Transcription

1 2016 ANNUAL REPORT

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4 Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands 70 B Maples Fund Services (Cayman) Limited P.O. Box 1093, Boundary Hall Cricket Square, Grand Cayman KY Cayman Islands Eagle Nice (International) Holdings Limited Annual Report 2016

5 1,535 1, ,559 1, ,099 1, , ,535 1, ,484 1, Annual Report 2016 Eagle Nice (International) Holdings Limited 33

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7 % ,900,000442,300, % Annual Report 2016 Eagle Nice (International) Holdings Limited 35

8 % 1,534,600,000 20% %1.3% 8.2%19.0% 125,100, NIKE The North Face Nike The North Face Eagle Nice (International) Holdings Limited Annual Report 2016

9 (Eagle Nice-er) Annual Report 2016 Eagle Nice (International) Holdings Limited 37

10 36.5% 13.4% 28.8% Eagle Nice (International) Holdings Limited Annual Report 2016

11 1,534,600,000 1,517,100, % 306,900,000266,000, %2.5% 20%16.8% 152,200, ,300,0008.6% 1.3% 9.9% 1,000, % 1.2% 1.2% 8,300, % 600, % 21,900, % 1,900, % 17.8% 19.3%1.5% 11,100,0008,900,000 2,500,000 1,800,000 1,400,0001,800,000 4,700,000 2,800,000 10,000,000 2,600,000 5,200, ,100, ,200, % 6.9%1.3% 8.2% % 59% Annual Report 2016 Eagle Nice (International) Holdings Limited 39

12 255,400, ,400, ,400, ,900, ,500, ,700, ,035 1, , ,252 4,675 29,091 1,550 20,584 4,462 12,595 62,270 6, ,400, ,900, ,500, ,700, Eagle Nice (International) Holdings Limited Annual Report 2016

13 8,8008, ,800, ,500,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 41

14 World Friendship Company Limited 42 Eagle Nice (International) Holdings Limited Annual Report 2016

15 Annual Report 2016 Eagle Nice (International) Holdings Limited 43

16 ,534,592 1,517,109 1,483,774 1,443,994 1,445, , ,311 37,232 94, ,335 (27,057) (25,128) (15,362) (21,568) (32,148) 125, ,183 21,870 73, , , , , , , , , , , ,033 (439,152) (462,019) (526,636) (607,638) (632,731) 340, , , , ,302 (20,017) (19,871) (16,999) (16,528) (21,592) 1,099,350 1,087,531 1,011,917 1,015,482 1,022, Eagle Nice (International) Holdings Limited Annual Report 2016

17 751,751,000751,751, ,674, %55.6% 42.2%13.1% 5% Annual Report 2016 Eagle Nice (International) Holdings Limited 45

18 87(1) Eagle Nice (International) Holdings Limited Annual Report 2016

19 571 XV XV ,650, ,038, ,100, ,450, Time Easy Investment Holdings LimitedTime EasyTime Easy 352 Annual Report 2016 Eagle Nice (International) Holdings Limited 47

20 XV Time Easy 72,650, ,000, Wealthplus Holdings Limited ( Wealthplus ) 192,000, ,000, Pou Hing Industrial Co. Ltd. ( Pou Hing ) 192,000, Great Pacific Investments Limited ( Great Pacific ) 192,000, Time Easy ,000,000Great PacificPou HingGreat PacificPou HingWealthplus Win Fortune Investment Ltd. Win Fortune46.89% 3.09%Wealthplus Win FortunePou Hing Wealthplus Win Fortune Great Pacific192,000, % 48 Eagle Nice (International) Holdings Limited Annual Report 2016

21 Din Tsun Holding Co., Ltd. Din Tsun2 Faith Year Investments Limited Faith Year2 Pro Kingtex Industrial Co., (HK) Ltd. Pro Kingtex Din Tsun Din TsunFaith Year70% 30%Faith YearPro Kingtex Din TsunDin Tsun Pro KingtexDin TsunDin Tsun Din Tsun Faith Year Pro Kingtex Din TsunPro KingtexDin Tsun Din Tsun Pro KingtexDin Tsun Pro Kingtex 14 Annual Report 2016 Eagle Nice (International) Holdings Limited 49

