XYZ Holdings (Singapore) Limited 2016

XYZ Holdings (Singapore) Limited 2016
XYZ Holdings
(Singapore)
Limited
Illustrative financial
statements for the year
ended 31 December 2016
This page has been left blank intentionally.
XYZ Holdings (Singapore) Limited
Preface
About this publication
XYZ Holdings (Singapore) Limited
This publication includes the following components:
§
§
§
§
XYZ Holdings (Singapore) Limited (XYZ) – Illustrative report on directors’ statement,
and financial statements
Appendix A – Additional illustrative disclosures
Appendix B – Illustrative disclosures under FRS 109
Appendix C – Comparison between Financial Reporting Standards and International
Financial Reporting Standards
The illustrative financial statements are an illustration of the annual financial statements of a
Singapore-incorporated listed company, XYZ Holdings (Singapore) Limited, prepared in
accordance with:
§
§
Singapore Financial Reporting Standards
The Singapore Companies Act, Chapter 50.
The illustrative financial statements serve to provide illustration of annual consolidated
financial statements of a group of companies whose activities include manufacturing,
property development and investment holding. The disclosures contained in these illustrative
financial statements are made based on a hypothetical group of entities and certain
assumptions have been made about the applicability of the disclosures required by Singapore
Financial Reporting Standards. In addition to the aforementioned standards and regulation,
certain disclosure requirements of the Singapore Exchange Securities Trading Limited’s
(SGX-ST) Listing Manual have also been included in these illustrative financial statements.
Readers should note that the disclosure requirements of the SGX-ST may be included in other
parts of the entity’s annual report instead.
The illustrative financial statements is designed to capture a wide set of circumstances and
transactions which may not be relevant to all entities. Disclosures illustrated are those that
are relevant to the circumstance of XYZ. Also, since XYZ is a fictitious entity, assessing
materiality is not possible in some circumstances. XYZ is a helpful enabler for entities
preparing financial statements under FRS, but its illustrative nature must be appreciated.
This 2016 edition includes illustration of disclosures which are effective for annual periods
beginning on or after 1 January 2016 and an illustration of the new auditor’s report. Also
included are illustrative disclosures for early adoption of FRS 109 Financial Instruments.
To provide users with insight of changes in this publication as compared to the 2015 edition,
we have side-lined the new illustrations, disclosure requirements and other editorial changes
in this manner.
Important notices
·
·
·
This publication is intended as an illustrative guide rather than a definitive
statement.
While the illustrative financial statements contain most of the usual disclosures
typically found in the financial statements of a group of companies whose activities
include manufacturing, property development and investment holding, the
disclosures and commentaries in this publication are not meant to be exhaustive.
Reference should be made to the relevant standards and regulations for specific
disclosure requirements.
This publication should not be relied upon as a substitute for seeking professional
advice concerning the appropriate accounting treatment for specific individual
situations or ensuring compliance with the Singapore Financial Reporting Standards
and/or Singapore Companies Act, Chapter 50.
XYZ Holdings (Singapore) Limited
Preface
Singapore Financial Reporting Standards (FRS)
For financial periods beginning on or after 1 January 2016, a number of new and revised
FRSs apply.
A list of the FRSs and INT FRS is provided in Appendix B, which also provides a brief summary
of the major differences with International Financial Reporting Standards (IFRS).
This publication reflects the requirements of the FRSs issued as at 30 September 2016. No
new accounting standards that would be applicable to financial statements covering periods
beginning on 1 January 2016 are expected. Nevertheless, the situation needs to be
monitored for any developments that may affect 2016 financial statements.
The following FRSs have not been dealt with in this publication:
·
·
·
·
·
·
·
·
·
·
·
·
·
·
FRS 26 Accounting and Reporting by Retirement Benefit Plans
FRS 29 Financial Reporting in Hyperinflationary Economies
FRS 34 Interim Financial Reporting
FRS 41 Agriculture
FRS 101 First-time Adoption of Financial Reporting Standards
FRS 104 Insurance Contracts
FRS 106 Exploration for and Evaluation of Mineral Resources
FRS 114 Regulatory Deferral Accounts
INT FRS 112 Service Concession Arrangements
INT FRS 113 Customer Loyalty Programmes
INT FRS 117 Distributions of Non-Cash Assets to Owners
INT FRS 118 Transfer of Assets from Customers
INT FRS 120 Stripping Costs in the Production of a Surface Mine
INT FRS 121 Levies
XYZ Holdings (Singapore) Limited
Preface
Singapore Financial Reporting Standards (FRS) (continued)
Abbreviations
The following abbreviations are used in this publication:
BC
Basis for Conclusions
CA
Singapore Companies Act, Chapter 50
FRS
Singapore Financial Reporting Standards
– INT FRS
Interpretations of FRSs
– FRS AG
FRS Application Guidance
– FRS IG
FRS Implementation Guidance
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards
SSA
Singapore Standards on Auditing
SGX
Singapore Exchange Securities Trading Limited (SGX-ST)’s Listing Manual
XYZ Holdings (Singapore) Limited
Contents
Page
General information ................................................................................................................ 1
Directors’ statement................................................................................................................ 2
Independent auditor’s report................................................................................................. .. 7
Consolidated income statement ............................................................................................. 12
Consolidated statement of comprehensive income .............................................................. ....13
Balance sheets………………… .................................................................................................. ...18
Statements of changes in equity ............................................................................................ 20
Consolidated cash flow statement .......................................................................................... 28
Notes to the financial statements
1.
Corporate information.................................................................................................... 32
2.
Summary of significant accounting policies ..................................................................... 32
2.1
Basis of preparation ............................................................................................. 32
2.2
Changes in accounting policies.............................................................................. 34
2.3
Standards issued but not yet effective…. ........................................................ ……..36
2.4
Basis of consolidation and business combinations .................................................. 42
2.5
Transactions with non-controlling interests ........................................................... 46
2.6
Foreign currency.................................................................................................. 46
2.7
Property, plant and equipment ............................................................................. 47
2.8
Investment properties .......................................................................................... 48
2.9
Intangible assets .................................................................................................. 50
2.10 Land use rights .................................................................................................... 51
2.11 Impairment of non-financial assets........................................................................ 52
2.12 Subsidiaries ......................................................................................................... 52
2.13 Joint arrangements.............................................................................................. 53
2.14 Joint ventures and associates ............................................................................... 54
2.15 Financial instruments ........................................................................................... 56
2.16 Impairment of financial assets .............................................................................. 61
2.17 Cash and cash equivalents .................................................................................... 63
2.18 Construction contracts ......................................................................................... 63
2.19 Development properties ....................................................................................... 63
2.20 Inventories .......................................................................................................... 64
2.21 Provisions............................................................................................................ 65
2.22 Government grants .............................................................................................. 66
2.23 Financial guarantee .............................................................................................. 66
2.24 Borrowing costs ................................................................................................... 67
2.25 Convertible redeemable preference shares............................................................ 67
XYZ Holdings (Singapore) Limited
Contents
Page
Notes to the financial statements (continued)
2.26 Employee benefits................................................................................................ 68
2.27 Leases ................................................................................................................. 71
2.28 Non-current assets held for sale and discontinued operations................................. 71
2.39 Revenue .............................................................................................................. 72
2.30 Taxes .................................................................................................................. 73
2.31 Share capital and share issuance expenses ............................................................ 75
2.32 Treasury shares ................................................................................................... 75
2.33 Contingencies ......................................................................................................75
3.
Significant accounting judgements and estimates ............................................................ 76
3.1
Judgements made in applying accounting policies ................................................. 76
3.2
Key sources of estimation uncertainty .................................................................. 78
4.
Revenue ............ ........................................................................................................... 81
5.
Interest income.............................................................................................................. 81
6.
Other income ................................................................................................................. 81
7.
Finance costs ................................................................................................................. 82
8.
Other expenses .............................................................................................................. 82
9.
Profit before tax from continuing operations ................................................................... 83
10. Income tax expense ....................................................................................................... 85
11. Discontinued operation and disposal group classified as held for sale ............................... 88
12. Earnings per share......................................................................................................... 90
13. Property, plant and equipment ....................................................................................... 93
14. Investment properties .................................................................................................... 96
15. Intangible assets ............................................................................................................ 98
16. Land use rights ............................................................................................................ 103
17. Investment in subsidiaries ............................................................................................ 103
18. Investment in joint venture ........................................................................................... 117
19. Investment in associates .............................................................................................. 120
20. Deferred tax ................................................................................................................ 123
21. Trade and other receivables ......................................................................................... 125
22. Investment securities ................................................................................................... 131
23. Gross amount due from/(to) customers for contract work-in-progress ............................ 132
24. Development properties................................................................................................ 133
25. Inventories …………………….... .......................................................................................... 134
26. Derivatives .................................................................................................................. 135
27. Cash and short-term deposits ....................................................................................... 136
XYZ Holdings (Singapore) Limited
Contents
Page
Notes to the financial statements (continued)
28. Provisions.................................................................................................................... 137
29. Deferred capital grants................................................................................................. 138
30. Loans and borrowings .................................................................................................. 139
31. Trade and other payables ............................................................................................. 142
32. Other liabilities ............................................................................................................ 143
33. Share capital and treasury shares ................................................................................. 144
34. Other reserves ............................................................................................................. 145
35. Employee benefits ........................................................................................................ 146
36. Related party transactions ........................................................................................... 149
37. Commitments .............................................................................................................. 152
38. Contingencies............................................................................................................... 155
39. Fair value of assets and liabilities .................................................................................. 156
40. Financial risk management objectives and policies ......................................................... 172
41. Capital management .................................................................................................... 186
42. Segment information ................................................................................................... 188
43. Dividends .................................................................................................................... 193
44. Events occurring after the reporting period................................................................... 194
45. Authorisation of financial statements for issue .............................................................. 194
Appendices
Appendix A-1 Consolidated statement of comprehensive income in one statement –
Illustrating the analysis of expense by nature ................................................. 195
Appendix A-2 Hedge accounting (FRS 39) ........................................................................... 197
Appendix A-3 Agreements for the construction of real estate .............................................. 203
Appendix A-4 Defined benefit plans ..................................................................................... 207
Appendix B-1 Financial instruments disclosures under FRS 109 ........................................... 218
Appendix B-2 Hedge accounting disclosures under FRS 109 ................................................ 261
Appendix C
Comparison between FRS and IFRS ................................................................275
Co. Reg. No 123456789Z
XYZ Holdings (Singapore) Limited
and its subsidiaries
Illustrative financial statements
for the financial year ended 31 December 2016
The names of people and corporations included as illustrations are fictitious. Any resemblance to
any person or business is purely coincidental.
XYZ Holdings (Singapore) Limited and its subsidiaries
General information
Gneral information
Directors
Ang Beng Choo – Chairman
De Silva Elizabeth Frances – Chief Executive Officer
Goh Hock Inn
Jee Kim Leng
Musa Nasir Osman
Pek Que Ru
See Tong Tong
SGX 1207.1
Company secretary
Lee Yiew Hong
Registered office
[Address, telephone number, facsimile number and electronic mail address (if any)]
SGX 1207.2
Solicitors
Laura & Co. LLP
Bankers
Good Bank Limited
South Bank Limited
CPA Bank Limited
Share registrar
SGX 1207.3
[Address]
Auditor
SGX 713.1
Ernst & Young LLP
One Raffles Quay
North Tower, Level 18
Singapore 048583
Partner in charge: Alex Yang (Date of appointment: since financial year ended 31 December 2015)
XYZ Holdings (Singapore) Limited | 1
XYZ Holdings (Singapore) Limited and its subsidiaries
Directors’ statement
The directors are pleased to present their statement to the members together with the audited
consolidated financial statements of XYZ Holdings (Singapore) Limited (the Company) and its
subsidiaries (collectively, the Group) and the balance sheet and statement of changes in equity
of the Company for the financial year ended 31 December 2016.
1.
CA 201.16
Opinion of the directors
In the opinion of the directors,
2.
(i)
the consolidated financial statements of the Group and the balance sheet Πand
statement of changes in equity of the Company are drawn up so as to give a true and
fair view of the financial position of the Group and of the Company as at 31
December 2016 and the financial performance, changes in equity and cash flows of
the Group and changes in equity of the Company • for the year ended on that date;
and
CA Sch 12.1.a
(ii)
at the date of this statement there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they fall due.
CA Sch 12.1.b
Directors
CA Sch 12.7
The directors of the Company in office at the date of this statement are:
Ang Beng Choo
De Silva Elizabeth Frances (appointed on 2 February 2016)
Goh Hock Inn
Jee Kim Leng
Musa Nasir Osman
Pek Que Ru
See Tong Tong
In accordance with Articles 93 and 94 of the Company’s Articles of Association, Jee Kim
Leng, Pek Que Ru and See Tong Tong retire and, being eligible, offer themselves for reelection.
3.
Arrangements to enable directors to acquire shares and debentures
Except as described in paragraph five below, neither at the end of nor at any time during
the financial year was the Company a party to any arrangement whose objects are, or one
of whose objects is, to enable the directors of the Company to acquire benefits by means
of the acquisition of shares or debentures of the Company or any other body corporate.
XYZ Holdings (Singapore) Limited | 2
CA Sch.12.8.a
CA Sch.12.8.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Directors’ statement
4.
CA Sch 12.9
Directors’ interests in shares and debentures
The following directors, who held office at the end of the financial year, had, according to
the register of directors’ shareholdings, required to be kept under section 164 of the
Singapore Companies Act, Chapter 50, an interest in shares and share options of the
Company and related corporations (other than wholly-owned subsidiaries) as stated
below:
Direct interest
At the
beginning of
financial year
or date of
appointment
At the end of
financial year
345,000
2,100,000
2,100,000
5,000
10,000
–
–
Goh Hock Inn
50,000
60,000
–
–
De Silva Elizabeth Frances
43,000
60,000
–
–
Ordinary shares of £1 each of the
holding company (Good Group
(International)
Ltd)
Goh Hock Inn
10,000
10,000
–
–
De Silva Elizabeth Frances
25,000
25,000
–
–
Name of director
At the
beginning of
financial year
or date of
appointment
At the end of
financial year
340,000
Deemed interest
Ordinary shares of the Company
Goh Hock Inn
De Silva Elizabeth Frances
Share options of the Company
There was no change in any of the above-mentioned interests in the Company between
the end of the financial year and 21 January 2017.
SGX 1207.7
Except as disclosed in this report, no director who held office at the end of the financial
year had interests in shares, share options, warrants or debentures of the Company, or of
related corporations, either at the beginning of the financial year, or date of appointment
if later, or at the end of the financial year.
5.
Options
At an Extraordinary General Meeting held on 23 December 2011, shareholders approved
the Senior Executive Option Plan and the General Employee Share Option Plan for the
granting of non-transferable options that are settled by physical delivery of the ordinary
shares of the Company, to eligible senior executives and employees respectively.
SGX 853
The committee administering the employee share option plans comprise three directors,
Musa Nasir Osman, Pek Que Ru and See Tong Tong.
SGX 852.1.a
During the financial year:
CA Sch 12.2
·
The Company has granted 37,000 share options under the Senior Executive Option
Plan. These options expire on 30 June 2021 and are exercisable if and when the
Group’s earnings per share amount increases by 12% within three years from the
date of grant.
·
The Company has also granted 163,000 share options under the General Employee
Share Option Plan. These options expire on 30 June 2021 and are exercisable if the
employee remains in service for three years from the date of grant and that certain
market conditions as detailed in Note 35 to the financial statements are met.
XYZ Holdings (Singapore) Limited | 3
XYZ Holdings (Singapore) Limited and its subsidiaries
Directors’ statement
5.
Options (continued)
·
75,000 treasury shares were reissued at a weighted average exercise price of
S$1.08 each, upon the exercise of options granted pursuant to the employee share
option plans.
