Annual Report 2019

ANNUAL REPORT 2019 197 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 March 2019 4. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued) (ii) Key sources of estimation uncertainty Fair value measurement and valuation processes Certain of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the management of the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation. At the end of each reporting period, the management of the Group works closely with the qualified external valuers to establish and determine the appropriate valuation techniques and inputs for Level 2 and Level 3 fair value measurements. The management of the Group will first consider and adopt Level 2 inputs where inputs can be derived from observable quoted prices in the active market. When Level 2 inputs are not available, the management of the Group will adopt valuation techniques that include Level 3 inputs. Where there is a material change in the fair value of the assets, the causes of the fluctuations will be reported to the directors of the Company for appropriate actions to be taken. Information about the valuation techniques, inputs and key assumptions used in the determination of the fair value of various assets and liabilities, including the investment properties and financial instruments are disclosed in notes 15 and 47. Deferred tax As 31 March 2019, a deferred tax asset of HK$68,021,000 (2018: HK$69,793,000) in relation to unused tax losses has been recognised in the Group’s consolidated statement of financial position. The reliability of the deferred tax assets mainly depends on whether sufficient future profits or taxable temporary differences will be available in the foreseeable future such that the deferred tax assets can be utilised. The management of the Group determine whether deferred tax assets would be recognised based on profit projections of the respective group entities and the expected reversal of taxable temporary differences in the coming years. The Group reviews the probability of utilising tax losses in future at the end of each reporting period. In cases where the actual future profits generated are more or less than expected, an additional recognition or a reversal of deferred tax assets may arise, which would be recognised in profit or loss for the year in which such a recognition or reversal takes place. No deferred tax asset has been recognised in respect of the remaining tax losses due to the unpredictability of future profit streams. 5. CAPITAL RISK MANAGEMENT It is the Group’s policy to maintain a strong capital base so as to safeguard the Group’s ability to continue as a going concern and to sustain future development of the Group’s business. The Group’s overall strategy remains unchanged from prior year. The capital structure of the Group consists of net debts (which includes bank and other borrowings, notes and bonds, net of bank balances and cash, restricted bank deposits, pledged deposits, customers’ deposits under escrow and deposit in a financial institution), and equity attributable to shareholders of the Company, comprising issued share capital, share premium, reserves. The Group actively and regularly reviews and manages its capital structure and makes adjustments to the capital structure in light of changes in economic conditions. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management of the Group, the Group will balance its overall structure through issuance of new shares, raising new debts and repayment of existing debts, if necessary.