22 ( (i)(ii) (iii) 50 Eagle Nice (International) Holdings Limited Annual Report 2016

23 Annual Report 2016 Eagle Nice (International) Holdings Limited 51

24 1. a. 7/7 1/1 6/6 1/1 6/6 1/1 6/6 1/1 7/7 1/1 7/7 1/1 7/7 0/1 b A Eagle Nice (International) Holdings Limited Annual Report 2016

25 1. c. d. A.2.1 e. f. 10 g. h. Annual Report 2016 Eagle Nice (International) Holdings Limited 53

26 1. h. A,C A,C A,C A,B,C A,B,C A,C A,C A: B: C: i. 14 j k. 54 Eagle Nice (International) Holdings Limited Annual Report 2016

27 2. a. B.1.2(c)(ii) 5/5 5/5 5/5 B.1.5 1,000, ,000,0011,500, ,500,0012,000, ,000,0012,500, ,500,0013,000, ,000,0013,500, b. Annual Report 2016 Eagle Nice (International) Holdings Limited 55

28 2. b. i) ii) iii) iv) 3/3 3/3 3/3 c. (i) (ii) (iii) (iv) 56 Eagle Nice (International) Holdings Limited Annual Report 2016

29 2. c. 1/1 1/1 1/1 3. a. 59 b. c. 2, ,552 Annual Report 2016 Eagle Nice (International) Holdings Limited 57

30 4. a. 58 b. c Eagle Nice (International) Holdings Limited Annual Report 2016

31 Annual Report 2016 Eagle Nice (International) Holdings Limited 59

32 Consolidated Income Statement Year ended Notes REVENUE 5 1,534,592 1,517,109 Cost of sales (1,227,650) (1,251,158) Gross profit 306, ,951 Other income and gains 5 11,052 8,925 Selling and distribution expenses (18,651) (17,698) Administrative expenses (129,129) (120,794) Fair value changes on derivative financial instruments, net (9,980) (2,578) Loss on deregistration of a subsidiary (5,169) Finance costs 6 (2,879) (3,495) PROFIT BEFORE TAX 7 152, ,311 Income tax expense 10 (27,057) (25,128) PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY 125, ,183 EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY 12 HK cents HK cents Basic Diluted Eagle Nice (International) Holdings Limited Annual Report 2016

33 Consolidated Statement of Comprehensive Income Year ended PROFIT FOR THE YEAR 125, ,183 OTHER COMPREHENSIVE INCOME/(EXPENSE) Other comprehensive income/(expense) not to be reclassified to profit or loss in subsequent periods: Actuarial gain/(loss) on a defined benefit plan 666 (277) Other comprehensive income/(expense) may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations Realisation of exchange fluctuation reserve upon deregistration of a subsidiary (28,490) 688 6,955 (21,535) 688 OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR THE YEAR, NET OF TAX (20,869) 411 TOTAL COMPREHENSIVE INCOME FOR THE YEAR AND ATTRIBUTABLE TO OWNERS OF THE COMPANY 104, ,594 Annual Report 2016 Eagle Nice (International) Holdings Limited 61

34 Consolidated Statement of Financial Position Notes NON-CURRENT ASSETS Property, plant and equipment , ,335 Prepaid land lease payments 14 65,587 72,407 Goodwill 16 26,112 26,112 Deposits 15 23,367 Total non-current assets 778, ,854 CURRENT ASSETS Inventories , ,899 Accounts and bills receivables , ,192 Prepayments, deposits and other receivables 15 52,952 47,327 Available-for-sale investments 19 63,750 Cash and cash equivalents , ,399 Total current assets 779, ,567 CURRENT LIABILITIES Accounts payable , ,090 Accrued liabilities and other payables 23 84,304 86,612 Derivative financial instruments 24 9,110 Interest-bearing bank borrowings , ,621 Tax payable 23,525 23,586 Total current liabilities 439, ,019 NET CURRENT ASSETS 340, ,548 TOTAL ASSETS LESS CURRENT LIABILITIES 1,119,367 1,107,402 NON-CURRENT LIABILITIES Pension scheme obligation 26 6,239 4,446 Deferred tax liabilities 27 13,778 15,425 Total non-current liabilities 20,017 19,871 Net assets 1,099,350 1,087,531 EQUITY Equity attributable to owners of the Company Issued capital 28 4,997 4,997 Reserves 29 1,094,353 1,082,534 Total equity 1,099,350 1,087,531 CHUNG YUK SING Director CHEN HSIAO YING Director 62 Eagle Nice (International) Holdings Limited Annual Report 2016

