Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 76 The United Laboratories International Holdings Limited Annual Report 2020 4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in Note 3.2, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgments in applying accounting policies The following are the critical judgments, apart from those involving estimations (see below), that the directors of the Company have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements. Disposal of entire equity interest in 聯邦制藥（成都）有限公司 (the “Chengdu Company”) The entire equity interest in Chengdu Company was considered as fully disposed of during the year ended 31 December 2019 although the Group retained 33% equity interest in Chengdu Company upon the completion of disposal. The directors of the Company assessed whether or not the Group has disposed of the entire interest in Chengdu Company based on whether the Group has power over Chengdu Company and exposure or rights to variable returns from its involvement through 33% equity interest is still retained in Chengdu Company. In making the judgment, the directors of the Company considered the substance of the overall transaction, its variable returns from its involvement on 33% equity interest in Chengdu Company and its ability to direct the relevant activities that significantly affect the Chengdu Company’s returns. After the assessment, the directors of the Company considered that the Group has disposed of the entire equity interest in Chengdu Company. Details of the transaction are set out in Note 10.