Details of all the options to subscribe for ordinary shares of the Company pursuant to the
employee share option plans as at 31 December 2016 are as follows:
Expiry date
Exercise price (S$)
1.05
45,000
30 November 2018
1.18
55,000
1 January 2019
1.22
100,000
31 December 2020
1.26
125,000
30 June 2021
1.30
200,000
525,000
Details of the options to subscribe for ordinary shares of the Company granted to
directors of the Company pursuant to the Senior Executive Option Plan are as follows:
Name of director
Options
granted
during
financial
year
Aggregate
options granted
since
commencement
of plan to end of
financial year
Aggregate options
exercised since
commencement of
plan to end of
financial year
SGX 852.1.b.i
Aggregate
options
outstanding as
at end of
financial year
Goh Hock Inn
15,000
105,000
(35,000)
60,000
De Silva Elizabeth Frances
22,000
75,000
(15,000)
60,000
37,0001
180,000
(50,000)
120,000
Total
CA Sch 12.6
Number of options
31 December 2017
Total
CA Sch 12.5
1
These options are exercisable between the periods from 30 June 2019 to 30 June 2021
at the exercise price of S$1.30 if the vesting conditions are met.
Since the commencement of the employee share option plans till the end of the financial
year:
SGX 852.2
· No options have been granted to the controlling shareholders of the Company and their
associates
SGX 852.1.b.ii
· No participant other than the two directors mentioned above has received 5% or more
of the total options available under the plans
· No options have been granted to directors and employees of the holding company and
its subsidiaries
SGX 852.1.b.ii
SGX 852.c.i
SGX 852.1.c.ii
· No options that entitle the holder to participate, by virtue of the options, in any share
issue of any other corporation have been granted
CA Sch 12.2
· No options have been granted at a discount
SGX 852.1.d
XYZ Holdings (Singapore) Limited | 4
XYZ Holdings (Singapore) Limited and its subsidiaries
Directors’ statement
6.
Audit committee
CA 201B.9
The audit committee (AC) carried out its functions in accordance with section 201B (5) Ž
of the Singapore Companies Act, Chapter 50, including the following:
· Reviewed the audit plans of the internal and external auditors of the Group and the
Company, and reviewed the internal auditor’s evaluation of the adequacy of the
Company’s system of internal accounting controls and the assistance given by the
Group and the Company’s management to the external and internal auditors
· Reviewed the quarterly and annual financial statements and the auditor’s report on the
annual financial statements of the Group and the Company before their submission to
the board of directors
· Reviewed effectiveness of the Group and the Company’s material internal controls,
including financial, operational and compliance controls and risk management via
reviews carried out by the internal auditor
· Met with the external auditor, other committees, and management in separate
executive sessions to discuss any matters that these groups believe should be
discussed privately with the AC
· Reviewed legal and regulatory matters that may have a material impact on the financial
statements, related compliance policies and programmes and any reports received
from regulators
· Reviewed the cost effectiveness and the independence and objectivity of the external
auditor
· Reviewed the nature and extent of non-audit services provided by the external auditor
· Recommended to the board of directors the external auditor to be nominated,
approved the compensation of the external auditor, and reviewed the scope and results
of the audit
· Reported actions and minutes of the AC to the board of directors with such
recommendations as the AC considered appropriate
· Reviewed interested person transactions in accordance with the requirements of the
Singapore Exchange Securities Trading Limited’s Listing Manual
The AC, having reviewed all non-audit services provided by the external auditor to the
Group, is satisfied that the nature and extent of such services would not affect the
independence of the external auditor. The AC has also conducted a review of interested
person transactions.
The AC convened four meetings during the year with full attendance from all members,
except for one where a member was absent. The AC has also met with internal and
external auditors, without the presence of the Company’s management, at least once a
year.
Further details regarding the AC are disclosed in the Report on Corporate Governance.
7.
Auditors
Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.
XYZ Holdings (Singapore) Limited | 5
SGX 1207.6.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Directors’ statement
CA 201.16
On behalf of the board of directors:
___________________________
___________________________
Ang Beng Choo
De Silva Elizabeth Frances
Director
Director
27 February 2017
Commentary:
Œ
FRS 1 uses the terms statement of financial position and statement of cash flows. However, an
entity is not obliged to use these terminologies.
In this illustration, the Group has chosen to use the terms balance sheet and cash flow
statement. If an entity has chosen to use the terms introduced by FRS 1, the entity should make
reference to the new terms used in its financial statements.
•
Presentation of the statement of changes in equity for the Company when consolidated financial
statements are presented is optional. In this illustration, the Company has chosen to present the
statement of changes in equity for the Company together with the consolidated financial
statements and balance sheet of the Company. Accordingly, the statement by directors includes
the directors’ opinion on whether the statement of changes in equity is drawn up so as to give a
true and fair view of the changes in equity of the Company. This applies to the auditor’s opinion
expressed in the auditor’s report as well.
Ž
Section 201B (5) of the Companies Act requires a description of the nature and extent of the
functions performed by the audit committee pursuant to section 201B (5). If the nature and
extent of the functions are described in the Report on Corporate Governance and the Directors’
Report makes reference to the Report on Corporate Governance instead, the directors must
ensure that the Report on Corporate Governance describes the functions pursuant to section
201B (5) of the Companies Act.
XYZ Holdings (Singapore) Limited | 6
XYZ Holdings (Singapore) Limited and its subsidiaries
Independent auditor’s report Œ•
For the financial year ended 31 December 2016
Independent Auditor’s Report to the Members of XYZ Holdings (Singapore) Limited
Report on the Audit of the Financial Statements
SSA 700.21 and 22
CA 207.1
SSA 700.44 and 45
Opinion
SSA 700.23
We have audited the financial statements of XYZ Holdings (Singapore) Limited (the “Company”) and its
subsidiaries (collectively, the “Group”), which comprise the balance sheets of the Group and the Company
as at 31 December 2016, the statements of changes in equity of the Group and the Company Îand the
consolidated income statement, consolidated statement of comprehensive income Í and consolidated cash
flow statement Ì of the Group for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies.
SSA 700.24
In our opinion, the accompanying consolidated financial statements of the Group, the balance sheet and
the statement of changes in equity of the Company are properly drawn up in accordance with the
provisions of the Companies Act, Chapter 50 (the Act) and Financial Reporting Standards in Singapore
(FRSs) so as to give a true and fair view of the consolidated financial position of the Group and the financial
position of the Company as at 31 December 2016 and of the consolidated financial performance,
consolidated changes in equity and consolidated cash flows of the Group and changes in equity of the
Company for the year ended on that date.
SSA 700.25
CA 207.2.a
Basis for Opinion
SSA 700.28
We conducted our audit in accordance with Singapore Standards on Auditing (SSAs). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Group in accordance with the Accounting and
Corporate Regulatory Authority (ACRA) Code of Professional Conduct and Ethics for Public Accountants
and Accounting Entities (ACRA Code) together with the ethical requirements that are relevant to our audit
of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the ACRA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
SSA 700.30
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
[Description of each key audit matter in accordance with SSA 701] Ï
Other Information
SSA 720.21 and32
Management is responsible for other information. The other information comprises the information
included in the annual report, Ð but does not include the financial statements and our auditor’s report
thereon.
SSA 720.22.a
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
SSA 720.22.c
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
SSA 720.22.d
SSA 720.22.e
[See alternative wording in Ê]
Responsibilities of Management and Directors for the Financial Statements
SSA 700.33.a
Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with the provisions of the Act and FRSs, and for devising and maintaining a system of internal
accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss
from unauthorised use or disposition; and transactions are properly authorised and that they are recorded
as necessary to permit the preparation of true and fair financial statements and to maintain accountability
of assets.
SSA 700.34.a
In preparing the financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
SSA 700.34.b
The directors’ responsibilities include overseeing the Group’s financial reporting process.
SSA 700.34
XYZ Holdings (Singapore) Limited | 7
XYZ Holdings (Singapore) Limited and its subsidiaries
Independent auditor’s report Œ•
For the financial year ended 31 December 2016
Independent Auditor’s Report to the Members of XYZ Holdings (Singapore) Limited (continued)
Auditor’s Responsibilities for the Audit of the Financial Statements
SSA 700.38
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with SSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
SSA 700.37
As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional SSA 700.39
scepticism throughout the audit. We also:
·
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
SSA 700.39
·
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
SSA 700.38.b.ii
·
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
SSA 700.38.b.iii
·
Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
SSA 700.38.b.iv
·
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
SSA 700.38.b.v
·
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
SSA 700.38.c
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
XYZ Holdings (Singapore) Limited | 8
SSA 700.40
SSA 700.39.b
SSA 700.39.c
XYZ Holdings (Singapore) Limited and its subsidiaries
Independent auditor’s report Œ•
For the financial year ended 31 December 2016
Independent Auditor’s Report to the Members of XYZ Holdings (Singapore) Limited (continued)
Report on Other Legal and Regulatory Requirements
SSA 700.43
In our opinion, the accounting and other records required by the Act to be kept by the Company and by
those subsidiary corporations incorporated in Singapore of which we are the auditors have been properly
kept in accordance with the provisions of the Act.
CA 207.2.b
The engagement partner on the audit resulting in this independent auditor’s report is [Partner’s name].
SSA 700.46
_____________________
Ernst & Young LLP
Public Accountants and
Chartered Accountants
Singapore
27 February 2017
SSA 700.47
SSA 700.48
SSA 700.49
XYZ Holdings (Singapore) Limited | 9
XYZ Holdings (Singapore) Limited and its subsidiaries
Independent auditor’s report Œ•
For the financial year ended 31 December 2016
Commentary:
Ê
The Institute of Singapore Chartered Accounts (ISCA) issued the enhanced Auditor Reporting
Standards that deals with the form and content of the auditor’s report to be issued for audits of
financial statements for periods ending on or after 15 December 2016 conducted in accordance
with Singapore Standards of Auditing (SSA).
The new SSA 701 Communicating Key Audit Matters (KAM)s In the Independent Auditor’s Report is
applicable to audits of complete sets of general purpose financial statements of listed entities.
Listed entities are defined in the Glossary of Terms to SSA as “an entity whose shares, stock or
debt are quoted or listed on a recognised stock exchange, or are marketed under the regulations
of a recognised stock exchange or other equivalent body“. As such, KAM reporting is also
applicable to entities which have their bonds or notes trading on SGX or other recognised stock
exchange.
Ë
This illustrative auditor’s report is of a listed entity.
Ì
Please refer to commentary no. 1 of the directors’ statement.
Í
In this illustration, the Group has chosen to present its comprehensive income in two linked
statements. If an entity has chosen to present its comprehensive income in one single statement,
the reference to consolidated income statement should be removed.
Î
Please refer to commentary no. 2 of the directors’ statement.
Ï
Key audit matters (KAM)s relate to those matters that, in the auditor’s professional judgement,
were of most significance in the audit of the financial statements of the current period and are
selected from matters communicated to those charged with governance.
This illustrative auditor’s report does not include illustration of KAMs of XYZ Holdings (Singapore)
Limited. The auditor’s report would be customised to include the KAMs according to the specific
circumstances of the entity.
Ð
SSA 720 The Auditor’s Responsibilities Relating to Other Information defines Other information as
financial or non-financial information (other than financial statements and the auditor’s report
thereon) included in an entity’s annual report.
A list of examples of amounts or other items that may be included in other information are
available in Appendix 1 of SSA 720.
XYZ Holdings (Singapore) Limited | 10
XYZ Holdings (Singapore) Limited and its subsidiaries
Independent auditor’s report Œ•
For the financial year ended 31 December 2016
Additional illustrative disclosures
Other information
Ê
In this illustration, the auditor has obtained all of the other information prior to the date of the
auditor’s report and has not identified a material misstatement of the other information.
The following is an illustrative “Other information” paragraphs when the auditor has obtained no
other information prior to the date of the auditor’s report but expects to obtain other information
after the date of auditor’s report.
Other Information
Management is responsible for other information. The other information comprises the
information included in the annual report, but does not include the financial statements and our
auditor’s report thereon. The annual report is expected to be made available to us after the date
of this auditor’s report.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above when it becomes available and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
When we read the annual report, if we conclude that there is a material misstatement therein,
we are required to communicate the matter to those charged with governance and take
appropriate actions in accordance with SSAs.
XYZ Holdings (Singapore) Limited | 11
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated income statement Υ
For the financial year ended 31 December 2016
(Illustrating the analysis of expenses by function)
Note
2016
2015
$’000
$’000
FRS 1.81.b and 103
136,720
142,571
FRS 1.82.a and 103
(104,271)
(111,820)
Continuing operations Ž
Revenue
4
Cost of sales
Gross profit
32,449
30,751
Other items of income •
Interest income •
FRS 1.103
FRS 1.103
5
Dividend income from investment securities •
Other income
FRS 1.103
6
430
327
FRS 18.35.b.iii
526
406
FRS 18.35.b.v
1,511
886
Other items of expense •
Marketing and distribution
Research and development •
Administrative expenses
(4,895)
(4,195)
(320)
(327)
FRS 1.103
FRS 1.103, FRS 38.126
(20,266)
(18,952)
FRS 1.103
Finance costs
7
(1,715)
(1,512)
FRS 1.82.b
Other expenses
8
(1,471)
(724)
FRS 1.103
128
FRS 1.82.c
FRS 1.82.c
Share of results of joint ventures •
151
Share of results of associates •
Profit before tax from continuing operations
Income tax expense
657
328
9
7,057
7,116
10
(1,557)
(1,687)
5,500
5,429
Profit from continuing operations, net of tax
FRS 1.85
FRS 1.82.d, FRS 12.77
FRS 1.85
Discontinued operation Ž
Loss from discontinued operation, net of tax
Profit for the year
11
‘
(544)
(188)
FRS 1.82.e, FRS 105.33.a
& 33A
4,956
5,241
FRS 1.81A.a
5,320
5,029
FRS 105.33.d
Attributable to:
Owners of the Company
Profit from continuing operations, net of tax
Loss from discontinued operation, net of tax
(544)
Profit for the year attributable to owners of the Company
(188)
FRS 105.33.d
4,776
4,841
Profit from continuing operations, net of tax
180
400
Loss from discontinued operation, net of tax
–
–
180
400
FRS 1.81B.i
FRS 1.81B.ii
Non-controlling interests
Profit for the year attributable to non-controlling interests
Earnings per share from continuing operations attributable
to owners of the Company (cents per share)
Basic
12(a)
22.98
21.81
FRS 33.66 and 67A
Diluted
12(a)
22.73
21.58
FRS 33.66 and 67A
Basic
12(b)
20.63
21.00
FRS 33.66 and 67A
Diluted
12(b)
20.43
20.78
FRS 33.66 and 67A
Earnings per share (cents per share)
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 12
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated statement of comprehensive income
For the financial year ended 31 December 2016
Consolidated statement of comprehensive income
Profit for the year
2016
2015
$’000
$’000
4,956
5,241
1,250
2,404
FRS 1.82.f
Other comprehensive income: ‘’
Items that will not be reclassified to profit or loss
Net surplus on revaluation of freehold land and buildings
Share of gain on property revaluation of associates “
FRS 1.82A.b
62
10
1,312
2,414
274
110
Items that may be reclassified subsequently to profit or loss
Net fair value gains on available-for-sale financial assets
FRS 16.77.f
FRS 1.82A.a
FRS 107.20.a.ii
Net fair value changes on available-for-sale financial assets
reclassified to profit or loss
(100)
(12)
FRS 107.20.a.ii
Foreign currency translation
(181)
(82)
FRS 21.52.b
(7)
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
‘
16
1,305
2,430
FRS 1.81A.b
6,261
7,671
FRS 1.81A.c
6,091
7,211
FRS 1.81B.b.ii
170
460
FRS 1.81B.b.i
6,261
7,671
Attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
Attributable to:
Owners of the Company
Total comprehensive income from continuing operations,
net of tax
Total comprehensive income from discontinued operation,
net of tax
Total comprehensive income for the year attributable to
owners of the Company
6,585
(494)
6,091
7,379
(168)
7,211
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 13
FRS 105.33.d
FRS 105.33.d
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated statement of comprehensive income
For the financial year ended 31 December 2016
Commentary:
Complete set of financial statements
FRS 1.10
Ê Under FRS 1, a complete set of financial statements comprises:
(a) A statement of financial position as at the end of the period*
(b) A statement of profit or loss and other comprehensive income for the period
(c) A statement of changes in equity for the period
(d) A statement of cash flows for the period*
(e) Notes, comprising a summary of significant accounting policies and other explanatory
information
(f)
Comparative information in respect of the preceding period**
(g) A statement of financial position as at the beginning of the earliest comparative period when
an entity applies an accounting policy retrospectively or makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its financial statements***
*
FRS 1 replaces the term balance sheet with statement of financial position, and cash flow
statement with statement of cash flows. However, an entity is not obliged to use these new
titles.