35 Consolidated Statement of Changes in Equity Year ended Attributable to owners of the Company Note Issued capital Share premium account Capital reserve Statutory surplus reserve Exchange fluctuation reserve Retained profits Total (Note 29) (Note 29) At 1 April , ,586 (229) 37, , ,438 1,011,917 Profit for the year 105, ,183 Other comprehensive income/(expense) for the year: Actuarial loss on a defined benefit plan (277) (277) Exchange differences on translation of foreign operations Total comprehensive income for the year , ,594 Transfer to reserve 8,158 (8,158) Interim 2015 dividend 11 (29,980) (29,980) At 31 March , ,586* (229)* 45,886* 112,085* 452,206* 1,087,531 At 1 April , ,586 (229) 45, , ,206 1,087,531 Profit for the year 125, ,129 Other comprehensive income/(expense) for the year: Actuarial gain on a defined benefit plan Exchange differences on translation of foreign operations (28,490) (28,490) Realisation of exchange fluctuation reserve upon deregistration of a subsidiary (note 30) 30 6,955 6,955 Total comprehensive income/(expense) for the year (21,535) 125, ,260 Transfer to reserve 13,571 (13,571) Transfer to statutory reserve upon deregistration of a subsidiary (809) 809 Final 2015 dividend 11 (32,479) (32,479) Interim 2016 dividend 11 (59,962) (59,962) At 4, ,586* (229)* 58,648* 90,550* 472,798* 1,099,350 * These reserve accounts comprise the consolidated reserves of HK$1,094,353,000 (31 March 2015: HK$1,082,534,000) in the consolidated statement of financial position. * 1,094,353,000 1,082,534,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 63

36 Consolidated Statement of Cash Flows Year ended Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 152, ,311 Adjustments for: Finance costs 6 2,879 3,495 Bank interest income 5 (2,497) (1,821) Write-off of items of property, plant and equipment 7 26 Fair value losses on derivative financial instruments, net 7 9,980 2,578 Depreciation 7 52,454 60,539 Amortisation of prepaid land lease payments 7 2,285 2,337 Gain on disposal of items of property, plant and equipment 5 (773) (268) Gain on disposal of prepaid land lease payments 5 (1,159) Loss on deregistration of a subsidiary 7 5, , ,197 Increase in inventories (94,053) (5,624) Decrease in accounts and bills receivables 12,669 10,071 Increase in prepayments, deposits and other receivables (5,894) (19,463) Increase in accounts payable 28,333 8,978 Increase/(decrease) in accrued liabilities and other payables (1,499) 5,246 Increase in pension scheme liabilities 2,502 2,271 Settlement of pension scheme liabilities (32) Cash generated from operations 162, ,676 Interest paid (2,879) (3,495) Dividends paid (92,441) (29,980) Hong Kong profits tax paid (14,487) (1,928) Overseas tax paid (12,250) (8,311) Net cash flows from operating activities 40, ,962 CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Proceeds from disposal of items of property, plant and equipment, net 1, Proceeds from disposal of prepaid land lease payments 2,861 Purchases of items of property, plant and equipment (24,758) (18,931) Movements in derivative financial instruments, net (19,090) 6,532 Movements in available-for-sale investments 63,750 (63,750) Interest received 2,497 1,821 Increase in non-current portion of deposits (23,367) Net cash flows from/(used in) investing activities 3,722 (73,895) 64 Eagle Nice (International) Holdings Limited Annual Report 2016

37 Consolidated Statement of Cash Flows (Continued) Year ended Notes CASH FLOWS USED IN FINANCING ACTIVITY Repayment of bank loans, net (39,721) (101,775) Net cash flows used in financing activity (39,721) (101,775) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 4,494 (20,708) Cash and cash equivalents at beginning of year 255, ,565 Effect of foreign exchange rate changes, net (4,480) (458) CASH AND CASH EQUIVALENTS AT END OF YEAR 255, ,399 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances , ,619 Non-pledged time deposits with original maturity of less than three months when acquired 20 14,824 58,780 Cash and cash equivalents 255, ,399 Annual Report 2016 Eagle Nice (International) Holdings Limited 65

