Interim Report 2018

Transcription

1 Interim Report 2018

2 Interim Report For the six months ended 30th June, 2018

3 CONTENTS Corporate Information Condensed Consolidated Statement of Profit or Loss Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Condensed Consolidated Statement of Financial Position Condensed Consolidated Statement of Changes in Equity Condensed Consolidated Statement of Cash Flows Notes to the Condensed Consolidated Financial Statements Report on Review of Condensed Consolidated Financial Statements Interim Dividend Management Discussion and Analysis Other Information Directors Interests Substantial Shareholders and Other Persons Interests Corporate Governance and Other Information Audit Committee Review Purchase, Sale or Redemption of Shares 1

4 CORPORATE INFORMATION BOARD OF DIRECTORS Executive Directors Song Zengbin, Deputy Chairman Patrick Lee Seng Wei, Managing Director Ma Sun, Deputy Managing Director Edwin Lo King Yau Tao Tsan Sang Non-Executive Directors Lee Seng Hui, Chairman Moses Cheng Mo Chi Independent Non-Executive Directors Francis J. Chang Chu Fai Jin Hui Zhi Ngai Wah Sang Lisa Yang Lai Sum EXECUTIVE COMMITTEE Patrick Lee Seng Wei, Chairman Ma Sun Edwin Lo King Yau Tao Tsan Sang AUDIT COMMITTEE Ngai Wah Sang, Chairman Francis J. Chang Chu Fai Moses Cheng Mo Chi Jin Hui Zhi Lisa Yang Lai Sum REMUNERATION COMMITTEE Francis J. Chang Chu Fai, Chairman Jin Hui Zhi Ngai Wah Sang Lisa Yang Lai Sum NOMINATION COMMITTEE Lisa Yang Lai Sum, Chairman Francis J. Chang Chu Fai Jin Hui Zhi Ngai Wah Sang Edwin Lo King Yau TIAN AN CHINA INVESTMENTS COMPANY LIMITED 2 Interim Report 2018

5 index.htm CORPORATE INFORMATION (continued) BANKERS Hong Kong Bank of China (Hong Kong) Limited The Bank of East Asia, Limited China CITIC Bank International Limited The Hongkong and Shanghai Banking Corporation Limited Standard Chartered Bank (Hong Kong) Limited OCBC Wing Hang Bank Limited Mainland China Bank of China Limited Bank of Communications Company Limited The Bank of East Asia (China) Limited China Construction Bank Corporation China Merchants Bank Company Limited Industrial and Commercial Bank of China Limited Ping An Bank Co., Ltd. OCBC Wing Hang Bank (China) Limited REGISTERED OFFICE 22nd Floor, Allied Kajima Building 138 Gloucester Road, Wanchai, Hong Kong Tel. : Fax : info@tiananchina.com SHARE REGISTRAR Tricor Secretaries Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong COMPANY SECRETARY Cindy Yung Yee Mei AUDITOR Deloitte Touche Tohmatsu SOLICITOR P. C. Woo & Co. STOCK CODE 28 WEBSITES index.htm 3

6 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS For the six months ended 30th June, 2018 The board of directors ( Board ) of Tian An China Investments Company Limited ( Company ) announces that the unaudited consolidated results of the Company and its subsidiaries ( Group ) for the six months ended 30th June, 2018 with the comparative figures for the corresponding period in 2017 are as follows: ( ) (Unaudited) Six months ended 30th June, NOTES HK$ 000 HK$ 000 Revenue 3 2,355, ,614 Cost of sales (1,327,790) (212,874) Gross profit 1,027, ,740 Other income and gains 5 134,096 68,402 Marketing and distribution expenses (28,451) (49,894) Administrative expenses (145,195) (176,102) Other operating expenses (14,069) (2,000) Net decrease in fair value of held-for-trading investments (13,382) Net decrease in fair value of financial assets and equity securities at fair value through profit or loss (25,064) Fair value gain on transfer of inventories of completed properties to investment properties 139,295 39,541 Increase in fair value of investment properties 107,261 43,981 Amortisation of properties for development (14,014) (21,285) Gain on disposal of a subsidiary 6 1,633,977 Finance costs 7 (82,049) (71,977) Share of profit of associates 46,382 64,925 Share of profit of joint ventures 160, ,851 Profit before tax 1,306,616 1,910,777 Taxation 8 (454,593) (213,764) Profit for the period 9 852,023 1,697,013 TIAN AN CHINA INVESTMENTS COMPANY LIMITED 4 Interim Report 2018