**
An entity shall present, as a minimum, two statements of financial position, two statements
of profits or loss and other comprehensive income, two separate statements of profit or loss
(if presented), two statements of cash flows and two statements of changes in equity, and
related notes. This shall include comparative information for narrative and descriptive
information if it is relevant to understanding the current period’s financial statements.
*** In such cases, a complete set of financial statements will include three statements of financial
position.
FRS 1.10
FRS 1.38 and 38A
FRS 1.10
Presentation of statement of profit or loss and other comprehensive income and analysis of expenses
•
An entity can present a single statement of profit or loss and other comprehensive income, with
profit or loss and other comprehensive income in two sections or as two linked statements.
FRS 1.81A
When an entity present a single statement of profit or loss and other comprehensive income, with
profit or loss and other comprehensive income in two sections, the sections shall be presented
together, with the profit or loss section presented first followed directly by the other
comprehensive income section. When an entity present the profit or loss section in a separate
statement of profit or loss, the separate statement of profit or loss shall immediately precede the
statement of comprehensive income, which shall begin with profit or loss.
An entity shall present an analysis of expenses using a classification based on either the nature of
expenses or their function within the entity, whichever provides information that is reliable and
more relevant. The main consideration in choosing an appropriate analysis for disclosure
purposes should be the entity’s accounting system and management reporting system.
FRS 1.99
In this illustration, the format adopted is two linked statements with analysis of expenses by their
function within the entity. An illustration of a statement of comprehensive income in a single
statement with analysis of expenses by their nature is provided in Appendix A-1 Consolidated
statement of comprehensive income in one statement – illustrating the analysis of expenses by
nature. Where the former format is adopted (as in the case of this illustration), the entity shall
disclose additional information on the nature of expenses, including depreciation and amortisation
as well as employee benefits expense in the notes.
FRS 1.104
XYZ Holdings (Singapore) Limited | 14
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated statement of comprehensive income
For the financial year ended 31 December 2016
Commentary (continued):
Reporting of continuing and discontinued operations
Ž
The separate reporting of continuing and discontinued operations in the statement of
comprehensive income is required only where there are discontinued operations as defined by
FRS 105 Non-current Assets Held for Sale and Discontinued Operations.
FRS 105.30 and 33
An entity shall re-present the disclosures required for discontinued operations for prior periods
presented in the financial statements so that the disclosures relate to all operations that have
been discontinued by the end of the reporting period for the latest period presented.
FRS 105.34
On disposal of the disposal group, the gain or loss from discontinued operation presented on the
statement of comprehensive income includes the gain or loss on disposal of the disposal group
constituting the discontinued operation.
FRS 105.33.b.iii
Other additional disclosures
•
Additional line items, heading and subtotals should be presented on the face of the statement of
comprehensive income, when such presentation is relevant to the understanding of the entity’s
financial performance.
•
Commentary on certain line items illustrated in the statement of comprehensive income
FRS 1.85
Interest income and dividend income
“Interest income” and “dividend income” exclude interest income and dividends respectively,
from financial assets at fair value through profit or loss. XYZ Holdings (Singapore) Limited has
made a policy choice to include interest and dividend income in the net gains or net losses on
financial assets at fair value through profit or loss, instead of recognising them separately.
FRS 107 AGB5.e
Research and development
“Research and development” costs represent the aggregate amount of research and development
expenditure recognised as an expense during the period, including amortisation of deferred
development cost.
FRS 38.126 and
127
Share of results of associates and joint ventures
“Share of results of associates” and “share of results of joint ventures” are presented net of tax
and non-controlling interests in the associates.
FRS 1.IG6
Terminology used
‘
Although FRS 1 uses the terms “other comprehensive income”, “profit or loss” and “total
comprehensive income”, an entity may use other terms to describe the totals as long as the
meaning is clear. For example, an entity may use the term “net income” to describe profit or loss.
XYZ Holdings (Singapore) Limited | 15
FRS 1.8
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated statement of comprehensive income
For the financial year ended 31 December 2016
Commentary (continued):
Tax effects related to each component of other comprehensive income
FRS 1.91
’ An entity may present components of other comprehensive income either:
(a) net of related tax effects, as illustrated in the statement of comprehensive income, or
(b) before related tax effects with one amount shown for the aggregate amount of income tax
relating to those components. Œ
“ In this illustration, the share of other comprehensive income of associates relates to property
revaluation attributable to owners of the associates, which is an item that will not be reclassified to
profit or loss. If an entity has share of other comprehensive income of associates which relates to
items that may be reclassified subsequently to profit or loss, the item shall be presented under the
group of items that may be reclassified subsequently to profit or loss.
Additional illustrative disclosures:
Tax effects related to each component of other comprehensive income
ΠExtract of statement of comprehensive income illustrating other comprehensive income presented
at gross before related tax effects:
2016
$’000
2015
$’000
1,506
75
2,868
12
(269)
1,312
(466)
2,414
350
135
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net surplus on revaluation of freehold land and buildings
Share of gain on property revaluation of associates
Income tax relating to components of other comprehensive
income
Items that may be reclassified subsequently to profit or
loss
Net fair value gains on available-for-sale financial assets
Net fair value changes on available-for-sale financial assets
reclassified to profit or loss
Foreign currency translation
(120)
(181)
(15)
(82)
Income tax relating to components of other comprehensive
income
(56)
(22)
Other comprehensive income for the year, net of tax
(7)
1,305
16
2,430
Either way, the amount of income tax relating to each component of other comprehensive
income must be disclosed either in the statement of comprehensive income or in the notes. In
this illustration, the entity has chosen to disclose the related tax effects in the Note 10 “Income
tax expense”.
XYZ Holdings (Singapore) Limited | 16
FRS 1.90
FRS 12.81.ab
This page has been left blank intentionally.
XYZ Holdings (Singapore) Limited | 17
XYZ Holdings (Singapore) Limited and its subsidiaries
Balance sheets Œ•Ž
As at 31 December 2016
Group
Note
2016
$'000
Company
31
December
2015
(Restated)
$'000
1 January
2015
(Restated)•
$’000
2016
$'000
2015
$'000
Assets
Non-current assets
Property, plant and equipment
Investment properties
Intangible assets
Land use rights
Investment in subsidiaries
Investment in joint venture
Investment in associates
Deferred tax assets
Other receivables
Investment securities
13
14
15
16
17
18
19
20
21
22
30,718
4,645
2,419
5,811
1,674
10,595
470
2,793
4,608
63,733
31,064
3,955
1,333
5,733
1,523
10,321
463
2,778
3,106
60,276
28,155
3,825
1,368
5,730
1,370
10,125
455
2,715
3,630
57,373
1,079
12,147
21
16,753
30,000
603
10,582
26
17,401
28,612
23
24
25
651
2,900
24,020
122
22,852
1,512
170
6,117
58,344
398
2,650
24,400
250
24,967
1,260
105
4,858
58,888
67
2,450
25,300
312
22,095
1,150
95
3,668
55,137
53
338
4,621
5,012
122
350
4,145
4,617
2,270
60,614
58,888
55,137
2,300
7,312
4,617
124,347
119,164
37,312
33,229
801
300
2,927
1,189
295
210
6,734
2,290
155
150
6,362
2,350
1,447
-
2,115
-
FRS 1.54.l
FRS 20.24
FRS 1.54.n
FRS 1.54.m
23
31
32
26
358
17,367
3,659
22
26,623
586
18,934
2,579
31,628
942
18,367
3,067
31,393
470
1,166
3,083
414
446
2,975
FRS 11.42.b
FRS 1.54.k
FRS 1.54.m
FRS 1.54.m
11
2,071
28,694
31,628
31,393
3,083
2,975
31,920
27,260
4,229
1,642
1,525
3,488
2,273
13,415
200
20,901
1,841
1,754
1,904
13,188
18,687
1,898
954
1,517
14,290
18,659
226
5,750
5,976
231
5,628
5,859
Total liabilities
49,595
50,315
50,052
9,059
8,834
Net assets
74,752
68,849
62,458
28,253
24,395
33(a)
33(b)
11,090
(159)
54,657
7,058
9,665
51,627
5,657
9,510
48,477
3,031
11,090
(159)
16,700
622
9,665
14,309
421
FRS 1.54.r
FRS 1.54.r
FRS 1.54.r
FRS 1.54.r
11
128
72,774
1,978
74,752
66,949
1,900
68,849
61,018
1,440
62,458
28,253
28,253
24,395
24,395
FRS 105.38
124,347
119,164
112,510
37,312
33,229
Current assets
Gross amount due from customers for
contract work-in-progress
Development properties
Inventories
Prepaid operating expenses
Trade and other receivables
Investment securities
Derivatives
Cash and short-term deposits
Assets of disposal group classified as held for
sale
21
22
26
27
11
Total assets
112,510
FRS 1.54.a
FRS 1.54.b
FRS 1.54.c
FRS 1.55
FRS 1.55
FRS 1.54.e
FRS 1.54.e
FRS 1.54.o and 56
FRS 1.54.h
FRS 1.54.d
FRS 11.42.a
FRS 1.54.g
FRS 1.54.g
FRS 1.55
FRS 1.54.h
FRS 1.54.d
FRS 1.54.d
FRS 1.54.i
FRS 1.54.j
FRS 105.38
Equity and liabilities
Current liabilities
Provisions
Deferred capital grants
Income tax payable
Loans and borrowings
Gross amount due to customers for contract
work-in-progress
Trade and other payables
Other liabilities
Derivatives
Liabilities directly associated with disposal
group classified as held for sale
28
29
30
Net current assets
Non-current liabilities
Provisions
Deferred capital grants
Deferred tax liabilities
Loans and borrowings
Other payables
Equity attributable to owners of the Company
Share capital
Treasury shares
Retained earnings
Other reserves
Reserve of disposal group classified as held
for sale
Non-controlling interests
Total equity
Total equity and liabilities
28
29
20
30
31
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 18
FRS 1.54.p,
FRS 105.38
FRS 1.54.l
FRS 20.24
FRS 1.54.o and 56
FRS 1.54.m
FRS 1.54.k
FRS 1.54.q
XYZ Holdings (Singapore) Limited and its subsidiaries
Balance sheets Υ
As at 31 December 2016
Commentary:
Complete set of financial statements
Ê Please refer to commentary no. 1 of the consolidated statement of comprehensive income.
• An entity shall disclose the amount expected to be recovered or settled after more than twelve
FRS 1.61
months for each asset and liability line item that combines amounts expected to be recovered or
settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.
Ž An entity shall present current and non-current assets, and current and non-current liabilities, as
FRS 1.60
• The third balance sheet as at 1 January 2015 (the beginning of the preceding period) is presented in
FRS 1.40A
separate classifications in its balance sheets in accordance with FRS1.66 to FRS 1.67 except when a
presentation based on liquidity provides information that is reliable and more relevant. When that
exception applies, an entity shall present all assets and liabilities in order of liquidity.
accordance with FRS 1.40A due to the Group’s change in accounting policy during the financial year.
Please refer to Note 2.2 for the details of the change in accounting policy.
