NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
32
POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND
INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED
31 DECEMBER 2018 (Continued)
HKFRS 16, Leases
As disclosed in note 1(i), currently the Group classifies leases into finance leases and operating leases and accounts for the lease arrangements differently, depending on the classification of the lease.
Under HKFRS16, lessees will account for all leases in-a similar way to current finance lease accounting, i.e. at the commencement date of the lease the lessee will recognise and measure a lease liability at the present value of the minimum future lease payments and will recognise a corresponding "right-of-use" asset. HKFRS 16 will primarily affect the Group's accounting as a lessee of leases for properties which are currently classified as operating leases. The application of the new accounting model is expected to lead to an increase in both assets and liabilities and to impact on the timing of the expense recognition in the statement of profit or loss over the period of the lease. HKFRS 16 is effective for annual periods beginning on or after 1 January 2019.
The Group plans to elect to use the modified retrospective approach for the adoption of HKFRS 16 and will recognise the cumulative effect of initial application as an adjustment to the opening balance of equity at 1 January 2019 and will not restate the comparative information. As disclosed in note 25, at 31 December 2018 the Group's future minimum lease payments under non-cancellable operating leases amount to HK$1,498,000. Upon the initial adoption of HKFRS 16, the opening balances of lease liabilities and the corresponding right-of-use assets will be adjusted to HK$1,130,000 and HK$1,082,000 respectively, after taking account the effects of discounting, as at 1 January 2019. Other than the recognition of lease liabilities and right-of-use assets, the Group expects that the transition adjustments to be made upon the initial adoption of HKFRS 16 will not be material.
However, the expected changes in accounting policies as described above could have a material impact on the Group's financial statement from 2019 onwards.
Hong Kong Ferry (Holdings) Company Limited
167
Annual Report 2018
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