7 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS (continued) For the six months ended 30th June, 2018 ( ) (Unaudited) Six months ended 30th June, NOTES HK$ 000 HK$ 000 Profit for the period attributable to: Owners of the Company 836,929 1,671,086 Non-controlling interests 15,094 25, ,023 1,697,013 HK cents HK cents Earnings per share 10 Basic

8 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the six months ended 30th June, 2018 (Unaudited) Six months ended 30th June, HK$ 000 HK$ 000 Profit for the period 852,023 1,697,013 Other comprehensive (expense) income Items that will not be reclassified to profit or loss: Exchange differences arising on translation to presentation currency (208,442) 287,728 Share of other comprehensive (expense) income of associates and joint ventures (49,470) 59,659 Net change in fair value of investments in equity instruments at fair value through other comprehensive income (15,842) Deferred tax effect on change in fair value of investment in an equity instrument at fair value through other comprehensive income 1,513 Surplus on revaluation of properties upon transfer to investment properties 2,217 Deferred tax effect on surplus on revaluation of properties upon transfer to investment properties 7,354 (272,241) 356,958 Items that may be subsequently reclassified to profit or loss: Exchange differences arising on translation of foreign operations (34,295) Net change in fair value of available-for-sale investments (74,454) Deferred tax effect on change in fair value of available-for-sale investments 2,612 Others 254 (34,041) (71,842) Other comprehensive (expense) income for the period (306,282) 285,116 Total comprehensive income for the period 545,741 1,982,129 Total comprehensive income attributable to: Owners of the Company 541,387 1,953,663 Non-controlling interests 4,354 28, ,741 1,982,129 TIAN AN CHINA INVESTMENTS COMPANY LIMITED 6 Interim Report 2018

9 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 30th June, 2018 (Unaudited) (Audited) 30th June, st December, 2017 NOTES HK$ 000 HK$ 000 Non-current assets Property, plant and equipment , ,871 Investment properties 13 13,409,397 13,100,399 Properties for development 3,754,035 3,485,361 Deposits for acquisition of properties for development 232, ,196 Prepaid lease payments on land use rights 57,753 58,281 Other assets properties interests 18,099 18,142 Interests in associates 2,988,205 2,939,345 Interests in joint ventures 3,489,927 2,950,262 Loans receivable , ,972 Available-for-sale investments 292,370 Financial assets at fair value through profit or loss 392,890 Equity instruments at fair value through other comprehensive income 235,092 Club memberships 10,500 Deferred tax assets 110,370 98,698 25,141,217 23,560,897 Current assets Inventories of properties under development 1,494,515 1,762,245 completed 2,705,679 3,557,462 Other inventories 1,620 1,952 Amounts due from associates 123, ,992 Amounts due from joint ventures 1,531,059 1,789,769 Amounts due from non-controlling interests 19,048 18,832 Loans receivable 14 1,204, ,471 Trade and other receivables, deposits and prepayments , ,271 Prepaid lease payments on land use rights Held-for-trading investments 81,527 Equity securities at fair value through profit or loss 66,126 Prepaid tax ,170 Pledged bank deposits , ,202 Bank balances and cash 3,556,411 4,782,753 11,345,783 13,595,544 7