XYZ Holdings (Singapore) Limited | 19
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Statement of changes in equity
Attributable to owners of the Company
2016
Group
Opening balance at 1 January
2016
Profit for the year
Note
2.2
Equity,
total
Equity
attributable
to owners
of the
Company,
total
Share
capital
Treasury
shares
$’000
$’000
$’000
$’000
68,849
66,949
9,665
4,956
4,776
–
Retained
earnings
Other
reserves,
total
Fair value
adjustment
reserve
Asset
revaluation
reserve
Statutory
reserve
fund
Foreign
currency
translation
reserve
$’000
$’000
$’000
$’000
$’000
$’000
-
51,627
5,657
426
4,414
740
-
4,776
-
-
-
-
(344)
-
Premium
paid on
acquisition
of noncontrolling
interests
Employee
share
option
reserve
Gain or loss
on
reissuance
of treasury
shares
Equity
component of
convertible
redeemable
preference
shares
Reserve of
disposal
group
classified as
held for sale
Noncontrolling
interests
$’000
$’000
$’000
$’000
$’000
$’000
-
341
-
80
-
1,900
-
-
-
-
-
180
FRS 1.106.d.i
Other comprehensive income Ê
Net gain on fair value changes of
available-for-sale financial
assets
Net surplus on revaluation of
freehold land and buildings
Foreign currency translation
174
1,250
(181)
174
1,250
(171)
–
–
–
–
–
–
–
–
–
174
1,250
(171)
174
–
–
1,250
–
–
–
–
–
–
–
(171)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
FRS 1.106A, FRS
1.106.d.ii, FRS 1.82,g
and FRS 107.20.a.II
–
FRS 1.106A,FRS
1.106.d.ii,
FRS 1.82.g, FRS 16.77.f
(10)
Share of other comprehensive
income of associates
Other comprehensive income
for the year, net of tax
62
62
–
–
–
62
-
62
–
1,305
1,315
–
–
–
1,315
174
1,312
–
(171)
–
–
–
–
–
(10)
Total comprehensive income for
the year
6,261
6,091
-
-
4,776
1,315
174
1,312
-
(171)
-
-
-
–
-
170
–
–
FRS 1.106A,FRS
1.106.d.ii, FRS 1.82.g,
FRS 21.52.b
FRS 1.106A, FRS
1.106.d.ii, FRS 1.82.h,
FRS 28.39
FRS 1.106.a
XYZ Holdings (Singapore) Limited | 20
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Attributable to owners of the Company
2016
Group
Note
Equity,
total
Equity
attributable
to owners
of the
Company,
total
Share
capital
Treasury
shares
Retained
earnings
Other
reserves,
total
Fair value
adjustment
reserve
Asset
revaluation
reserve
Statutory
reserve
fund
Foreign
currency
translation
reserve
Premium
paid on
acquisition
of noncontrolling
interests
Employee
share
option
reserve
Gain or loss
on
reissuance
of treasury
shares
Equity
component of
convertible
redeemable
preference
shares
Reserve of
disposal
group
classified as
held for sale
Noncontrolling
interests
Contributions by and
distributions to owners
FRS 1.106.d.iii
Shares issued for acquisition of a
subsidiary
33(a)
Share issuance expense
33(a)
1,475
(50)
1,475
(50)
1,475
(50)
Grant of equity-settled share
options to employees
35
245
245
-
Purchase of treasury shares
33(b)
(254)
(254)
-
Treasury shares reissued
pursuant to employee share
option plans
33(b)
Dividends on ordinary shares
43
Total contributions by and
distributions to owners
81
81
(116)
(116)
1,425
Acquisition of non-controlling
interests without a change in
control
17
-
-
-
-
-
-
-
-
-
-
FRS 1.106.d.iii
-
-
-
-
-
-
-
-
-
-
-
FRS 32.39
-
-
245
-
-
-
-
-
245
-
-
-
-
FRS 102.50
-
-
-
-
-
-
-
-
-
-
-
-
FRS 32.33
-
-
-
-
-
65
-
-
-
FRS 102.50,
FRS 32.33
(254)
-
-
558
-
-
95
(1,613)
17
-
-
-
(1,613)
Changes in ownership interests in
subsidiaries
Acquisition of subsidiary
-
(159)
-
(14)
(79)
(1,613)
-
-
-
-
-
-
-
-
-
-
-
FRS 1.106.d.iii
(1,613)
231
-
-
-
-
–
166
65
–
-
-
FRS 1.106.d.iii
-
-
-
-
-
-
-
-
-
-
558
FRS 1.106.d.iii
-
-
-
-
(800)
(150)
-
-
-
(150)
-
-
-
-
(150)
-
-
-
-
(650)
Total changes in ownership
interests in subsidiaries
(242)
(150)
-
-
-
(150)
-
-
-
-
(150)
-
-
-
-
(92)
FRS 1.106.d.iii
Total transactions with owners
in their capacity as owners
(358)
(266)
1,425
-
-
-
-
(150)
166
65
-
-
(92)
FRS 1.106.d.iii
(159)
(1,613)
81
XYZ Holdings (Singapore) Limited | 21
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Attributable to owners of the Company
2016
Group
Note
Equity,
total
Equity
attributable
to owners
of the
Company,
total
Share
capital
Treasury
shares
Retained
earnings
Other
reserves,
total
Fair value
adjustment
reserve
Asset
revaluation
reserve
Statutory
reserve
fund
Foreign
currency
translation
reserve
Premium
paid on
acquisition
of noncontrolling
interests
Employee
share
option
reserve
Gain or loss
on
reissuance
of treasury
shares
Equity
component of
convertible
redeemable
preference
shares
Reserve of
disposal
group
classified as
held for sale
Noncontrolling
interests
Others
Reserve attributable to disposal
group classified as held for
sale
-
-
-
-
-
(128)
-
(128)
-
-
-
Expiry of employee share options
-
-
-
-
30
(30)
-
-
-
-
-
Transfer to statutory reserve
fund
-
-
-
-
(163)
163
-
-
163
-
-
Total Others
-
-
-
-
(133)
5
-
(128)
163
-
-
74,752
72,774
54,657
7,058
600
5,598
903
Closing balance at 31 December
2016
11
11,090
(159)
(515)
(150)
(30)
(30)
477
-
-
128
-
FRS 105.38
-
-
-
-
FRS 102.50
-
-
-
-
FRS 1.106.d.iii
-
-
128
-
65
80
128
1,978
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 22
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Attributable to owners of the Company
2015
Group
Opening balance at 1 January 2015
Profit for the year
Note
2.2
Equity,
total
Equity
attributable
to owners of
the Company,
total
Share
capital
Retained
earnings
Other
reserves,
total
Fair value
adjustment
reserve
$’000
$’000
$’000
$’000
$’000
$’000
$’000
62,458
61,018
9,510
48,477
3,031
328
2,000
613
5,241
4,841
-
4,841
-
-
-
-
Asset
revaluation
reserve
Statutory
reserve
fund
$’000
Foreign
currency
translation
reserve
Employee
share
option
reserve
$’000
$’000
(202)
-
Equity
component of
convertible
redeemable
preference
shares
$’000
Noncontrolling
interests
$’000
292
-
1,440
-
-
400
FRS 1.106.d.i
Other comprehensive income Ê
Net gain on fair value changes of available-forsale financial assets
Net surplus on revaluation of freehold land and
buildings
Foreign currency translation
Share of other comprehensive income of
associates
98
2,404
(82)
98
2,404
(142)
-
-
-
-
-
-
98
2,404
(142)
98
-
-
-
2,404
-
-
-
-
10
10
-
-
10
-
10
-
Other comprehensive income for the year, net of
tax
2,430
2,370
–
–
2,370
98
2,414
–
Total comprehensive income for the year
7,671
7,211
-
4,841
2,370
98
2,414
-
-
-
(142)
-
-
-
-
-
-
-
-
FRS 1.106A, FRS
1.106.d.ii, FRS 1.82.g
and FRS 107.20.a.II
-
FRS 1.106A, FRS
1.106.d.ii,FRS 1.82.g,
FRS 16.77.f
60
-
-
-
(142)
–
–
60
(142)
-
-
460
XYZ Holdings (Singapore) Limited | 23
FRS 1.106A, FRS
1.106.d.ii, FRS
1.82.g, FRS 21.52.b
FRS 1.106A, FRS
1.106.d.ii, FRS
1.82.h, FRS 28.39
FRS 1.106.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Attributable to owners of the Company
2015
Group
Note
Equity,
total
Equity
attributable
to owners of
the Company,
total
Share
capital
Retained
earnings
Other
reserves,
total
Fair value
adjustment
reserve
$’000
$’000
$’000
$’000
$’000
$’000
Asset
revaluation
reserve
$’000
Statutory
reserve
fund
$’000
Foreign
currency
translation
reserve
Employee
share
option
reserve
$’000
$’000
Equity
component of
convertible
redeemable
preference
shares
$’000
Noncontrolling
interests
$’000
Contributions by and distributions to owners
Grant of equity-settled share options to
employees
Exercise of employee share options
Dividends on ordinary shares
Equity component of redeemable preference
shares
Total transactions with owners in their capacity
as owners
FRS 1.106.d.iii
35
33(a)
43
150
150
-
-
150
-
-
-
-
150
-
-
FRS 102.50
72
72
155
-
(83)
-
-
-
-
(83)
-
-
FRS 102.50
-
-
-
-
-
-
-
-
FRS 1.106.d.iii
(1,582)
80
(1,280)
(1,582)
80
(1,280)
155
(1,582)
(1,582)
80
-
-
-
-
-
80
-
FRS 32.28
147
-
-
-
-
67
80
-
FRS 1.106.d.iii
(18)
-
-
FRS 102.50
-
-
FRS 1.106.d.iii
-
-
80
1,900
Others
Expiry of employee share options
-
-
-
(18)
-
-
-
-
Transfer to statutory reserve fund
-
-
-
(127)
127
-
-
127
-
Total others
-
-
-
(109)
109
-
-
127
-
68,849
66,949
9,665
5,657
426
4,414
740
Closing balance at 31 December 2015
18
51,627
(344)
(18)
341
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 24
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Retained earnings
Other reserves,
total
Employee share
option reserve
Gain or loss on
reissuance of
treasury shares
Equity component
of convertible
redeemable
preference shares
$'000
$'000
$'000
$'000
$'000
2016
Company •
Note
Opening balance at 1 January 2016
Profit for the year, representing total comprehensive income for
the year
Equity, total
Share capital
Treasury shares
$'000
$'000
$'000
24,395
9,665
-
14,309
421
341
-
80
3,974
-
-
3,974
-
-
-
-
1,475
1,475
-
-
-
-
-
-
FRS 1.106.d.iii
Contributions by and distributions to owners
FRS 1.106.d.iii
Shares issued for acquisition of a subsidiary
33(a)
Share issuance expense
33(a)
Grant of equity-settled share options to employees
35
Expiry of employee share options
Purchase of treasury shares
33(b)
Treasury shares reissued pursuant to employee share option plans
Dividends on ordinary shares
Total transactions with owners in their capacity as owners
Closing balance at 31 December 2016
FRS 1.106.d.i ,FRS
1.106.a
-
-
-
-
-
-
FRS 32.39
245
(50)
(50)
-
-
-
245
245
-
-
FRS 102.50
-
-
-
30
(30)
(30)
-
-
FRS 102.50
-
-
FRS 32.33
65
-
FRS 102.50, FRS 32.33
(254)
-
81
43
-
(254)
95
-
-
-
(14)
(79)
(1,613)
-
(1,613)
-
-
-
-
FRS 1.106.d.iii
(116)
1,425
(159)
(1,583)
201
136
65
-
FRS 1.106.d.iii
11,090
(159)
16,700
622
477
65
80
28,253
-
-
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 25
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
2015
Company •
Note
Opening balance at 1 January 2015
Profit for the year, representing total comprehensive income for
the year
Employee share
option reserve
Gain or loss on
reissuance of
treasury shares
Equity component
of convertible
redeemable
preference shares
$'000
$'000
$'000
Equity, total
Share capital
Treasury shares
Retained earnings
Other reserves,
total
$'000
$'000
$'000
$'000
$'000
23,226
9,510
-
13,424
292
292
-
-
-
2,449
-
-
-
-
2,449
-
Contributions by and distributions to owners
Grant of equity-settled share options to employees
FRS 1.106.d.i , FRS
1.106.a
FRS 1.106.d.iii
150
-
-
-
150
150
-
-
FRS 102.50
72
155
-
-
(83)
(83)
-
-
FRS 102.50
-
-
-
18
(18)
(18)
FRS 102.50
80
-
-
-
(1,582)
-
-
Total transactions with owners in their capacity as owners
(1,280)
155
Closing balance at 31 December 2015
24,395
9,665
Exercise of employee share options
35
33(a)
Expiry of employee share options
Equity component of redeemable preference shares
Dividends on ordinary shares
43
-
-
80
-
-
80
(1,582)
-
-
-
-
FRS 1.106.d.iii
-
(1,564)
129
49
-
80
FRS 1.106.d.iii
-
14,309
421
341
-
80
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 26
FRS 32.28
XYZ Holdings (Singapore) Limited and its subsidiaries
Statements of changes in equity
For the financial year ended 31 December 2016
Commentary:
Analysis of other comprehensive income for each component of equity in the statement of changes in equity
Ê
FRS 1 Presentation of Financial Statements requires an analysis of other comprehensive income for
each component of equity to be presented either in the statement of changes in equity or in the notes
to the financial statements.
In this illustration, the Group has chosen to present an analysis of other comprehensive income for
each component of equity in the statement of changes in equity.
Statement of changes in equity for the company
•
Presentation of the statement of changes in equity for the Company when consolidated financial
statements are presented is optional. Information relating to the equity items presented in the
Company’s balance sheet may be presented in the notes to the financial statements instead.
XYZ Holdings (Singapore) Limited | 27
FRS 1.106.d.ii
FRS 1.106A
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated cash flow statement Ê•
For the financial year ended 31 December 2016
2016
2015
$'000
$'000
Consolidated cash flow statement
Note
FRS 7.18.b
Operating activities
Profit before tax from continuing operations
Loss before tax from discontinued operation
7,057
11
Profit before tax, total
(551)
6,506
7,116
(193)
6,923
Adjustments for:
FRS 7.20.b and c
Amortisation of deferred capital grant
29
(239)
(180)
Amortisation of intangible assets
15
220
252
Amortisation of land use rights
16
132
130
Depreciation of property, plant and equipment
13
3,043
2,838
Grant of equity-settled share options to employees
35
245
150
Net fair value gains on investment properties
14
(489)
(129)
Net fair value gains on held for trading investment securities
6
(135)
(95)
Net fair value gains on derivatives
6
(43)
(56)
Net fair value gains on available-for-sale financial assets (transferred from
equity on disposal of investment securities)
6
(120)
(15)
Net gain on remeasuring previously held equity interest in associates to fair
value on business combination
140
-
17
235
–
Impairment loss on property, plant and equipment
13
500
–
Impairment loss on intangible assets
15
200
–
Impairment loss on investment securities
22
198
210
Fair value adjustment of contingent consideration for a business
combination Œ
Impairment loss on trade receivables
135
Net loss/(gain) on disposal of property, plant and equipment
76
Finance costs
1,715
115
(120)
1,512
Dividend income from investment securities
(526)
(406)
Interest income
(430)
(327)
Loss recognised on re-measurement to fair value less costs to sell
11
450
–
Provisions
(144)
105
Share of results of joint venture
(151)
(128)
Share of results of associates
(657)
(328)
Unrealised exchange (gain)/loss
(240)
Total adjustments
Operating cash flows before changes in working capital
120
4,115
3,648
10,621
10,571
Changes in working capital
FRS 7.20.a
Increase in development property
(250)
(200)
Increase in gross amount due from customers for contract work-in-progress
(253)
(331)
Decrease in gross amount due to customers for contract work-in-progress
(228)
Decrease/(increase) in inventories
Decrease in trade and other receivables
Decrease in prepaid operating expenses
Decrease in trade and other payables
Increase/(decrease) in other liabilities
Total changes in working capital
Cash flows from operations
Interest received
FRS 7.28
942
2,255
128
(1,562)
(356)
(1,575)
904
62
(1,864)
630
(496)
1,662
(3,856)
12,283
6,715
430
327
FRS 7.31
Interest paid
(1,834)
(1,550)
FRS 7.31
Income taxes paid
(5,682)
(3,571)
FRS 7.35
5,197
1,741
FRS 7.10
Net cash flows from operating activities
XYZ Holdings (Singapore) Limited | 28
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated cash flow statement Ê•
For the financial year ended 31 December 2016
Note
2016
2015
$'000
$'000
Investing activities
Net cash inflow on acquisition of a subsidiary
FRS 7.21
217
–
FRS 7.39
Dividend income from investment securities
526
406
FRS 7.31
Proceeds from disposal of investment securities
328
278
FRS 7.16.d
2,040
1,030
FRS 20.28
6,867
1,559
FRS 7.16.b
Proceeds from government grants
17
29
Proceeds from disposal of property, plant and equipment
Purchase of investment securities
(2,025)
(588)
FRS 7.16.c
Purchase of property, plant and equipment
13
(8,640)
(4,358)
FRS 7.16.a
Subsequent expenditure on investment properties
14
(500)
Additions to intangible assets
15
(200)
(200)
(1,387)
(1,873)
Net cash flows generated from/(used in) investing activities
–
Financing activities
FRS 7.16.a
FRS 7.16.a
FRS 7.10
FRS 7.21
Acquisition of non-controlling interests
17
(800)
Dividends paid on ordinary shares
43
(1,613)
–
(1,582)
FRS 7.42A
FRS 7.31
Purchase of treasury shares
33(b)
(254)
–
FRS 7.17.b
Proceeds from re-issuance of treasury shares
33(b)
95
–
FRS 7.17.a
–
72
FRS 7.17.a
4,259
3,000
FRS 7.17.c
Proceeds from exercise of employee share options
Proceeds from loans and borrowings
Share issuance expense
17
Repayment of loans and borrowings
–
(2,807)
Repayment of obligations under finance leases
(135)
Net cash flows (used in)/from financing activities
Net increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents •
–
(132)
(1,305)
1,358
2,505
1,226
(50)
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
(50)
27
FRS 7.17.d
FRS 7.17.e
FRS 7.10
35
FRS 7.28
3,414
2,153
FRS 7.45
5,869
3,414
FRS 7.45
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
XYZ Holdings (Singapore) Limited | 29
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated cash flow statement Ê•
For the financial year ended 31 December 2016
Additional illustrative disclosures:
Presentation of consolidated cash flow statement using direct method
Ê
In this illustration, the consolidated cash flow statement is presented using indirect method whereby
profit or loss is adjusted for the effects of non-cash transactions, deferrals, accruals and investing or
financing cash flows. FRS 7.18 allows entities to report cash flows from operating activities using
either the direct method or indirect method. The cash flow from operating activities prepared using
the direct method is illustrated below:
FRS 7.App A
Group
2016
$'000
FRS 7.18
2015
$'000
Operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest paid
Income taxes paid
Net cash flows from/(used in) operating activities
XXX
(XXX)
XXX
(XXX)
(XXX)
XXX
XXX
(XXX)
XXX
(XXX)
(XXX)
(XXX)
The cash flow from financing and investing activities under the direct method are identical to that
prepared under indirect method.