38 Notes to Financial Statements 1. CORPORATE AND GROUP INFORMATION The Company is a limited liability company incorporated in the Cayman Islands. The registered office address of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands. The principal place of business of the Company is located at Units and , 9/F, Tower B, Regent Centre, 70 Ta Chuen Ping Street, Kwai Chung, New Territories, Hong Kong. The Group s principal activities are the manufacture and trading of sportswear and garments. Information about subsidiaries Particulars of the Company s principal subsidiaries are as follows: 1. Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands 70B Name Place of incorporation/ registration and business Issued share/ paid-up registered capital Percentage of equity attributable to the Company Principal activities Eagle Nice (EAG) Limited Hong Kong Ordinary HK$2; Non-voting deferred HK$10,000 (Note (a)) (2015: Ordinary HK$2; Non-voting deferred HK$10,000) 2 10,000(a) 2 10, Investment holding ( YM (Shantou) ) (Notes (b) and (c)) (b) (c) ( YY (Shantou) ) (Notes (b) and (c)) (b) (c) The People s Republic of China ( PRC )/ Mainland China PRC/ Mainland China US$23,500,000 (2015: US$23,500,000) 23,500,000 23,500,000 HK$15,000,000 (2015: HK$15,000,000) 15,000,000 15,000, Manufacture and trading of sportswear and garments Manufacture and trading of sportswear and garments 66 Eagle Nice (International) Holdings Limited Annual Report 2016

39 1. CORPORATE AND GROUP INFORMATION (Continued) Information about subsidiaries (Continued) 1. Name Place of incorporation/ registration and business Issued share/ paid-up registered capital Percentage of equity attributable to the Company Principal activities Eagle Nice Development Limited Hong Kong HK$1 (2015: HK$1) Manufacture and trading of sportswear and garments Yue Mei (HK) Garment Limited Hong Kong HK$1 (2015: HK$1) Manufacture and trading of sportswear and garments Maitex (EAG) Limited Hong Kong HK$1,000 (2015: HK$1,000) 1,000 1, Manufacture and trading of sportswear and garments ( Maitex PRC ) (Notes (b) and (c)) (b) (c) PRC/Mainland China HK$40,000,000 (2015: HK$40,000,000) 40,000,000 40,000, Manufacture and trading of sportswear and garments King Eagle (EAG) Limited Hong Kong HK$1 (2015: HK$1) Manufacture and trading of sportswear and garments ( KE (Shantou) ) (Notes (b), (c) and (d)) (b) (c) (d) PRC/Mainland China US$2,680,000 (2015: US$2,680,000) 2,680,000 2,680, Manufacture and trading of sportswear and garments ( Hung Eagle Garment ) (Notes (b) and (c)) (b) (c) PRC/Mainland China US$4,000,000 (2015: US$4,000,000) 4,000,000 4,000, Manufacture and trading of sportswear and garments Annual Report 2016 Eagle Nice (International) Holdings Limited 67

40 1. CORPORATE AND GROUP INFORMATION (Continued) Information about subsidiaries (Continued) 1. Name Place of incorporation/ registration and business Issued share/ paid-up registered capital Percentage of equity attributable to the Company Principal activities Eagle Nice (Indonesia) Holdings Limited Hong Kong HK$1 (2015: HK$1) Investment holding P.T. Eagle Nice Indonesia ( EN Indonesia ) Indonesia US$30,000,000 (2015: US$30,000,000) 30,000,000 30,000, Manufacture and trading of sportswear and garments Eagle Nice (Jiangxi) Garment Limited Hong Kong HK$10,000 (2015: HK$10,000) 10,000 10, Investment holding ( EN (Yifeng) ) (Notes (b) and (c)) (b) (c) PRC/Mainland China US$25,000,000 (2015: US$25,000,000) 25,000,000 25,000, Manufacture and trading of sportswear and garments Notes: (a) The non-voting deferred shares carry no rights to dividends, no rights to attend or vote at general meetings and no rights to receive any surplus assets in a return of capital in a winding-up (other than the nominal amount paid up or credited as paid-up on such shares, after the sum of HK$100,000,000,000,000 per ordinary share has been distributed to the holders of the ordinary shares of the company in such winding-up). (a) 100,000,000,000,000 (b) YM (Shantou), YY (Shantou), Maitex PRC, KE (Shantou), Hung Eagle Garment and EN (Yifeng) are registered as wholly-foreign-owned enterprises under PRC law. (b) (c) The statutory financial statements of these entities are not audited by Ernst & Young, Hong Kong or another member firm of the Ernst & Young global network. (c) (d) Pursuant to an approval of deregistration issued by the local authority, KE (Shantou) was deregistered during the year. Details of the deregistration was set out in note 30. (d) 30 All of the above subsidiaries are indirectly held by the Company. 68 Eagle Nice (International) Holdings Limited Annual Report 2016