10 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) At 30th June, 2018 (Unaudited) (Audited) 30th June, st December, 2017 NOTES HK$ 000 HK$ 000 Current liabilities Trade and other payables 16 1,545,323 1,536,349 Contract liabilities 916,899 Pre-sale deposits 2,491,148 Tax liabilities 1,366,681 1,182,993 Interest-bearing borrowings 17 1,098, ,566 Interest-free borrowings ,390 20,281 5,188,453 6,096,337 Net current assets 6,157,330 7,499,207 31,298,547 31,060,104 Capital and reserves Share capital 19 3,788,814 3,788,814 Reserves 19,876,499 19,636,466 Equity attributable to owners of the Company 23,665,313 23,425,280 Non-controlling interests 1,386,444 1,459,760 Total equity 25,051,757 24,885,040 Non-current liabilities Interest-bearing borrowings 17 3,393,297 3,513,564 Deferred rental income from a tenant 29,967 33,845 Rental deposits from tenants 21,759 15,932 Deferred tax liabilities 2,801,767 2,611,723 6,246,790 6,175,064 31,298,547 31,060,104 TIAN AN CHINA INVESTMENTS COMPANY LIMITED 8 Interim Report 2018

11 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30th June, 2018 Share capital Special capital reserve Attributable to owners of the Company Exchange translation reserve Revaluation reserves Other reserves Retained earnings Total Noncontrolling interests Total equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1st January, 2017 (audited) 3,788,814 1,417, ,124 97,985 (5,170) 15,981,789 21,513, ,184 22,051,395 Exchange differences arising on translation to presentation currency 287, ,737 (9) 287,728 Share of other comprehensive income of associates and joint ventures 59,659 59,659 59,659 Net change in fair value of available-for-sale investments (74,598) (74,598) 144 (74,454) Deferred tax effect on change in fair value of available-for-sale investments 2,612 2,612 2,612 Surplus on revaluation of properties upon transfer to investment properties 1,660 1, ,217 Deferred tax effect on surplus on revaluation of properties upon transfer to investment properties 5,507 5,507 1,847 7,354 Profit for the period 1,671,086 1,671,086 25,927 1,697,013 Total comprehensive income (expense) for the period 347,396 (64,819) 1,671,086 1,953,663 28,466 1,982,129 6 Transfer on disposal of a subsidiary (note 6) 23,176 (23,176) a Partial disposal of a subsidiary without loss of control (Note a) (325,131) (325,131) 814, , Dividend recognised as distribution (note 11) (489,700) (489,700) (489,700) Dividend distributed to non-controlling interests (29,042) (29,042) At 30th June, 2017 (unaudited) 3,788,814 1,417, ,696 33,166 (330,301) 17,139,999 22,652,043 1,352,439 24,004,482 9

12 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the six months ended 30th June, 2018 Share capital Special capital reserve Attributable to owners of the Company Exchange translation reserve Revaluation reserves Other reserves Retained earnings Total Noncontrolling interests Total equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1st July, 2017 (unaudited) 3,788,814 1,417, ,696 33,166 (330,301) 17,139,999 22,652,043 1,352,439 24,004,482 Exchange differences arising on translation to presentation currency 287, , ,195 Exchange differences arising on translation of foreign operation 19,231 19,231 19,231 Share of other comprehensive income of associates and joint ventures 54,327 54,327 54,327 Net change in fair value of available-for-sale investments (45,317) (45,317) 395 (44,922) Impairment loss on available-for-sale investments classified to profit or loss 78,168 78,168 78,168 Deferred tax effect on change in fair value of available-for-sale investments (274) (274) (274) Surplus on revaluation of properties upon transfer to investment properties 7,104 7, ,790 Deferred tax effect on surplus on revaluation of properties upon transfer to investment properties (11,460) (11,460) (2,742) (14,202) Profit for the period 383, ,056 12, ,093 Total comprehensive income for the period 360,826 28, , ,103 11, ,406 Acquisition of subsidiaries 177, ,895 Transfer on disposal of an associate (11,305) 11,305 Share repurchased and cancelled of a subsidiary 1,134 1,134 (3,865) (2,731) Dividend distributed to non-controlling interests (78,012) (78,012) At 31st December, 2017 (audited) 3,788,814 1,417, ,217 61,387 (329,167) 17,534,360 23,425,280 1,459,760 24,885,040 TIAN AN CHINA INVESTMENTS COMPANY LIMITED 10 Interim Report 2018