Disposal of subsidiary
•
In this illustration, there is no disposal of subsidiary or other business units during the financial year.
If there is such disposal, an entity should disclose:
(a)
(b)
(c)
(d)
FRS 7.40.a-d
The total disposal consideration;
The portion of the disposal consideration discharged by means of cash and cash equivalents;
The amount of cash and cash equivalents in the subsidiary or business unit disposed of; and
The amount of the assets and liabilities other than cash and cash equivalents in the subsidiary or
business unit disposed of, summarised by each major category.
An investment entity, as defined in FRS 110 Consolidated Financial Statements, need not apply (c)
and (d) above to an investment in subsidiary that is required to be measured at fair value through
profit or loss.
FRS 7.40A
Illustrative note disclosure:
The company disposed of XXX Limited, a wholly owned subsidiary, on 30 November 2016 at its
carrying value. The disposal consideration was fully settled in cash.
FRS 7.40.b
The value of assets and liabilities of XXX Limited recorded in the consolidated financial
statements as at 30 November 2016, and the cash flow effect of the disposal were:
FRS 7.40.d
Property, plant and equipment
Trade and other receivables
Inventories
Cash and cash equivalents
Trade and other payables
Income tax payable
Carrying value of net assets
Total consideration
Cash and cash equivalents of the subsidiary
Net cash inflow on disposal of a subsidiary
$’000
XXX
XXX
XXX
XXX
XXX
(XXX)
(XXX)
FRS 7.40.c
XXX
XXX
(XXX)
XXX
XYZ Holdings (Singapore) Limited | 30
FRS 7.40.a and b
FRS 7.40.c
FRS 7.39
XYZ Holdings (Singapore) Limited and its subsidiaries
Consolidated cash flow statement Ê•
For the financial year ended 31 December 2016
Commentary:
Contingent consideration for business combination
Œ
In this illustration, there is no payment of contingent consideration for business combination during
the year. For illustrative disclosure of contingent consideration for business combination in the year
when the amount is paid and its impact on the presentation in the statement of cash flows, please
refer to commentary no.1 of Note 32 Other liabilities.
Foreign currency translation differences
•
Foreign currency translation differences that arise on translation of foreign currency cash and cash
equivalents should be reported in the consolidated cash flow statement in order to reconcile opening
and closing balances of cash and cash equivalents, separately from operating, financing and investing
cash flows.
XYZ Holdings (Singapore) Limited | 31
FRS 7.28
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
1.
Corporate information ʌ
XYZ Holdings (Singapore) Limited (the Company) is a limited liability company
incorporated and domiciled in Singapore and is listed on the Singapore Exchange. The
immediate and ultimate holding company is Good Group (International) Ltd. •
FRS 1.138.a and c
FRS 24.13
CA 201.10
The registered office and principal place of business of the Company is located at Level
18, One Raffles Quay, North Tower, 048583, Singapore.
FRS 1.138.a
The principal activity of the Company is investment holding. The principal activities of the
subsidiaries are disclosed in Note 17 to the financial statements.
FRS 1.138.b
Commentary:
Disclosures required by FRS 1.138
Ê
The following information may be provided in the notes to the financial statements or
disclosed elsewhere in information published with the financial statements:
-
the domicile and legal form of the entity, its country of incorporation and the address of
its registered office (or principal place of business, if different from the registered
office);
-
a description of the nature of the entity’s operations and its principal activities; and
-
the name of the parent and ultimate parent of the Group.
FRS 1.138
Disclosures of name of the ultimate controlling party
• FRS 24 requires an entity to disclose the name of the entity’s parent and, if different, the
FRS 24.13
ultimate controlling party. The ultimate controlling party can be either an entity or a person.
Additional illustrative disclosures:
Change in entity’s name during the financial year
ΠIf the entity changes its name during the financial year, the change shall be disclosed.
FRS 1.51.a
Illustrative disclosure where the entity changes its name during the financial year:
With effect from [insert effective date of change], the name of the company was changed
from [XXX] to [XXX].
2.
2.1
Summary of significant accounting policies
FRS 1.117
Basis of preparation Ê
The consolidated financial statements of the Group and the balance sheet and
statement of changes in equity of the Company have been prepared in accordance with
Singapore Financial Reporting Standards (FRS).
FRS 1.16, FRS
1.51.b and FRS
1.112.a
SGX 1207.5.d
The financial statements have been prepared on the historical cost basis except as
disclosed in the accounting policies below.
FRS 1.117.a
The financial statements are presented Ë in Singapore Dollars (SGD or $) and all values
in the tables are rounded to the nearest thousand ($’000), except when otherwise
indicated.
FRS 1.51.d and e
The Accounting Standards Council announced on 29 May 2014 that Singapore
incorporated companies listed on the Singapore Exchange will apply a new financial
reporting framework identical to the International Financial Reporting Standards. The
Group will adopt the new financial reporting framework on 1 January 2018.
XYZ Holdings (Singapore) Limited | 32
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.1
Summary of significant accounting policies (continued)
Basis of preparation Ê (continued)
Commentary:
Going concern uncertainty
Ê
When preparing financial statements, management shall make an assessment of an
entity’s ability to continue as a going concern. Where the effect of the judgement made in
relation to the entity’s ability to continue as a going concern has significant effect on the
amounts recognised in the financial statements, the judgement made should be disclosed.
FRS 1.25
FRS 1.122
Financial statements shall be prepared on a going concern basis unless management
either intends to liquidate the entity or to cease trading, or has no realistic alternative but
to do so. When management is aware, in making its assessment, of material uncertainties
related to events or conditions that may cast significant doubt upon the entity’s ability to
continue as a going concern, those uncertainties shall be disclosed. Ê
FRS 1.25
Functional and presentation currency
•
When the presentation currency is different from the functional currency of the Company,
that fact shall be stated, together with disclosure of the functional currency and the
reasons for using a different presentation currency.
Additional illustrative disclosures:
Going concern uncertainty
Ê
Illustrative disclosure where the ability of the company to continue as a going concern is
dependent on the holding company undertaking to provide continuing financial support to
the company to enable it to continue as a going concern:
The Company incurred a net loss of $XXX (2015: $XXX) during the financial year ended 31
December 2016 and as at that date, the Company’s current and total liabilities
exceeded its current and total assets by $XXX (2015: $XXX) and $XXX (2015: $XXX)
respectively. These factors indicate the existence of a material uncertainty which may
cast significant doubt about the Company’s ability to continue as a going concern. The
ability of the Company to continue as a going concern depends on the holding
company undertaking to provide continuing financial support to enable the Company
to continue as a going concern.
If the Company is unable to continue in operational existence for the foreseeable future,
the Company may be unable to discharge its liabilities in the normal course of
business and adjustments may have to be made to reflect the situation that assets
may need to be realised other than in the normal course of business and at amounts
which could differ significantly from the amounts at which they are currently recorded
in the balance sheet. In addition, the Company may have to reclassify non-current
assets and liabilities as current assets and liabilities. No such adjustments have been
made to these financial statements.
XYZ Holdings (Singapore) Limited | 33
FRS 21.53
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.2
Summary of significant accounting policies (continued)
Changes in accounting policies ÊË
The accounting policies adopted are consistent with those of the previous financial year
except in the current financial year, the Group has adopted all the new and revised
standards which are effective for annual financial periods beginning on or after 1
January 2016. The adoption of these standards did not have any effect on the financial
performance or position of the Group and the Company.
Determination of expected manner of recovery of indefinite life intangible assets when
measuring deferred tax
The Group previously recognised deferred tax on indefinite life intangible assets on the
presumption that the carrying amount of the indefinite life intangible assets are
recovered through sale as the indefinite life intangible assets are not amortised.
In 2016, the IFRS Interpretations Committee (IFRIC) issued an agenda decision which
observe that the reason for not amortising an indefinite life intangible asset is not
because there is no consumption of the future economic benefits embodied in the
asset. Therefore, the determination of tax consequences of an indefinite life intangible
assets shall reflect the expected manner of recovery of the carrying amount of the
assets either through use or through sale. Based on the IFRIC agenda decision, the
Group has reassessed and determined that the carrying amount of the indefinite life
intangible assets are to be recovered through use. Ê
The change in accounting policy has been applied retrospectively. The effects of the
change are as follows:
Group
As at 31
December
2016
As at 31
December
2015
As at 1
January
2015
(Restated)
(Restated)
$’000
$’000
(41)
(41)
(41)
41
41
41
$’000
(Decrease)/increase in:
Consolidated balance sheet
Deferred tax liabilities
Goodwill
XYZ Holdings (Singapore) Limited | 34
FRS 8.28
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.2
Summary of significant accounting policies (continued)
Changes in accounting policies ÊË
Commentary:
Ê
FRSs effective for annual period beginning on or after 1 January 2016
The following FRS and INT FRS are effective for the annual period beginning on or after
1 January 2016:
•
·
Amendments to FRS 27 Equity Method in Separate Financial Statements
·
Amendments to FRS 16 and FRS 38 Clarification of Acceptable Methods of
Depreciation and Amortisation
·
Amendments to FRS 16 and FRS 41 Agriculture: Bearer Plants
·
Amendments to FRS 111 Accounting for Acquisitions of Interests in Joint
Operations
·
Improvements to FRSs (November 2014)
·
Amendments to FRS 1 Disclosure Initiative
·
Amendments to FRS 110, FRS 112 and FRS 28 Investment Entities: Applying the
Consolidation Exception
FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires the
disclosure of the amount of the adjustment for the current period and each prior period
(to the extent practicable) upon initial application of a Standard or an Interpretation. In
this illustration, it is assumed that the adoption of the new and revised standards do not
have any impact on the financial statements.
Additional illustrative disclosures
Determination of expected manner of recovery of indefinite life intangible assets when
measuring deferred tax
Ê
In this illustration, it is assumed that the application of the IFRIC agenda decision has an
impact to the measurement of deferred tax on the indefinite life intangible assets
acquired as part of a business combination that gave rise to a goodwill and the goodwill
was not impaired before 1 January 2016.
In the event where the indefinite life intangible assets were (i) acquired as part of a
business combination that gave rise to a negative goodwill or (ii) acquired as part of a
business combination that gave rise to a goodwill and the goodwill was impaired before 1
January 2016, the following is an illustrative disclosure on the impact arising from the
changes in accounting policy.
The changes in accounting policy has been applied retrospectively. The effects of the
change are as follows:
Group
As at 31
December
2016
(Decrease)/increase in:
$’000
As at 31
December
2015
(Restated)
$’000
As at 1
January
2015
(Restated)
$’000
Consolidated balance sheet
Deferred tax liabilities
Retained earnings*
(XX)
(XX)
(XX)
XX
XX
XX
*The adjustment to opening retained earnings should also be reflected in the
statement of changes in equity.
XYZ Holdings (Singapore) Limited | 35
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.3
Summary of significant accounting policies (continued)
Standards issued but not yet effective Ê
The Group has not adopted the following standards applicable to the Group that have
been issued but not yet effective:
Description
Effective for annual periods
beginning on or after
Amendments to FRS 7 Disclosure Initiative
1 January 2017
FRS 109 Financial Instruments
1 January 2018
FRS 115 Revenue from Contracts with Customers
1 January 2018
FRS 116 Leases
1 January 2019
Except for FRS 109, FRS 115 and FRS 116, the directors expect that the adoption of
the other standards above will have no material impact on the financial statements in
the period of initial application. The nature of the impending changes in accounting
policy on adoption of FRS 109, FRS 115 and FRS 116 are described below.
The disclosures in response to standards issued but not yet effective below are
based on the specific circumstances of XYZ Holdings (Singapore) Limited and
may not be applicable or relevant to other entities. Each entity should
customise the information disclosed according to the specific circumstances.
FRS 115 Revenue from Contracts with Customers Ê
FRS 115 establishes a five-step model to account for revenue arising from contracts
with customers. Under FRS 115, revenue is recognised at an amount that reflects the
consideration which an entity expects to be entitled in exchange for transferring goods
or services to a customer.
The new revenue standard will supersede all current revenue recognition requirements
under FRS. Either a full retrospective application or a modified retrospective
application is required for annual periods beginning on or after 1 January 2018. Early
adoption is permitted.
During 2015, the Group performed a preliminary assessment of FRS 115 which is
subject to changes arising from a more detailed ongoing analysis. The Group is in a
business of providing sale of electronics equipment, installation of fire prevention
equipment, property development and construction. The Group expects the following
impact upon adoption of FRS 115:
(a) Variable consideration
Some contracts with customers provide a right of return, trade discounts or volume
rebates. Currently, the Group recognises revenue from the sale of goods measured at
the fair value of the consideration received or receivable, net of returns and allowance,
trade discounts and volume rebates. If revenue cannot be reliably measured, the Group
defers revenue recognition until the uncertainty is resolved. Such provisions give rise to
variable consideration under FRS 115, and will be required to be estimated at contract
inception. FRS 115 requires the estimated variable consideration to be constrained to
prevent over-recognition of revenue. The Group continues to assess individual contracts
to determine the estimated variable consideration and related constraint. The group
expects that application of the constraint may result in more revenue being deferred
than is under current FRS. Ë
XYZ Holdings (Singapore) Limited | 36
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.3
Summary of significant accounting policies (continued)
Standards issued but not yet effective Ê
FRS 115 Revenue from Contracts with Customers (continued) Ê
(b) Right of return
The Group currently recognises a provision for the net margin arising from expected
returns. Under FRS 115, an entity estimates the transaction price and recognises
revenue based on the amounts to which the entity expects to be entitled through the
end of the return period, and recognises such amount of expected returns as a refund
liability, representing its obligation to return the customer’s consideration. The Group
expects to recognise a liability for the refund obligation and an asset for the right to
recover the returned foods under FRS 115.
Transition
The following practical expedients are available when applying FRS 115 retrospectively.
-
For completed contracts, an entity need not restate contracts that begin and end
with the same annual reporting period or are completed contracts at the beginning
of the earliest period presented.
-
For completed contracts that have variable consideration, an entity may use the
transaction price at the date the contract was completed rather than estimating
the variable consideration amounts in the comparative reporting periods; and
-
For contracts that were modified before the beginning of the earliest period
presented, an entity need not retrospectively restate the contract for those
contract modifications. Instead, an entity shall reflect the aggregate effect of all of
the modifications that occur before the beginning of the earliest period presented
when:
-
o
identifying the satisfied and unsatisfied performance obligations;
o
determining the transaction price; and
o
allocating the transaction price to the satisfied and unsatisfied
performance obligations.
For all reporting periods presented before the date of initial application, an entity
need not disclose the amount of the transaction price allocated to the remaining
performance obligations and an explanation of when the entity expects to
recognise that amount as revenue
The Group plans to adopt the new standard on the required effective date using the full
retrospective method and apply all the practical expedients available for full
retrospective approach under FRS 115 as listed above.
XYZ Holdings (Singapore) Limited | 37
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.3
Summary of significant accounting policies (continued)
Standards issued but not yet effective Ê
Additional illustrative disclosures
Impact on adoption of FRS 115 on sale of completed development property and precompletion contracts for sale of development property
Ê
In this illustration, the Group does not have any sale of completed development property
and pre-completion contracts for sale of development property.
The following are Illustrative disclosures for impact on adoption of FRS 115 on sale of
completed development property and pre-completion contracts for sale of development
property.
(a) Development properties and construction contracts
The Group is engaged in development and construction business for both residential and
commercial properties. The Group has assessed that for most of its residential and
commercial developments, performance obligations for the sale of pre-completion units
will be satisfied over time. Accordingly, some of the revenue previously recognised using
the completed contract method will be adjusted upon adoption of FRS 115 to recognise
the revenue over time and the Group expects an increase in its net assets arising from the
adoption of FRS 115.
