Annual Report 2019

FAR EAST CONSORTIUM INTERNATIONAL LIMITED 166 For the year ended 31 March 2019 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (continued) HKFRS 9 Financial Instruments (continued) Summary of effects arising from initial application of HKFRS 9 (continued) Notes: (a) Available-for-sale investments From available-for-sale equity investments to fair value through profit or loss (“FVTPL”) At the date of initial application of HKFRS 9, the Group’s equity investments of HK$12,876,000 previously measured at cost less impairment under HKAS 39 were reclassified from available-for-sale investments to equity securities at FVTPL. From available-for-sale debt instruments to FVTPL Debt securities at fair value amounting to HK$146,423,000 were reclassified from available-for-sale investments to debt instruments at FVTPL, as the debt securities are not held within business models whose objective is to collect contractual cash flows or both to collect contractual cashflow and to sell. (b) Financial assets at FVTPL Investments held for trading and financial assets designated at FVTPL The Group has reassessed its investments in listed equity securities, listed and unlisted debt securities and investment funds classified as held for trading under HKAS 39 as if the Group has purchased these investments as the date of initial application. Based on the facts and circumstances as at the date of initial application, HK$3,257,338,000 of the Group’s investments were no longer held for trading but continue to be measured at FVTPL, because either (i) the contractual cash flows of these financial assets do not represent solely parts of principal and interest on the principal amount outstanding, or (ii) these financial assets are not held within business models whose objective is to collect contractual cash flows or both to collect contractual cash flows and to sell. The investments in listed equity securities amounting to HK$62,218,000 continued to be held for trading and measured at FVTPL. The Group no longer designate its structured deposits at FVTPL. At the date of initial application, the Group’s structured deposits, which is managed and its performance evaluated on a fair value basis, was reclassified from financial assets designated at FVTPL to financial assets at FVTPL. (c) Impairment under ECL model The Group applies the HKFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all contract assets and trade debtors. Except for those which had been determined as credit impaired under HKAS 39, trade debtors have been grouped based on past due status for impairment assessment and contract assets have been assessed for impairment individually. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade debtors for same types of contracts. The Group has therefore estimated the expected loss rates for the trade debtors and the contract assets on the same basis. Assessment of loss allowances for other financial assets at amortised cost mainly comprise of other receivables, pledged deposits, restricted bank deposits, deposit in a financial institution, bank balances, customers’ deposits under escrow, loan receivables and amounts due from associates, joint ventures, an investee company are assessed on 12-month ECL basis as there had been no significant increase in credit risk since initial recognition. The directors considered that the measurement of ECL has no material impact to the Group’s retained profits as at 1 April 2018. Amendments to HKAS 40 Transfers of Investment Property The amendments clarify that a transfer to, or from, investment property necessitates an assessment of whether a property meets, or has ceased to meet, the definition of investment property, supported by evidence that a change in use has occurred. The amendments further clarify that situations other than the ones listed in HKAS 40 may evidence a change in use, and that a change in use is possible for properties under construction (i.e. a change in use is not limited to completed properties). The application of the amendments to HKAS 40 has had no material impact to the net assets of the Group as at 1 April 2018 or at 31 March 2019 or the profit or loss of the Group of the year then ended.