13 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the six months ended 30th June, 2018 Share capital Special capital reserve Attributable to owners of the Company Exchange translation reserve Revaluation reserves Other reserves Retained earnings Noncontrolling interests Total equity Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (b) (Note b) At 1st January, 2018 (audited) 3,788,814 1,417, ,217 61,387 (329,167) 17,534,360 23,425,280 1,459,760 24,885,040 2 Effect on changes in accounting policies (note 2) (77,903) 77,903 As restated 3,788,814 1,417, ,217 (16,516) (329,167) 17,612,263 23,425,280 1,459,760 24,885,040 Exchange differences arising on translation to presentation currency (198,974) (198,974) (9,468) (208,442) Exchange differences arising on translation of foreign operation (34,295) (34,295) (34,295) Share of other comprehensive income of associates and joint ventures (49,470) (49,470) (49,470) Net change in fair value of investments in equity instruments at fair value through other comprehensive income (14,570) (14,570) (1,272) (15,842) Deferred tax effect on change in fair value on investment in an equity instrument at fair value through other comprehensive income 1,513 1,513 1,513 Others Profit for the period 836, ,929 15, ,023 Total comprehensive income (expense) for the period (282,739) (13,057) , ,387 4, , Dividend recognised as distribution (note 11) (301,354) (301,354) (301,354) Dividend distributed to non-controlling interests (77,670) (77,670) At 30th June, 2018 (unaudited) 3,788,814 1,417, ,478 (29,573) (328,913) 18,147,838 23,665,313 1,386,444 25,051,757 Notes: (a) % 325,131,000 (a) During the period ended 30th June, 2017, the Group distributed its 15.77% equity interest in Asiasec Properties Limited ( ASL ) through distribution of special dividend as disclosed in note 11. The difference of HK$325,131,000 between the fair value of the special dividend and the increase in carrying amount of the non-controlling interests had been recognised directly in equity under other reserves. (b) (b) Revaluation reserves of the Group as at 1st January, 2018 and 30th June, 2018 comprise the investment revaluation reserve arising from the fair value adjustment on equity instruments at fair value through other comprehensive income (previously described as available-forsale investments prior to the adoption of HKFRS 9 on 1st January, 2018 (as detailed in note 2.2)) and property revaluation reserve arising from revaluation of properties upon transfer to investment properties. 11

14 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30th June, 2018 (Unaudited) Six months ended 30th June, NOTE HK$ 000 HK$ 000 Net cash (used in) from operating activities (85,050) 234,371 Net cash used in investing activities Interest received 114,363 55,288 Dividends received from associates 78,385 Dividends received from joint ventures 9,048 Dividends received from available-for-sale investments 2,373 Dividends received from equity instruments at fair value through other comprehensive income 1,500 Dividends received from financial assets at fair value through profit or loss 286 Dividends received from equity securities at fair value through profit or loss 326 Purchase of property, plant and equipment (1,699) (16,610) Proceeds on disposal of property, plant and equipment Addition of investment properties (749) (651,871) Proceeds from disposal of investment properties, net of value added tax 7,401 Purchase of equity securities at fair value through profit or loss (11,687) Purchase of financial assets at fair value through profit or loss (388,678) Proceeds from disposal of equity instruments at fair value through other comprehensive income 15,970 Proceeds from disposal of equity securities at fair value through profit or loss 12,443 Capital contribution to an associate (11,429) Net cash inflow from disposal of a subsidiary 6 1,071,943 Repayment from (advances to) associates 100,190 (125,085) Advances to joint ventures (193,690) (77,926) Loans receivable repaid 238, ,888 Loans receivable advanced (846,496) (225,153) Withdrawal of pledged bank deposits 1, ,311 Placement of pledged bank deposits (807,309) (950,789) (300,127) TIAN AN CHINA INVESTMENTS COMPANY LIMITED 12 Interim Report 2018