(b) Sales commissions paid to sales or marketing agents on the sale of real estate units
The Group pays sales commissions to sales or marketing agents on the sale of real estate
units and currently recognised such sales commissions as expense when incurred. FRS
115 requires an entity to capitalise incremental costs to obtain a contract with a
customer if these costs are recoverable and amortised to profit or loss as the entity
expects to recognise the related revenue. Upon adoption of FRS 115, the Group expects
to capitalise such sales commissions.
FRS 109 Financial Instruments Ê
FRS 109 introduces new requirements for classification and measurement of financial
assets, impairment of financial assets and hedge accounting. Financial assets are
classified according to their contractual cash flow characteristics and the business
model under which they are held. The impairment requirements in FRS 109 are based
on an expected credit loss model and replace the FRS 39 incurred loss model.
(a) Classification and measurement
The Group expects to have mixed business model. The Group intends to hold its
currently held-to-maturity debt instruments assets to collect contractual cash flows,
and accordingly measured at amortised cost when it applies FRS 109. For its availablefor-sale debt securities, the Group intends to hold the debt instrument to collect
contractual cash flows and sell, and accordingly measured at fair value through other
comprehensive income when it applies FRS 109. The Group does not expect any
significant impact to arise from these changes.
XYZ Holdings (Singapore) Limited | 38
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.3
Summary of significant accounting policies (continued)
Standards issued but not yet effective Ê
FRS 109 Financial Instruments (continued) Ê
For equity securities, the Group will continue to measure its currently held-for-trading
equity securities and one of its available-for-sale quoted equity securities at fair value
though profit or loss (FVTPL). The Group does not expect any significant impact arising
from these changes. The Group will elect to measure its currently held available-forsale unquoted equity securities at fair value through other comprehensive income
(FVOCI). In addition, the Group currently measures one of its investments in unquoted
equity securities at cost. Under FRS 109, the Group will be required to measure the
investment at fair value. Any difference between the previous carrying amount under
FRS 39 and the fair value would be recognised in the opening retained earnings when
the Group applies FRS 109.
(b) Impairment
FRS 109 requires the Group to record expected credit losses on all of its debt
securities, loans and trade receivables, either on a 12-month or lifetime basis. The
Group expects to apply the simplified approach and record lifetime expected losses on
all trade receivables. Upon application of the expected credit loss model, the Group
expects a significant impact on its equity due to unsecured nature of its loans and
receivables, but it will need to perform a more detailed analysis which considers all
reasonable and supportable information, including forward-looking elements to
determine the extent of impact.
Transition
The Group plans to adopt the new standard on the required effective date without
restating prior periods’ information and recognises any difference between the
previous carrying amount and the carrying amount at the beginning of the annual
reporting period at the date of initial application in the opening retained earnings.
Additional illustrative disclosures
Impact on adoption of FRS 109 on hedge accounting
Ê
In this illustration, the Group does not apply hedge accounting.
The following are Illustrative disclosures for impact on adoption of FRS 109 on hedge
accounting.
The Group currently designates only the intrinsic value of an option as hedging instrument
for one of its hedge relationships and accounts for the fair value changes in time value of
option in profit or loss. FRS 109 requires fair value changes in time value of options not
designated as hedging instrument to be accounted as cost of hedging. Cost of hedging are
required to be deferred in other comprehensive income and recognised in the profit or
loss depending on the nature of the hedge item, whether it is transaction related or timeperiod related. Upon adoption of FRS 109, the Group will defer the recognition of time
value of options in other comprehensive income (OCI) retrospectively and expects an
increase in opening retained earnings.
For illustration of accounting policies and disclosures relating to hedge accounting,
please refer to Appendix B-2 Hedge Accounting.
XYZ Holdings (Singapore) Limited | 39
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.3
Summary of significant accounting policies (continued)
Standards issued but not yet effective Ê
FRS 116 Leases
FRS 116 requires lessees to recognise most leases on balance sheets to reflect the
rights to use the leased assets and the associated obligations for lease payments as
well as the corresponding interest expense and depreciation charges. The standard
includes two recognition exemption for lessees – leases of ‘low value’ assets and shortterm leases. The new standard is effective for annual periods beginning on or after 1
January 2019.
The Group is currently assessing the impact of the new standard and plans to adopt the
new standard on the required effective date. The Group expects the adoption of the
new standard will result in increase in total assets and total liabilities, EBITDA and
gearing ratio.
Commentary:
Standards issued but not yet effective
Œ
FRS 8 requires an entity to:
(a) disclose those standards or interpretations that have been issued which are not yet
effective; and
(b) provide known or reasonably estimable information to assess the possible impact
that the application of such FRSs will have on the entity’s financial statements in
the period of initial application.
Therefore, the Group has listed those standards and interpretations that are issued but
not yet effective and relevant to the Group. For example, Amendments to FRS 16 and
FRS 41 Agriculture – Bearer Plants and FRS 114 Regulatory Deferral Accounts are not
relevant and have been excluded.
The following is a list of standards and interpretations issued but not effective as at 30
September 2016. • Each entity should customise the note accordingly to include
standards that are applicable to the entity.
Description
Effective for
annual periods
beginning on or
after
Amendments to FRS 7 Disclosure Initiative
1 January 2017
Amendments to FRS 12 Recognition of Deferred Tax Assets for
Unrealised Losses
1 January 2017
FRS 109 Financial Instruments Ž
1 January 2018
FRS 115 Revenue from Contracts with Customers
1 January 2018
FRS 116 Leases
1 January 2019
Amendments to FRS 110 and FRS 28 Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture •
Date to be
determined
XYZ Holdings (Singapore) Limited | 40
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.3
Summary of significant accounting policies (continued)
Standards issued but not yet effective Ê
Commentary:
• In this illustration, the Group expects that application of the variable considerations and
constraint under FRS 115 may result in more revenue being deferred than is under
current FRS.
However, depending on the requirements entities were previously applying, some
entities may recognise revenue sooner under the new standard, while others may
recognise revenue later.
Ž
In this illustration, the Group does not early adopt FRS 109 Financial Instruments.
The illustrative disclosure of early adoption of FRS 109 for classification and
measurement and impairment is illustrated in Appendix B-1 Financial Instruments under
FRS 109.
The illustrative disclosure of early adoption of FRS 109 for hedge accounting is
illustrated in Appendix B-2 Hedge accounting under FRS 109.
•
In August 2015, the International Accounting Standards Board (IASB) issued an
amendment to defer the effective date of these Amendments to FRS 110 and FRS 28 to
a date to be decided after the IASB completes its research project on equity accounting.
•
In June 2016, the IASB issued amendments to IFRS 2 Classification and Measurement of
Share-based Payment Transactions. At the date of this publication, the amendment has
not been adopted as FRS in Singapore. If the amendment is adopted as FRS before the
financial statements for the year ended 31 December 2016 are authorised for issue,
Note 2.3 should be updated to:
(a) include the amendment; and
(b) provide known or reasonably estimable information to assess the possible impact that
the application of the amendment will have on the entity’s financial statements in the
period of initial application.
XYZ Holdings (Singapore) Limited | 41
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
Summary of significant accounting policies (continued)
Notes to users:
The summary of significant accounting policies in this illustration are based on assumed
circumstances of XYZ Holdings (Singapore) Limited and may not be relevant to all entities. Each
entity should customise the significant accounting policies disclosed according to the specific
circumstances relevant to the entity.
2.4
Basis of consolidation and business combinations
a)
Basis of consolidation Œ
The consolidated financial statements comprise the financial statements of the
Company and its subsidiaries as at the end of the reporting period. The
financial statements of the subsidiaries used in the preparation of the
consolidated financial statements are prepared for the same reporting date as
the Company. • Consistent accounting policies are applied to like transactions
and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses
resulting from intra-group transactions and dividends are eliminated in full.
Subsidiaries are consolidated from the date of acquisition, being the date on
which the Group obtains control, and continue to be consolidated until the date
that such control ceases.
b)
FRS 110.4
FRS
110.Appendix A
FRS 110.B92
FRS 110.19 and
B87
FRS 110.B86.c
FRS 110.20 and
B88
Losses within a subsidiary are attributed to the non-controlling interest even if
that results in a deficit balance.
FRS 110.B94
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:
FRS 110.23
FRS 110.B98
-
de-recognises the assets (including goodwill) and liabilities of the
subsidiary at their carrying amounts at the date when control is lost;
-
de-recognises the carrying amount of any non-controlling interest;
-
de-recognises the cumulative translation differences recorded in equity;
-
recognises the fair value of the consideration received;
-
recognises the fair value of any investment retained;
-
recognises any surplus or deficit in profit or loss;
-
re-classifies the Group’s share of components previously recognised in
other comprehensive income to profit or loss or retained earnings, as
appropriate.
Business combinations and goodwill
Business combinations are accounted for by applying the acquisition method.
Œ• Identifiable assets acquired and liabilities Ì assumed in a business
combination are measured initially at their fair values at the acquisition date.
Acquisition-related costs are recognised as expenses in the periods in which
the costs are incurred and the services are received.
XYZ Holdings (Singapore) Limited | 42
FRS 103.4
FRS 103.10 and
18
FRS 103.53
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
Summary of significant accounting policies (continued)
2.4 Basis of consolidation and business combinations (continued)
b)
Business combinations and goodwill (continued)
Any contingent consideration to be transferred by the acquirer will be
recognised at fair value at the acquisition date. Subsequent changes to the fair
value of the contingent consideration which is deemed to be an asset or
liability, will be recognised in profit or loss. Ì
The Group elects for each individual business combination, whether noncontrolling interest in the acquiree (if any), that are present ownership
interests and entitle their holders to a proportionate share of net assets in the
event of liquidation, is recognised on the acquisition date at fair value, or at
the non-controlling interest’s proportionate share of the acquiree’s identifiable
net assets. Í Other components of non-controlling interests are measured at
their acquisition date fair value, unless another measurement basis is required
by another FRS.
Any excess of the sum of the fair value of the consideration transferred in the
business combination, the amount of non-controlling interest in the acquiree
(if any), and the fair value of the Group’s previously held equity interest in the
acquiree (if any), over the net fair value of the acquiree’s identifiable assets
and liabilities is recorded as goodwill. In instances where the latter amount
exceeds the former, the excess is recognised as gain on bargain purchase in
profit or loss on the acquisition date.
Goodwill is initially measured at cost. Following initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated to the Group’s cashgenerating units that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree
are assigned to those units. Í
The cash-generating units to which goodwill have been allocated is tested for
impairment annually • and whenever there is an indication that the cashgenerating unit may be impaired. Impairment is determined for goodwill by
assessing the recoverable amount of each cash-generating unit (or group of
cash-generating units) to which the goodwill relates.
XYZ Holdings (Singapore) Limited | 43
FRS 103.39, 40
and 58
FRS 103.19
FRS 103.32
FRS 103.34
FRS 103.B63.a
FRS 36.80
FRS 36.90
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.4
Summary of significant accounting policies (continued)
Basis of consolidation and business combinations (continued)
Commentary:
Investment entities
Ê FRS 110 provides exception to the consolidation requirement for entities that meet the
definition of an investment entity. The exception to consolidation requires investment
entities to account for subsidiaries at fair value through profit or loss in accordance with
FRS 39 Financial Instrument: Recognition and Measurement.
Please refer to commentary no.9 in Note 17 Investment in subsidiaries for disclosure
requirements.
Reporting date of subsidiary
• The financial statements of the parent and its subsidiaries used in the preparation of the
FRS 110.B92
Where it is impracticable to do so, the parent may use the financial statements of a
subsidiary prepared as of a reporting date different from that of the parent, provided
adjustments are made for the effects of significant transactions or events that occur
between that date and the date of the parent’s financial statements, and the difference
between the reporting dates of the subsidiary and parent is no more than three months.
In addition, the length of the reporting periods and any difference in the reporting dates
shall be the same from period to period.
FRS 110.B93
When the financial statements of a subsidiary used in the preparation of consolidated
financial statements are as of a date or for a period that is different from that of the
consolidated financial statements, an entity shall disclose the date of the end of the
reporting period of the financial statements of that subsidiary and the reason for using a
different date or period.
FRS 112.11
consolidated financial statements shall be prepared as of the same reporting date. When
the end of the reporting period of the parent is different from that of a subsidiary, the
subsidiary prepares, for consolidation purposes, additional financial statements as of the
same date as the financial statements of the parent, unless it is impracticable to do so.
Contingent consideration
Ì
If there is no contingent consideration recognised in a business combination, the
accounting policy is not required.
Measurement of non-controlling interest
• FRS 103 provides acquirers with the option of measuring non-controlling interest arising
in a business combination that are present ownership interests and entitle their holders to
a proportionate share of net assets of the subsidiary in the event of liquidation at either:
-
Fair value; or
-
The non-controlling interest’s proportionate interest in the acquiree’s identifiable net
assets.
The option is elected for each individual business combination and does not constitute an
accounting policy choice for similar transactions. Selecting the option will require
management to carefully consider their future intentions regarding transactions with noncontrolling interest, since the two options, combined with the revisions to accounting for
changes in ownership interest of a subsidiary will potentially result in significantly
different amounts of goodwill and equity.
Goodwill
• FRS 36 Impairment of Assets permits annual impairment test for goodwill and intangible
assets with indefinite useful lives to be performed at any time during the year provided it
is at the same time each year. Different goodwill and intangible assets may be tested at
different times.
XYZ Holdings (Singapore) Limited | 44
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.4
Summary of significant accounting policies (continued)
Basis of consolidation and business combinations (continued)
Additional illustrative disclosures:
Business combinations involving entities under common control
Œ
In this illustration, there is no business combination involving entities under common
control. Where a business combination involves entities or businesses under common
control, it is outside the scope of FRS 103 and may be accounted for using the pooling of
interest method or the acquisition method (when the transaction has substance from the
perspective of the reporting entity).
Illustrative accounting policy where the pooling of interest method is applied:
Business combinations involving entities under common control are accounted for by
applying the pooling of interest method which involves the following:
· The assets and liabilities of the combining entities are reflected at their carrying
amounts reported in the consolidated financial statements of the controlling holding
company.
· No adjustments are made to reflect the fair values on the date of combination, or
recognise any new assets or liabilities.
· No additional goodwill is recognised as a result of the combination.
· Any difference between the consideration paid/transferred and the equity ‘acquired’ is
reflected within the equity as merger reserve.
· The statement of comprehensive income reflects the results of the combining entities
for the full year, irrespective of when the combination took place.
Comparatives are restated to reflect the combination as if it had occurred from the
beginning of the earliest period presented in the financial statements or from the date the
entities had come under common control, if later.
Business combinations achieved in stages
•
In this illustration, there is no business combinations achieved in stages.
Illustrative accounting policy where there is business combinations achieved in stages:
In business combinations achieved in stages, previously held equity interests in the
acquiree are remeasured to fair value at the acquisition date and any corresponding gain
or loss is recognised in profit or loss.
FRS 103.42
Contingent liabilities recognised in a business combination
Ì
In this illustration, there is no contingent liabilities recognised in a business combination.
Illustrative accounting policy where there is contingent liabilities assumed in the business
combination:
A contingent liability recognised in a business combination is initially measured at its fair
value. Subsequently, it is measured at the higher of:
FRS 103.56
- The amount that would be recognised in accordance with the accounting policy for
provisions set out in Note 2.21; or
- The amount initially recognised less, when appropriate, cumulative amortisation
recognised in accordance with guidance for revenue recognition.
Goodwill
Í
In this illustration, the Group does not have goodwill which forms cash generating unit in
which part of the operation within that cash generating unit is disposed of.
Illustrative accounting policy for goodwill which forms cash generating unit in which part of
the operation within that cash generating unit is disposed of:
Where goodwill forms part of a cash-generating unit and part of the operation within that
cash-generating 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
disposal of the operation. Goodwill disposed of in this circumstance is measured based on
the relative fair values of the operations disposed of and the portion of the cashgenerating unit retained.