41 1. CORPORATE AND GROUP INFORMATION (Continued) Information about subsidiaries (Continued) The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length BASIS OF PREPARATION These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements have been prepared under the historical cost convention, except for derivative financial instruments which have been measured at fair value. These financial statements are presented in Hong Kong dollars ( HK$ ) and all values are rounded to the nearest thousand except when otherwise indicated. Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the Group ) for the year ended. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee). When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: 2.1 (a) the contractual arrangement with the other vote holders of the investee; (a) (b) rights arising from other contractual arrangements; and (b) (c) the Group s voting rights and potential voting rights. (c) Annual Report 2016 Eagle Nice (International) Holdings Limited 69

42 2.1 BASIS OF PREPARATION (Continued) Basis of consolidation (Continued) The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the noncontrolling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described in the accounting policy for subsidiaries above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities. 2.1 (i) (ii) (iii)(i) (ii) (iii) 2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES The Group has adopted the following revised standards for the first time for the current year s financial statements. Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions Annual Improvements to HKFRSs Cycle Annual Improvements to HKFRSs Cycle Eagle Nice (International) Holdings Limited Annual Report 2016

43 2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (Continued) The adoption of the above revised standards has had no significant financial effect on these financial statements other than as described below: 2.2 (a) Amendments to HKAS 19 apply to contributions from employees or third parties to defined benefit plans. The amendments simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. If the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction of service cost in the period in which the related service is rendered. The amendments have had no impact on the Group as the Group does not have contributions from employees or third parties to its defined benefit plan. (a) 19 (b) Annual Improvements to HKFRSs Cycle: HKAS 24 Related Party Disclosures: Clarifies that a management entity (i.e., an entity that provides key management personnel services) is a related party subject to related party disclosure requirements. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The amendment has had no impact on the Group as the Group does not receive any management services from other entities. (b) 24 In addition, the Company has adopted the amendments to the Rules Governing the Listing of Securities (the Listing Rules ) on The Stock Exchange of Hong Kong Limited (the Stock Exchange ) issued by the Stock Exchange relating to the disclosure of financial information with reference to the Hong Kong Companies Ordinance (Cap. 622) during the current financial year. The main impact to the financial statements is on the presentation and disclosure of certain information in the financial statements. 622 Annual Report 2016 Eagle Nice (International) Holdings Limited 71

44 2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements. 2.3 HKFRS 9 Financial Instruments 2 Amendments to HKFRS 10 and HKAS 28 (2011) Amendments to HKFRS 10, HKFRS 12 and HKAS 28 (2011) Amendments to HKFRS 11 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 5 Investment Entities: Applying the Consolidation Exception 1 Accounting for Acquisitions of Interests in Joint Operations 1 HKFRS 14 Regulatory Deferral Accounts 4 HKFRS 15 Revenue from Contracts with Customers 2 HKFRS 16 Leases 3 Amendments to HKAS 1 Disclosure Initiative 1 Amendments to HKAS 16 and HKAS 38 Amendments to HKAS 16 and HKAS 41 Amendments to HKAS 27 (2011) Annual Improvements Cycle Clarification of Acceptable Methods of Depreciation and Amortisation 1 Agriculture: Bearer Plants 1 Equity Method in Separate Financial Statements 1 Amendments to a number of HKFRSs Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group 5 No mandatory effective date yet determined but available for adoption Eagle Nice (International) Holdings Limited Annual Report 2016