15 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (continued) For the six months ended 30th June, 2018 (Unaudited) Six months ended 30th June, NOTE HK$ 000 HK$ 000 Net cash (used in) from financing activities Interest paid (97,464) (91,586) Dividend paid (301,354) Dividend paid to non-controlling interests (77,670) (29,042) New bank and other loans raised 573,039 1,375,192 Repayment of bank and other loans (410,764) (873,802) Advances from associates 4, ,258 Advances from joint ventures 242,453 6,389 (67,024) 515,409 Net (decrease) increase in cash and cash equivalents (1,102,863) 449,653 Cash and cash equivalents at the beginning of the period 4,194,781 3,559,907 Effect of foreign exchange rate changes 17,402 12,566 Cash and cash equivalents at the end of the period 3,109,320 4,022,126 Analysis of the balances of cash and cash equivalents Bank balances and cash 3,556,411 4,723,577 Less: restricted bank deposits (Note) (447,091) (701,451) 3,109,320 4,022,126 Note: The restricted bank deposits are included in bank balances and cash which can only be applied in the designated property development projects. 13

16 1. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30th June, BASIS OF PREPARATION 34 The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ) as well as the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities ( Listing Rules ) on The Stock Exchange of Hong Kong Limited ( Stock Exchange ). The financial information relating to the year ended 31st December, 2017 that is included in these condensed consolidated financial statements does not constitute the Company s statutory annual consolidated financial statements for that financial year but is derived from those financial statements. Further information relating to these statutory financial statements is as follows: 662(3) (2) 407(2) (3) 2. The Company has delivered the financial statements for the year ended 31st December, 2017 to the Registrar of Companies in accordance with section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance ( CO ). The Company s auditor has reported on those financial statements for The auditor s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the CO. 2. SIGNIFICANT ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at fair values, as appropriate. Other than changes in accounting policies resulting from application of new and amendments to Hong Kong Financial Reporting Standards ( HKFRSs ), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30th June, 2018 are the same as those followed in the preparation of the Group s annual financial statements for the year ended 31st December, TIAN AN CHINA INVESTMENTS COMPANY LIMITED 14 Interim Report 2018

17 2. 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Application of new and amendments to HKFRSs In the current interim period, the Group has applied, for the first time, the following new and amendments to HKFRSs issued by the HKICPA which are mandatory effective for the annual period beginning on or after 1st January, 2018 for the preparation of the Group s condensed consolidated financial statements: HKFRS 9 Financial Instruments 9 15 HKFRS 15 HK (IFRIC) Int 22 Revenue from Contracts with Customers and the related Amendments Foreign Currency Transactions and Advance Consideration Amendments to HKFRS 2 Amendments to HKFRS 4 Classification and Measurement of Sharebased Payment Transactions Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts 9 28 Amendments to HKAS 28 As part of the Annual Improvements to HKFRSs Cycle Amendments to HKAS 40 Transfers of Investment Property 40 The new and amendments to HKFRSs have been applied in accordance with the relevant transition provisions in the respective standards and amendments which result in changes in accounting policies, amounts reported and/or disclosures as described below. 15

18 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers The Group has applied HKFRS 15 for the first time in the current interim period. HKFRS 15 superseded HKAS 18 Revenue, HKAS 11 Construction Contracts and the related interpretations. The Group recognises revenue from the following major sources: Sales of completed properties 15 Rental income (not within the scope of HKFRS 15) Property management fee income Revenue from leasing of investment properties will continue to be accounted for in accordance with HKAS 17 Leases, whereas revenue from other sources will be accounted for under HKFRS 15. The Group has applied HKFRS 15 retrospectively with the cumulative effect of initially applying this standard recognised at the date of initial application, 1st January, Any difference at the date of initial application is recognised in the opening retained profits (or other components of equity, as appropriate) and comparative information has not been restated. Furthermore, in accordance with the transition provisions in HKFRS 15, the Group has elected to apply the standard retrospectively only to contracts that are not completed at 1st January, Accordingly, certain comparative information may not be comparable as comparative information was prepared under HKAS 18 Revenue and HKAS 11 Construction Contracts and the related interpretations. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 16 Interim Report 2018