XYZ Holdings (Singapore) Limited | 45
FRS 36.86
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.5
Summary of significant accounting policies (continued)
Transactions with non-controlling interests
Non-controlling interest represents the equity in subsidiaries not attributable, directly
or indirectly, to owners of the Company.
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss
of control are accounted for as equity transactions. In such circumstances, the carrying
amounts of the controlling and non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiary. Any difference between the
amount by which the non-controlling interest is adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to owners
of the Company.
2.6
FRS 110.Appendix
A
FRS 110.22
FRS 110.23
FRS 110.B96
Foreign currency Ê
The financial statements are presented in Singapore Dollars, which is also the
Company’s functional currency. Each entity in the Group determines its own functional
currency and items included in the financial statements of each entity are measured
using that functional currency.
a)
b)
FRS 1.51.d
Transactions and balances
Transactions in foreign currencies are measured in the respective functional
currencies of the Company and its subsidiaries and are recorded on initial
recognition in the functional currencies at exchange rates approximating those
ruling at the transaction dates. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the end of
the reporting period. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as
at the dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at the date
when the fair value was measured.
FRS 21.21
Exchange differences arising on the settlement of monetary items or on
translating monetary items at the end of the reporting period are recognised in
profit or loss. •
FRS 21.28
FRS 21.23
Consolidated financial statements
For consolidation purpose, the assets and liabilities of foreign operations are
translated into SGD at the rate of exchange ruling at the end of the reporting
period and their profit or loss are translated at the exchange rates prevailing at
the date of the transactions. The exchange differences arising on the
translation are recognised in other comprehensive income. On disposal of a
foreign operation, the component of other comprehensive income relating to
that particular foreign operation is recognised in profit or loss.
FRS 21.39
FRS 21.48
Additional illustrative disclosures:
Partial disposal of foreign operation
Ê
In this illustration, the Group does not have partial disposal of foreign operation.
Illustrative accounting policy for foreign currency for partial disposal of foreign
operation.
In the case of a partial disposal without loss of control of a subsidiary that
includes a foreign operation, the proportionate share of the cumulative
amount of the exchange differences are re-attributed to non-controlling
interest and are not recognised in profit or loss.
XYZ Holdings (Singapore) Limited | 46
FRS 21.48C
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.6
Summary of significant accounting policies (continued)
Foreign currency (continued) Ê
Additional illustrative disclosures (continued):
Partial disposal of foreign operation (continued)
Ê
For partial disposals of associates or jointly controlled entities that are
foreign operations, the proportionate share of the accumulated exchange
differences is reclassified to profit or loss.
Net investment in foreign operations
•
In this illustration, the Group does not have exchange differences arising from
monetary items that form part of the Group’s net investment in foreign
operation.
Illustrative accounting policy for exchange differences arising from monetary
items that form part of the Group’s net investment in foreign operation.
Exchange differences arising on monetary items that form part of the
Group’s net investment in foreign operations are recognised initially in other
comprehensive income and accumulated under foreign currency translation
reserve in equity. The foreign currency translation reserve is reclassified
from equity to profit or loss of the Group on disposal of the foreign
operation.
2.7
FRS 21.32 and 48
Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. Subsequent to
recognition, property, plant and equipment other than freehold land and buildings are
measured at cost less accumulated depreciation and any accumulated impairment
losses.
Freehold land and buildings are measured at fair value less accumulated depreciation
on buildings and impairment losses recognised after the date of the revaluation.
Valuations are performed with sufficient regularity to ensure that the carrying amount
does not differ materially from the fair value of the freehold land and buildings at the
end of the reporting period.
Any revaluation surplus is recognised in other comprehensive income and accumulated
in equity under the asset revaluation reserve, except to the extent that it reverses a
revaluation decrease of the same asset previously recognised in profit or loss, in which
case the increase is recognised in profit or loss. A revaluation deficit is recognised in
profit or loss, except to the extent that it offsets an existing surplus on the same asset
carried in the asset revaluation reserve.
Any accumulated depreciation as at the revaluation date is eliminated against the gross
carrying amount of the asset and the net amount is restated to the revalued amount of
the asset. Ê The revaluation surplus included in the asset revaluation reserve in
respect of an asset is transferred directly to retained earnings on retirement or
disposal of the asset. •
FRS 16.15 and 16
FRS 16.30
FRS 16.31 and
73.a
FRS 16.39
FRS 16.40
FRS 16.35.b
FRS 16.41
Freehold land has an unlimited useful life and therefore is not depreciated.
Depreciation is computed on a straight-line basis over the estimated useful lives of the
assets as follows:
-
Buildings: 40 years
Plant and equipment: 3 to 15 years
Furniture and fixtures: 5 to 20 years
XYZ Holdings (Singapore) Limited | 47
FRS 16.73.b and c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.7
Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
Assets under construction included in plant and equipment are not depreciated as
these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate that the carrying value may not be
recoverable.
The residual value, useful life and depreciation method are reviewed at each financial
year-end, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in profit or loss in the year the asset is
derecognised.
FRS 36.9
FRS 16.51
FRS 16.61
FRS 16.67
FRS 16.68
Commentary:
Revaluation of property, plant and equipment
2.8
Ê
When an item of property, plant and equipment is revalued, any accumulated depreciation
at the date of the revaluation may instead be restated proportionately with the change in
the gross carrying amount of the asset so that the carrying amount of the asset after
revaluation equals its revalued amount. This method is often used when an asset is
revalued by means of applying an index to its depreciated replacement cost.
•
Alternatively, the entity may adopt a policy to make an annual transfer of the revaluation
surplus to retained earnings as the asset is used. In such a case, the amount of the
surplus transferred would be the difference between depreciation based on the revalued
carrying amount of the asset and depreciation based on the asset’s original cost.
FRS 16.35.a
FRS 16.41
Investment properties ÊÌ
Investment properties are properties that are either owned by the Group or leased
under a finance lease that are held to earn rentals or for capital appreciation, or both,
rather than for use in the production or supply of goods or services, or for
administrative purposes, or in the ordinary course of business. Investment properties
comprise completed investment properties and properties that are being constructed
or developed for future use as investment properties. Properties held under operating
leases are classified as investment properties when the definition of an investment
property is met.
FRS 40.5
Investment properties are initially measured at cost, including transaction costs.
FRS 40.20
Subsequent to initial recognition, investment properties are measured at fair value. •
Gains or losses arising from changes in the fair values of investment properties are
included in profit or loss in the year in which they arise.
FRS 40.33
Investment properties are derecognised when either they have been disposed of or
when the investment property is permanently withdrawn from use and no future
economic benefit is expected from its disposal. Any gains or losses on the retirement or
disposal of an investment property are recognised in profit or loss in the year of
retirement or disposal.
XYZ Holdings (Singapore) Limited | 48
FRS 40.8.e
FRS 40.6
FRS 40.35
FRS 40.66
FRS 40.69
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.8
Summary of significant accounting policies (continued)
Investment properties ÊÌ (continued)
Commentary:
Investment properties
Ê
Judgement is needed to determine whether a property qualifies as investment property.
When classification is difficult, the entity should disclose the criteria developed by the entity
so that it can exercise that judgement consistently in accordance with the definition of
investment property.
FRS 40.14 and 75.c
•
Alternatively, the entity may adopt the cost model which is to measure investment
properties at cost less accumulated depreciation and accumulated impairment losses. In
these circumstances, disclosure about the cost basis and depreciation rates would be
required. This option is not available if the entity accounts for property interest held under
an operating lease as investment property.
FRS 40.30 and 56
In addition, for any investment properties recorded at cost, FRS 40 requires disclosure
about the fair value, including disclosures about the methods and significant assumptions
used to determine the fair value. Therefore, companies would still need to determine the
fair value of the investment properties. In the exceptional cases when an entity cannot
measure the fair value of investment properties reliably, it shall disclose:
FRS 40.79.e
FRS 40.34
(a) a description of the investment properties;
(b) an explanation of why fair value cannot be measured reliably; and
(c) if possible, the range of estimate within which fair value is highly likely to lie.
Ž
If an owner-occupied property becomes an investment property that will be carried at fair
value, the entity shall treat any difference at that date between the carrying amount of the
property in accordance with FRS 16 and its fair value in the same way as a revaluation in
accordance with FRS 16.
XYZ Holdings (Singapore) Limited | 49
FRS 40.61
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.9
Summary of significant accounting policies (continued)
Intangible assets
Intangible assets acquired separately are measured initially at cost. Following initial
acquisition, intangible assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses. Ê Internally generated intangible assets,
excluding capitalised development costs, are not capitalised and expenditure is
reflected in profit or loss in the year in which the expenditure is incurred.
FRS 38.24
FRS 38.33
The useful lives of intangible assets are assessed as either finite or indefinite.
FRS 38.88
Intangible assets with finite useful lives are amortised over the estimated useful lives
and assessed for impairment whenever there is an indication that the intangible asset
may be impaired. The amortisation period and the amortisation method are reviewed at
least at each financial year-end. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset is accounted
for by changing the amortisation period or method, as appropriate, and are treated as
changes in accounting estimates.
FRS 38.97 and
118.b
FRS 36.9
Intangible assets with indefinite useful lives or not yet available for use are tested for
impairment annually •, or more frequently if the events and circumstances indicate
that the carrying value may be impaired either individually or at the cash-generating
unit level. Such intangible assets are not amortised. The useful life of an intangible
asset with an indefinite useful life is reviewed annually to determine whether the useful
life assessment continues to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
FRS 36.10.a
Gains or losses arising from de-recognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and
are recognised in profit or loss when the asset is derecognised.
FRS 38.113
a)
FRS 38.104
FRS 36.9
FRS 38.107
FRS 38.109
Brands
The brands were acquired in business combinations. The useful lives of the
brands are estimated to be indefinite because based on the current market
share of the brands, management believes there is no foreseeable limit to the
period over which the brands are expected to generate net cash inflows for the
Group.
b)
FRS 38.74
FRS 38.118.a
FRS 38.122.a
Research and development costs
Research costs are expensed as incurred. Deferred development costs arising
from development expenditures on an individual project are recognised as an
intangible asset when the Group can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how the asset will
generate future economic benefits, the availability of resources to complete
and the ability to measure reliably the expenditures during the development.
XYZ Holdings (Singapore) Limited | 50
FRS 38.54
FRS 38.57
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.9
Summary of significant accounting policies (continued)
Intangible assets (continued)
b)
Research and development costs (continued)
Following initial recognition of the deferred development costs as an intangible
asset, it is carried at cost less accumulated amortisation and any accumulated
impairment losses. Amortisation of the intangible asset begins when
development is complete and the asset is available for use. Deferred
development costs have a finite useful life and are amortised over the period
of expected sales from the related project (ranging from 4 to 8 years) on a
straight line basis.
c)
FRS 38.74
FRS 38.118.a and b
Club membership
Club membership was acquired separately and is amortised on a straight line
basis over its finite useful life of 10 years.
FRS 38.118.a and b
Commentary:
Intangible assets
2.10
Ê
Alternatively, the entity may adopt the revaluation model which is to measure intangible
assets at fair value less accumulated amortisation and accumulated impairment losses.
This option is only available if the fair value can be determined by reference to an active
market.
•
Please refer to commentary no.5 of Note 2.4 Business combinations and goodwill.
FRS 38.75
Land use rights Ê
Land use rights are initially measured at cost. Following initial recognition, land use
rights are measured at cost less accumulated amortisation. The land use rights are
amortised on a straight-line basis over the lease term of 50 years.
Commentary:
Land use rights
Ê
Long-term land-use rights are leases under the definition of FRS 17. In this illustration, it
is assumed that the lease does not transfer substantially all the risks and rewards
incidental to ownership of the land. Therefore, the lease is an operating lease and the
payments made on acquiring the land-use right represent prepaid lease payments.
XYZ Holdings (Singapore) Limited | 51
FRS 17.8
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.11
2.12
Summary of significant accounting policies (continued)
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset
may be impaired. If any indication exists, or when an annual impairment testing for an
asset is required, the Group makes an estimate of the asset’s recoverable amount.
FRS 36.9
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair
value less costs of disposal and its value in use 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. Where the carrying amount of an asset or
cash-generating unit exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount.
FRS 36.18 and 22
Impairment losses of continuing operations are recognised in profit or loss, except for
assets that are previously revalued where the revaluation was taken to other
comprehensive income. In this case, the impairment is also recognised in other
comprehensive income up to the amount of any previous revaluation.
FRS 36.60
A previously recognised impairment loss is reversed only if there has been a change in
the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case, the carrying amount of the asset is
increased to its recoverable amount. That increase cannot exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss been
recognised previously. Such reversal is recognised in profit or loss unless the asset is
measured at revalued amount, in which case the reversal is treated as a revaluation
increase.
FRS 36.114
FRS 36.59
FRS 36.117
FRS 36.119
Subsidiaries
A subsidiary is an investee that is controlled by the Group. The Group controls an
investee when it 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.
In the Company’s separate financial statements, investments in subsidiaries are
accounted for at cost less impairment losses. Ê
FRS 110.6
FRS 27.17.c
Commentary:
Subsidiaries
Ê
Alternatively, the entity may choose to account for its investment in subsidiary in
accordance with FRS 39 Financial Instruments: Recognition and Measurement. The same
accounting must be applied for all investments in subsidiaries. When an entity accounts
for a subsidiary at fair value in accordance with FRS 39, this treatment continues when
the subsidiary is subsequently classified as held for sale.
XYZ Holdings (Singapore) Limited | 52
FRS 27.10.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.13
Summary of significant accounting policies (continued)
Joint arrangements
A joint arrangement is a contractual arrangement whereby two or more parties have
joint control. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require the
unanimous consent of the parties sharing control.
A joint arrangement is classified either as joint operation or joint venture, based on the
rights and obligations of the parties to the arrangement.
To the extent the joint arrangement provides the Group with rights to the assets and
obligations for the liabilities relating to the arrangement, the arrangement is a joint
operation. To the extent the joint arrangement provides the Group with rights to the
net assets of the arrangement, the arrangement is a joint venture.
FRS 111.4
FRS 111.7
FRS 111.14
FRS 111.15
FRS 111.16
a) Joint operations ÊË
The Group recognises in relation to its interest in a joint operation,
FRS 111.20
(a) its assets, including its share of any assets held jointly;
(b) its liabilities, including its share of any liabilities incurred jointly;
(c) its revenue from the sale of its share of the output arising from the joint
operation;
(d) its share of the revenue from the sale of the output by the joint operation; and
(e) its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its
interest in a joint operation in accordance with the accounting policies applicable to
the particular assets, liabilities, revenues and expenses.
FRS 111.21
b) Joint ventures
The Group recognises its interest in a joint venture as an investment and accounts
for the investment using the equity method. The accounting policy for investment
in joint venture is set out in Note 2.14.
FRS 112.21.b.i
Additional illustrative disclosures:
Sales and contributions of assets to a joint operation
Ê
In this illustration, sales and contributions of assets to a joint operation are not
significant.
Illustrative accounting policy for sales and contributions of assets to a joint operation
When the Group enters into transaction involving a sale or contribution of assets with
a joint operation in which it is a joint operator, the Group recognises gains or losses
resulting from such a transaction only to the extent of the interests held by the other
parties of the joint operation.
FRS 111.B34
Purchases of assets from a joint operation
•
In this illustration, purchases of assets from a joint operation are not significant.
Illustrative accounting policy for purchases of assets from a joint operation
When the Group enters into a transaction involving purchase of assets with a joint
operation in which it is a joint operator, the Group does not recognise its share of the
gains and losses until it resells those assets to a third party. When such transactions
provide evidence of a reduction in the net realisable value of the assets to be
purchased or of an impairment loss of those assets, the Group recognises it share of
those losses.
