2018E — Page 106

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1

SIGNIFICANT ACCOUNTING POLICIES (Continued)

(i)

Credit losses and impairment of assets (Continued)

(i)

Credit losses from financial instruments, contract assets and lease receivables (Continued)

(B)

Policy applicable prior to 1 January 2018 (Continued)

If any such evidence exists, any impairment loss was determined and recognised as follows:

For unquoted equity securities carried at cost, the impairment loss was measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial

asset where the effect of discounting is material. Impairment losses for equity securities

carried at cost were not reversed.

For trade and other current receivables and other financial assets carried at amortised cost, impairment loss was measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting was material. This assessment was made collectively where these financial assets shared similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which were assessed for impairment collectively were based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss was reversed through profit or loss. A reversal of an impairment loss shall not result in the asset's carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

When the recovery of a trade debtor or other financial assets carried at amortised cost was considered doubtful but not remote, associated impairment losses were recorded using an allowance account. When the Group was satisfied that recovery was remote, the amount considered irrecoverable was written off against the gross carrying amount of those assets directly. Subsequent recoveries of amounts previously charged to the allowance account were reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly were recognised in profit or loss.

Hong Kong Ferry (Holdings) Company Limited Annual Report 2018