19 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (continued) Key changes in accounting policies resulting from application of HKFRS HKFRS 15 introduces a 5-step approach when recognising revenue: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the Group satisfies a performance obligation. 15 Under HKFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. A performance obligation represents a good and service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same. Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met: the customer simultaneously receives and consumes the benefits provided by the Group s performance as the Group performs; the Group s performance creates and enhances an asset that the customer controls as the Group performs; or the Group s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. 17

20 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (continued) Key changes in accounting policies resulting from application of HKFRS 15 (continued) Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service. A contract liability represents the Group s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. Revenue from properties developed for sale is recognised at a point in time when the customer obtains the control of the completed properties, which is the completed property stated in the sale and purchase agreement being delivered and its title being passes to the customer. Deposits received from sales of properties prior to meeting the above criteria for revenue recognition are presented as contract liabilities in the condensed consolidated statement of financial position under current liabilities. Property management fee income is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation, as the customer simultaneously receives and consumes the benefits provided by the Group s performance as the Group performs. Existence of significant financing component In determining the transaction price, the Group adjusts the promised amount of consideration for the effects of the time value of money if the timing of payments agreed (either explicitly or implicitly) provides the customer or the Group with a significant benefit of financing the transfer of goods or services to the customer. In those circumstances, the contract contains a significant financing component. A significant financing component may exist regardless of whether the promise of financing is explicitly stated in the contract or implied by the payment terms agreed to by the parties to the contract. For contracts where the period between payment and transfer of the associated goods or services is less than one year, the Group applies the practical expedient of not adjusting the transaction price for any significant financing component. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 18 Interim Report 2018

21 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (continued) Summary of effects arising from initial application of HKFRS The application of the HKFRS 15 has no significant impact on the timing and amounts of revenue in the current interim period and retained profits at 1st January, The table below illustrates the reclassification of pre-sale deposits to contract liabilities under HKFRS 15 at the date of initial application, 1st January, Pre-sale deposits HK$ 000 Contract liabilities HK$ 000 Closing balance at 31st December, ,491,148 Reclassification (2,491,148) 2,491,148 Opening balance at 1st January, ,491,148 19

22 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (continued) Summary of effects arising from initial application of HKFRS 15 (continued) 15 The following tables summarise the impacts of applying HKFRS 15 on the Group s condensed consolidated statement of financial position as at 30 June 2018 for each of the line items affected. Line items that were not affected by the changes have not been included. Impact on the condensed consolidated statement of financial position As reported Reclassification 15 Amount without application of HKFRS 15 HK$ 000 HK$ 000 HK$ 000 Current assets Pre-sale deposits 916,899 (916,899) Contract liabilities 916, , Except as described above, the application of HKFRS 15 has had no material impact on the amounts reported set out in the condensed consolidated financial statements Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments 9 9 (i) (ii) (iii) In the current period, the Group has applied HKFRS 9 Financial Instruments and the related consequential amendments to other HKFRSs. HKFRS 9 introduces new requirements for (i) the classification and measurement of financial assets and financial liabilities; (ii) expected credit losses ( ECL ) for financial assets and other items (for example, financial guarantee contracts); and (iii) general hedge accounting. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 20 Interim Report 2018

23 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) 9 9 The Group has applied HKFRS 9 in accordance with the transition provisions set out in HKFRS 9, i.e. applied the classification and measurement requirements (including impairment) retrospectively to instruments that have not been derecognised as at 1st January, 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised as at 1st January, The difference between carrying amounts as at 31st December, 2017 and the carrying amounts as at 1st January, 2018 are recognised in the opening retained profits and other components of equity, without restating comparative information. 39 Accordingly, certain comparative information may not be comparable as comparative information was prepared under HKAS 39 Financial Instruments: Recognition and Measurement Key changes in accounting policies resulting from application of HKFRS 9 Classification and measurement of financial assets 15 Trade receivables arising from contracts with customers are initially measured in accordance with HKFRS All recognised financial assets that are within the scope of HKFRS 9 are subsequently measured at amortised cost or fair value, including unquoted equity investments measured at cost less impairment under HKAS 39. Debt instruments that meet the following conditions are subsequently measured at amortised cost: the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 21

