Annual Report 2023

220 2023 Annual Report Transport International Holdings Limited NOTES TO THE FINANCIAL STATEMENTS (Expressed in Hong Kong dollars unless otherwise indicated) 2 Accounting judgements and estimates Notes 16, 21(f), 22(c), 30 and 33(f) contain information about the assumptions and their risk factors relating to impairment of goodwill and intangible assets with indefinite useful lives, employee benefit assets, provision for long service payments, fair value of share options and fair value of financial instruments. Other key sources of estimation uncertainty are as follows: (a) Depreciation Interest in leasehold land and other property, plant and equipment, including right-of-use assets, are depreciated on a straight-line basis over the estimated useful lives of the assets. The Group reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives and residual values are based on the Group’s historical experience with similar assets, taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are material changes from previous estimates. (b) Credit losses and impairment of assets (i) Credit losses from financial instruments The Group recognises a loss allowance for ECLs on the asset. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). In measuring ECLs, the Group takes into account reasonable and supportable information that is available without undue cost or effort. ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. (ii) Impairment of other non-current assets Internal and external sources of information are reviewed by the Group at the end of each reporting period to assess whether there is any indication that an asset may be impaired. If any such indication exists, the recoverable amount of the asset or the cash-generating unit to which it belongs is estimated to determine impairment losses on the asset. Changes in facts and circumstances may result in revisions to the conclusion of whether an indication of impairment exists and revised estimates of recoverable amounts, which would affect profit or loss in future years. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually even when there is no indication of impairment. (c) Contingency provision – insurance Estimation of the contingency provision – insurance, as disclosed in note 27, is based on past claim experience and recent claim developments. The provision is assessed based on independent valuation performed by qualified external actuaries. As the ultimate claim amount will be affected by future external events, for example the amount of court awards, changes in standards of liability and the attitude of claimants towards settlement of their claims, actual claims may deviate from these estimations. Any increase or decrease in the provision would affect the Group’s results in future years. (d) Fair value of investment properties and investment property under development Investment properties and investment property under development are stated at fair value. Such fair value is based on the valuations performed by independent firm of professional qualified valuers. Income capitalisation method is used in the valuation of investment properties which is dependent on certain estimates, including fair market rents, appropriate capitalisation rates, and reversionary income potential, where appropriate. The valuations of investment properties under development are also dependent upon the estimated costs to complete and expected developer’s profit margin. Details of the fair value measurement of investment properties and investment property under development are set out in note 14.