45 2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (Continued) HKFRS 15 establishes a new five-step model to account for revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in HKFRS 15 provide a more structured approach for measuring and recognising revenue. The standard also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates. The standard will supersede all current revenue recognition requirements under HKFRSs. In September 2015, the HKICPA issued an amendment to HKFRS 15 regarding a one-year deferral of the mandatory effective date of HKFRS 15 to 1 January The Group expects to adopt HKFRS 15 on 1 April 2018 and is currently assessing the impact of HKFRS 15 upon adoption. The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application but is not yet in a position to state whether these new and revised HKFRSs would have a significant impact on the Group s results of operations and financial position SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business combinations and goodwill Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree s identifiable net assets. All other components of noncontrolling interests are measured at fair value. Acquisition-related costs are expensed as incurred. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 73

46 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business combinations and goodwill (Continued) If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in the income statement. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in the income statement. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in the income statement as a gain on bargain purchase. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 March. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cashgenerating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period. Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained Eagle Nice (International) Holdings Limited Annual Report 2016

47 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair value measurement The Group measures its derivative financial instruments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 based on quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly Level 3 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 75

48 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of non-financial assets Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets and goodwill), the asset s recoverable amount is estimated. An asset s recoverable amount is the higher of the asset s or cash-generating unit s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises in those expense categories consistent with the function of the impaired asset. An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises. Related parties A party is considered to be related to the Group if: 2.4 (a) the party is a person or a close member of that person s family and that person (a) (i) has control or joint control over the Group; (i) (ii) has significant influence over the Group; or (ii) (iii) is a member of the key management personnel of the Group or of a parent of the Group; (iii) or 76 Eagle Nice (International) Holdings Limited Annual Report 2016

49 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Related parties (Continued) (b) the party is an entity where any of the following conditions applies: 2.4 (b) (i) the entity and the Group are members of the same group; (i) (ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity); (ii) (iii) the entity and the Group are joint ventures of the same third party; (iii) (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; (iv) (v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; (v) (vi) the entity is controlled or jointly controlled by a person identified in (a); (vi) (a) (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and (vii) (a)(i) (viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group. (viii) Annual Report 2016 Eagle Nice (International) Holdings Limited 77

50 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant and equipment and depreciation Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. 2.4 Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows: Leasehold land under finance Over the lease terms leases Buildings Over the lease terms Leasehold improvements Over the shorter of the lease terms or 20% Plant and machinery 10% to 20% Furniture, fixtures, equipment 20% and motor vehicles 20% 10% 20% 20% Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end. 78 Eagle Nice (International) Holdings Limited Annual Report 2016

51 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant and equipment and depreciation (Continued) An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sale proceeds and the carrying amount of the relevant asset. Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use. Leases Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases, including prepaid land lease payments under finance leases, are included in property, plant and equipment, and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the income statement so as to provide a constant periodic rate of charge over the lease terms. Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under operating leases net of any incentives received from the lessor are charged to the income statement on the straight-line basis over the lease terms. Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 79

52 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments and other financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss. All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income in the income statement. The loss arising from impairment is recognised in the income statement in finance costs for loans. Available-for-sale financial investments Available-for-sale financial investments are non-derivative financial assets in listed and unlisted equity investments and debt securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated as at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in market conditions Eagle Nice (International) Holdings Limited Annual Report 2016

53 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments and other financial assets (Continued) Subsequent measurement (Continued) Available-for-sale financial investments (Continued) After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in the income statement in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the available-for-sale investment revaluation reserve to the income statement in other gains or losses. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income and dividend income, respectively and are recognised in the income statement as other income in accordance with the policies set out for Revenue recognition below. When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses. The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term are still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity. For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on that asset that has been recognised in equity is amortised to the income statement over the remaining life of the investment using the effective interest rate. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement. 2.4 (a) (b) Annual Report 2016 Eagle Nice (International) Holdings Limited 81

54 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group s consolidated statement of financial position) when: the rights to receive cash flows from the asset have expired; or the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. 2.4 (a) (b) 82 Eagle Nice (International) Holdings Limited Annual Report 2016

55 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The amount of any impairment loss identified is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 83