in most cases classification as current assets will be appropriate, as in most cases the amounts will be charged to profit or loss during the entity's normal operating cycle. An exception to this approach may be when the amortisation period for the contract costs is an extended period which reflects the timing of goods or services to be transferred under a specific anticipated contract (for example services to be provided over some extended future period after renewal of an existing contract). In those cases, the contract costs may be closer in nature to intangible assets for customer relationships recognised in a business combination and therefore presentation as a non-current asset may be more appropriate, if the amortisation period is expected to extend beyond both 12 months and the entity's normal operating cycle. The classification as current or non-current may therefore in some cases involves judgements based on an entity's facts and circumstances. 128 © 2023 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved.
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