TUNG LOK RESTAURANTS (2000) LTD / Annual Report
2016
54
Notes to the financial statements
For the financial year ended 31 March 2016
2.
Summary of significant accounting policies (cont’d)
2.12
Impairment of financial assets (cont’d)
(a)
Financial assets carried at amortised cost (cont’d)
To determine whether there is objective evidence that an impairment loss on financial assets has been incurred,
the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor
and default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss
is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal
date. The amount of reversal is recognised in profit or loss.
(b)
Financial assets carried at cost
If there is objective evidence (such as significant adverse changes in the business environment where the issuer
operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on
financial assets carried at cost had been incurred, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows discounted at the current
market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.
(c)
Available-for-sale financial assets
In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i)
significant financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse
effect that have taken place in the technological, market, economic or legal environment in which the issuer
operates, and indicates that the cost of the investment in equity instrument may not be recovered; and (iii) a
significant or prolonged decline in the fair value of the investment below its costs.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition
cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss
previously recognised in profit or loss, is transferred from other comprehensive income and recognised in profit or
loss. Reversals of impairment losses in respect of equity instruments are not recognised in profit or loss; increase
in their fair value after impairment are recognised directly in other comprehensive income.
2.13
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand which are subject to an insignificant risk of changes in
value.
2.14
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the
amount of the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no
longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed.
If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects,
where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