24 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Classification and measurement of financial assets (continued) Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income ( FVTOCI ): the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 3 All other financial assets are subsequently measured at fair value through profit or loss ( FVTPL ), except that at the date of initial application/ initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income ( OCI ) if that equity investment is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 Business Combinations applies. In addition, the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. Equity instruments designated as at FVTOCI At the date of initial application/initial recognition, the Group has made an irrevocable election (on an instrument-by-instrument basis) to designate certain investments in equity instruments as at FVTOCI. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in OCI and accumulated in the revaluation reserve; and are not subject to impairment assessment. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be transferred to retained profits. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 22 Interim Report 2018

25 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Classification and measurement of financial assets (continued) Equity instruments designated as at FVTOCI (continued) 9 Dividends on these investments in equity instruments are recognised in profit or loss when the Group s right to receive the dividends is established in accordance with HKFRS 9, unless the dividends clearly represent a recovery of part of the cost of the investment. Dividends are included in the other income and gains line item in profit or loss. Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the other income and gains line item The directors of the Company ( Directors ) reviewed and assessed the Group s financial assets as at 1st January, 2018 based on the facts and circumstances that existed at that date. Changes in classification and measurement on the Group s financial assets and the impacts thereof are detailed in note Impairment under ECL model 9 The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under HKFRS 9 (including trade receivables, loans receivable, lease receivables, loan commitment and financial guarantee contracts). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. 23

26 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Impairment under ECL model (continued) Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL ( 12m ECL ) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions. The Group always recognises lifetime ECL for trade receivables and lease receivables. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings. 12 For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition. Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 24 Interim Report 2018

27 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Impairment under ECL model (continued) Significant increase in credit risk (continued) In particular, the following information is taken into account when assessing whether credit risk has increased significantly: an actual or expected significant deterioration in the financial instrument s external (if available) or internal credit rating; existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor s ability to meet its debt obligations; an actual or expected significant deterioration in the operating results of the debtor; and an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor s ability to meet its debt obligations. 30 Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. (i) (ii) (iii) Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if (i) it has a low risk of default; (ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and (iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an internal or external credit rating of investment grade as per globally understood definitions. 25

28 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Impairment under ECL model (continued) Significant increase in credit risk (continued) For loan commitments and financial guarantee contracts, the date that the Group becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument for impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition of a loan commitment, the Group considers changes in the risk of a default occurring on the loan to which a loan commitment relates; for financial guarantee contracts, the Group considers the changes in the risk that the specified debtor will default on the contract. 90 The Group considers that default has occurred when the instrument is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. Measurement and recognition of ECL The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. 17 Generally, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition. For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in measuring the lease receivable in accordance with HKAS 17 Leases. For a financial guarantee contract, the Group is required to make payments only in the event of a default by the debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the expected losses are the present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the Group expects to receive from the holder, the debtor or any other party. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 26 Interim Report 2018

29 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Key changes in accounting policies resulting from application of HKFRS 9 (continued) Impairment under ECL model (continued) Measurement and recognition of ECL (continued) For undrawn loan commitments, the ECL is the present value of the difference between the contractual cash flows that are due to the Group if the holder of the loan commitments draws down the loan, and the cash flows that the Group expects to receive if the loan is drawn down. For ECL on financial guarantee contracts or on loan commitments for which the effective interest rate cannot be determined, the Group will apply a discount rate that reflects the current market assessment of the time value of money and the risks that are specific to the cash flows but only if, and to the extent that, the risks are taken into account by adjusting the discount rate instead of adjusting the cash shortfalls being discounted. Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset. The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivable where the corresponding adjustment is recognised through a loss allowance account As at 1st January, 2018, the Directors reviewed and assessed the Group s existing financial assets and lease receivables for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of HKFRS 9. The results of the assessment and the impact thereof are detailed in note

30 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Summary of effects arising from initial application of HKFRS The table below illustrates the classification and measurement (including impairment) of financial assets and financial liabilities and other items subject to ECL under HKFRS 9 and HKAS 39 at the date of initial application, 1st January, Availablefor-sale investments Equity securities at FVTPL (previously classified as heldfor-trading investments) Financial assets at FVTPL Equity instruments at FVTOCI Club memberships Revaluation reserves Retained earnings HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 a b (Note a) (Note b) 39 Closing balance at 31st December, 2017 HKAS ,370 81,527 61,387 17,534,360 Reclassification (292,370) 12, ,304 10,500 (77,903) 77,903 Opening balance at 1st January, ,527 12, ,304 10,500 (16,516) 17,612,263 TIAN AN CHINA INVESTMENTS COMPANY LIMITED 28 Interim Report 2018

31 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Summary of effects arising from initial application of HKFRS 9 (continued) Notes: (a) (a) Available-for-sale investments Reclassification of AFS equity investments 9 269,304,00012,566,000 49,529, , ,168,000 10,500,000 The Group elected to present in OCI for the fair value changes of all its equity investments previously classified as available-for-sale investments. These investments are not held for trading and not expected to be sold in the foreseeable future. At the date of initial application of HKFRS 9, HK$269,304,000 and HK$12,566,000 were reclassified from available-for-sale investments to equity instruments at FVTOCI and financial assets at FVTPL respectively. The fair value gains of HK$49,529,000 relating to those investments reclassified to equity instruments at FVTOCI continued to accumulate in revaluation reserves. The fair value losses of HK$265,000 relating to the investment reclassified to financial asset at FVTPL were transferred from revaluation reserves to retained earnings as at 1st January, Impairment loss previously recognised on available-forsale investments now classified as equity instrument at FVTOCI under HKFRS 9 of HK$78,168,000 was transferred from retained earnings to revaluation reserves as at 1st January, In addition, the Group s club memberships of HK$10,500,000 were reclassified from available-for-sale financial assets to club memberships. (b) (b) Equity securities at FVTPL 9 9 Investments are equity securities held for trading which are required to be classified as FVTPL under HKFRS 9. There was no impact on the amounts recognised in relation to these assets from the application of HKFRS 9. 29

32 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments and the related amendments (continued) Summary of effects arising from initial application of HKFRS 9 (continued) Notes: (continued) (c) (c) Impairment under ECL model 9 The Group applies the HKFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables. To measure the ECL, trade receivables have been grouped based on shared credit risk characteristics. Loss allowances for other financial assets at amortised cost mainly comprise of pledged bank deposits, bank balances and loans receivable are measured on 12m 12 ECL basis and there had been no significant increase in credit risk since initial recognition. 9 The application of the HKFRS 9 has no significant impact on the provision of impairment of financial assets in the current interim period and retained profits at 1st January, Impacts and changes in accounting policies of application on Amendments to HKAS 40 Transfers of Investment Property 40 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). At the date of initial application, the Group assessed the classification of certain properties based on conditions existed at that date, there is no impact to the classification at 1st January, Except as described above, the application of other amendments to HKFRSs in the current interim period has had no material effect on the amounts reported and/or disclosures set out in these condensed consolidated financial statements. TIAN AN CHINA INVESTMENTS COMPANY LIMITED 30 Interim Report 2018

33 SIGNIFICANT ACCOUNTING POLICIES (continued) 2.4 Impacts on opening condensed consolidated statement of financial position arising from the application of all new standards, amendments and interpretation As a result of the changes in the Group s accounting policies above, the opening condensed consolidated statement of financial position had to be restated. The following table shows the adjustments recognised for each individual line item. (Audited) 31st December, HKFRS 15 9 HKFRS 9 (Restated) 1st January, 2018 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Non-current assets Available-for-sale investments 292,370 (292,370) Financial assets at FVTPL 12,566 12,566 Equity instruments at FVTOCI 269, ,304 Club memberships 10,500 10,500 Current liabilities Pre-sale deposits 2,491,148 (2,491,148) Contract liabilities 2,491,148 2,491,148 Capital and reserves Revaluation reserves 61,387 (77,903) (16,516) Retained earnings 17,534,360 77,903 17,612,263 31