XYZ Holdings (Singapore) Limited | 53
FRS 111.B36
FRS 111.B37
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.14
Summary of significant accounting policies (continued)
Joint ventures and associates Υ
An associate is an entity over which the Group has the power to participate in the
financial and operating policy decisions of the investee but does not have control or
joint control of those policies.
FRS 28.3
The Group account for its investments in associates and joint ventures using the equity
method from the date on which it becomes an associate or joint venture.
FRS 28.16
FRS 28.32
On acquisition of the investment, any excess of the cost of the investment over the
Group’s share of the net fair value of the investee’s identifiable assets and liabilities is
accounted as goodwill and is included in the carrying amount of the investment. Any
excess of the Group’s share of the net fair value of the investee’s identifiable assets
and liabilities over the cost of the investment is included as income in the
determination of the entity’s share of the associate or joint venture’s profit or loss in
the period in which the investment is acquired.
FRS 28.32
Under the equity method, the investment in associates or joint ventures are carried in
the balance sheet at cost plus post-acquisition changes in the Group’s share of net
assets of the associates or joint ventures. The profit or loss reflects the share of results
of the operations of the associates or joint ventures. Distributions received from joint
ventures or associates reduce the carrying amount of the investment. Where there has
been a change recognised in other comprehensive income by the associates or joint
venture, the Group recognises its share of such changes in other comprehensive
income. Unrealised gains and losses resulting from transactions between the Group
and associate or joint venture are eliminated to the extent of the interest in the
associates or joint ventures.
FRS 28.10
When the Group’s share of losses in an associate or joint venture equals or exceeds its
interest in the associate or joint venture, Πthe Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the associate
or joint venture.
FRS 28.38
After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on the Group’s investment in associate or joint
ventures. The Group determines at the end of each reporting period whether there is
any objective evidence that the investment in the associate or joint venture is impaired.
If this is the case, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate or joint venture and its carrying value
and recognises the amount in profit or loss.
The financial statements of the associates and joint ventures are prepared as the same
reporting date as the Company. • Where necessary, adjustments are made to bring the
accounting policies in line with those of the Group.
XYZ Holdings (Singapore) Limited | 54
FRS 28.28
FRS 28.40
FRS 28.42
FRS 28.33 and 44
FRS 28.35
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.14
Summary of significant accounting policies (continued)
Joint ventures and associates Υ (continued)
Commentary:
Joint ventures and associates
Œ
The interest in an associate or a joint venture is the carrying amount of the investment in
the associate or joint venture under the equity method together with any long-term
interests that, in substance, form part of the investor’s net investment in the associate or
joint venture. For example, an item for which settlement is neither planned nor likely to
occur in the foreseeable future is, in substance, an extension of the entity’s investment in
that associate or joint venture. Such items may include preference shares and long-term
receivables or loans but do not include trade receivables, trade payables or any long-term
receivables for which adequate collateral exists, such as secured loans.
•
The financial statements of the associate or joint venture are prepared as of the same
reporting date as the Company unless it is impracticable to do so. When the financial
statements of an associate or joint venture used in applying the equity method are
prepared as of a different reporting date from that of the Company, adjustments are
made for the effects of significant transactions or events that occur between that date
and the reporting date of the Company. In any case, the difference between the end of
the reporting period of the associate or joint venture and that of the investor shall be no
more than three months. The length of the reporting periods and any difference between
the ends of the reporting periods shall be the same from period to period.
When the financial statements of an associate or joint venture used in applying the equity
method are as of a reporting date or for a period that is different from that of the
Company, the reporting date of the financial statements of the associate or joint venture
and the reason for using a different reporting date or different period shall be disclosed.
FRS 28.38
FRS 28.33
FRS 28.34
FRS 112.22.b
Additional illustrative disclosures:
Loss of significant influence or joint control
Ê
In this illustration, loss of significant influence over associate or joint control over joint
venture is not significant to the Group.
Illustrative accounting policy upon loss of significant influence over associate or joint
control over joint venture:
Upon loss of significant influence or joint control over the associate or joint venture,
the Group measures the retained interest at fair value. Any difference between the
fair value of the aggregate of the retained interest and proceeds from disposal and
the carrying amount of the investment at the date the equity method was
discontinued is recognised in profit or loss.
FRS 28.22
Changes in ownership interest
•
In this illustration, changes in ownership interest without loss of significant influence or
joint control is not significant to the Group.
Illustrative accounting policy upon changes in ownership interest:
If the Group’s ownership interest in an associate or a joint venture is reduced, but the
Group continues to apply the equity method, the Group reclassifies to profit or loss
the proportion of the gain or loss that had previously been recognised in other
comprehensive income relating to that reduction in ownership interest if that gain or
loss would be required to be reclassified to profit or loss on the disposal of the related
assets or liabilities.
XYZ Holdings (Singapore) Limited | 55
FRS 28.25
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.15
Summary of significant accounting policies (continued)
Financial instruments ÊÊË
a)
FRS 107.21
Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Group becomes a
party to the contractual provisions of the financial instrument. The Group
determines the classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value,
plus, in the case of financial assets not at fair value through profit or loss,
directly attributable transaction costs.
FRS 39.14
FRS 39.43
Subsequent measurement ÌÍ
The subsequent measurement of financial assets depends on their
classification as follows:
i)
Loans and receivables
Non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market are classified as loans and
receivables. Subsequent to initial recognition, loans and receivables are
measured at amortised cost using the effective interest method, less
impairment. Gains and losses are recognised in profit or loss when the
loans and receivables are derecognised or impaired, and through the
amortisation process.
ii)
FRS 39.9
FRS 39.46.a
FRS 39.56
FRS 107.AGB5.e
Available-for-sale financial assets
Available-for-sale financial assets include equity and debt securities.
Equity investments classified as available-for-sale are those, which are
neither classified as held for trading nor designated 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 the
market conditions.
After initial recognition, available-for-sale financial assets are
subsequently measured at fair value. Any gains or losses from changes
in fair value of the financial assets are recognised in other
comprehensive income, except that impairment losses, foreign
exchange gains and losses on monetary instruments and interest
calculated using the effective interest method are recognised in profit or
loss. The cumulative gain or loss previously recognised in other
comprehensive income is reclassified from equity to profit or loss as a
reclassification adjustment when the financial asset is de-recognised.
Investments in equity instruments whose fair value cannot be reliably
measured are measured at cost less impairment loss.
FRS 107.AGB5.b
FRS 39.9
FRS 39.46
FRS 39.55.b
FRS 107.AGB5.e
FRS 39.46.c
De-recognition
A financial asset is derecognised where the contractual right to receive cash
flows from the asset has expired. • On de-recognition of a financial asset in
its entirety, the difference between the carrying amount and the sum of the
consideration received and any cumulative gain or loss that had been
recognised in other comprehensive income is recognised in profit or loss.
XYZ Holdings (Singapore) Limited | 56
FRS 39.17.a
FRS 39.26
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.15
Summary of significant accounting policies (continued)
Financial instruments (continued)
b)
Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a
party to the contractual provisions of the financial instrument. The Group
determines the classification of its financial liabilities at initial recognition.
FRS 39.14
All financial liabilities are recognised initially at fair value plus in the case of
financial liabilities not at fair value through profit or loss, directly attributable
transaction costs.
FRS 39.43
Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value
through profit or loss are subsequently measured at amortised cost using the
effective interest method. Gains and losses are recognised in profit or loss
when the liabilities are derecognised, and through the amortisation process.
FRS 39.56
FRS 107.B5.e
De-recognition
A financial liability is de-recognised when the obligation under the liability is
discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange
or modification is treated as a de-recognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying
amounts is recognised in profit or loss.
FRS 39.39
FRS 39.40 and 41
Commentary :
Transfers between fair value hierarchy
Ê
The policy for determining the timing of transfers between levels of the fair include the
following:
(a) The date of the event or change in circumstances that caused the transfer
(b) the beginning of the reporting period
(c) the end of the reporting period
The policy about the timing of recognising transfers shall be the same for transfers into
levels as for transfers out of the levels. Ê
XYZ Holdings (Singapore) Limited | 57
FRS 113.95
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.15
Summary of significant accounting policies (continued)
Financial instruments (continued)
Commentary:
Financial assets or financial liabilities designated as at fair value through profit or loss
Ë
In this illustration, no financial instrument has been designated as financial assets or
financial liabilities at fair value through profit or loss. The following disclosures of
accounting policies apply if there is any financial asset or financial liability designated as
at fair value through profit or loss:
(a)
(b)
(c)
(d)
FRS 107.B5.a
The nature of the financial assets or financial liabilities the entity has designated as
at fair value through profit or loss;
The criteria for so designating such financial assets or financial liabilities on initial
recognition; and
How the entity has satisfied the conditions in paragraph 9, 11A or 12 of FRS 39 for
such designation. For instruments designated as at fair value through profit or loss
in accordance with FRS 39.9.b.i, that disclosure includes a narrative description of
the circumstances underlying the measurement or recognition inconsistency that
would otherwise arise. For instruments designated as at fair value through profit or
loss in accordance with paragraph FRS 39.9.b.ii, that disclosure includes a
narrative description of how designation at fair value through profit or loss is
consistent with the entity’s documented risk management or investment strategy.
How net gains or net losses are determined, for example, whether the net gains or
net losses on items at fair value through profit or loss include interest or dividend
income or exclude interest or dividend income.
Net gain or loss on financial assets at fair value through profit or loss
Ì
Alternatively, interest and dividend income may be recognised separately.
FRS 107.B5.e
Additional illustrative disclosures:
Transfers between fair value hierarchy
Ê
In this illustration, transfers between levels of the fair value hierarchy are not common
for the Group.
Illustrative accounting policy for transfers between levels of the fair value hierarchy.
Transfers between levels of the fair value hierarchy are deemed to have occurred on
the date of the event or change in circumstances that caused the transfers.
Regular way purchases and sales
Ë
In this illustration, the Group does not have regular way purchases and sales of financial
assets.
Illustrative accounting policy for regular way purchase and sale of a financial asset:
All regular way purchases and sales of financial assets are recognised or
derecognised on the trade date i.e. 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 concerned.
Alternatively, regular way purchases and sales can be accounted for on settlement dates.
XYZ Holdings (Singapore) Limited | 58
FRS 39.9
FRS 39.38
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.15
Summary of significant accounting policies (continued)
Financial instruments (continued)
Additional illustrative disclosures (continued):
Financial assets and financial liabilities at fair value through profit or loss which are held for
trading
Ì
In this illustration, financial assets and financial liabilities at fair value through profit or
loss which are classified as held for trading are not significant to the Group.
Illustrative accounting policies for financial assets at fair value through profit or loss
which are classified as held for trading (if significant):
Financial assets at fair value through profit or loss include financial assets held for
trading. Ë Financial assets are classified as held for trading if they are acquired for
the purpose of selling or repurchasing in the near term. This category includes
derivative financial instruments entered into by the Group. Derivatives, including
separated embedded derivatives are also classified as held for trading.
FRS 39.9
Subsequent to initial recognition, financial assets at fair value through profit or loss
are measured at fair value. Any gains or losses arising from changes in fair value of
the financial assets are recognised in profit or loss. Net gains or net losses on
financial assets at fair value through profit or loss include exchange differences,
interest and dividend income. Ì
FRS 39.46
FRS 39.55.a
FRS 107.B5.e
Derivatives embedded in host contracts are accounted for as separate derivatives and
recorded at fair value if their economic characteristics and risks are not closely
related to those of the host contracts and the host contracts are not measured at fair
value with changes in fair value recognised in profit or loss. These embedded
derivatives are measured at fair value with changes in fair value recognised in profit
or loss. Reassessment only occurs if there is a change in the terms of the contract
that significantly modifies the cash flows that would otherwise be required.
FRS 39.11
INT FRS 109.7
Illustrative accounting policies for financial liabilities at fair value through profit or loss
which are classified as held for trading (if significant):
Financial liabilities at fair value through profit or loss include financial liabilities held
for trading. Ë Financial liabilities are classified as held for trading if they are acquired
for the purpose of selling in the near term. This category includes derivative financial
instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships. Separated embedded derivatives are also
classified as held for trading unless they are designated as effective hedging
instruments.
Subsequent to initial recognition, financial liabilities at fair value through profit or loss
are measured at fair value. Any gains or losses arising from changes in fair value of
the financial liabilities are recognised in profit or loss.
FRS 39.9
FRS 39.47.a
FRS 39.47
FRS 39.55.b
FRS 107.B5.e
Held–to-maturity investments
Í
In this illustration, held-to-maturity investments are not significant to the Group.
Illustrative accounting policies for held-to-maturity investments (if significant):
Non-derivative financial assets with fixed or determinable payments and fixed
maturity are classified as held-to-maturity when the Group has the positive intention
and ability to hold the investment to maturity. Subsequent to initial recognition, heldto-maturity investments are measured at amortised cost using the effective interest
method, less impairment. Gains and losses are recognised in profit or loss when the
held-to-maturity investments are derecognised or impaired, and through the
amortisation process.
XYZ Holdings (Singapore) Limited | 59
FRS 107.B5.e
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.15
Summary of significant accounting policies (continued)
Financial instruments (continued)
Additional illustrative disclosures (continued):
De-recognition of financial assets
•
In this illustration, there is no transfer of financial asset.
Illustrative accounting policy when the entity transfers its financial asset:
A financial asset (or, where applicable a part of a financial asset or part of a group of
similar financial asset) is de-recognised when:
(a)
The Group transfers the contractual rights to receive the cash flows of the
financial asset; or
FRS 39.18
(b)
The Group retains the contractual rights to receive the cash flows of the
financial asset, but assumes a contractual obligation to pay the cash flows to one
or more recipients in a “past-through” arrangement; or
FRS 39.18.b and
19
(c)
The Group has transferred its rights to receive cash flows from the asset and
either has transferred substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
FRS 39.20
Where the Group has transferred its rights to receive cash flows from an asset and
has neither transferred nor retained substantially all the risks and rewards of the
asset nor transferred control of the asset, the asset is recognised to the extent of the
Group’s continuing involvement in the asset. 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.
Where continuing involvement takes the form of a written and/or purchased option
on the transferred asset, the extent of the Group’s continuing involvement is the
amount of the transferred asset that the Group may repurchase, except that in the
case of a written put option on an asset measured at fair value, the extent of the
Group’s continuing involvement is limited to the lower of the fair value of the
transferred asset and the option exercise price.
If the Group have transfers of financial assets that are not derecognised in their entirety
or transfers of financial assets that are derecognised in their entirety but retains
continuing involvement, please refer to disclosure requirements of paragraphs 42A to
42H and AGB 29 to AGB 39 of FRS 107.
XYZ Holdings (Singapore) Limited | 60
FRS 39.20.c.ii
FRS 39.30.a
FRS 39.20.b and c
FRS 107.42A-42H
FRS 107.AGB 29AGB 39
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.16
Summary of significant accounting policies (continued)
Impairment of financial assets
FRS 107.21
The Group assesses at each reporting date whether there is any objective evidence that
a financial asset is impaired. Ê
FRS 39.58
a)
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether
objective evidence of 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.
If there is objective evidence that an impairment loss on financial assets
carried at amortised cost has 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 financial asset’s
original effective interest rate. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective
interest rate. The carrying amount of the asset is reduced through the use of
an allowance account. • The impairment loss is recognised in profit or loss.
When the asset becomes uncollectible, the carrying amount of impaired
financial asset is reduced directly or if an amount was charged to the
allowance account, the amounts charged to the allowance account are written
off against the carrying value of the financial asset.
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)
FRS 39.64
FRS 39.63
FRS 39.AG84
FRS 107.AGB5.d
FRS 107.AGB5.f
FRS 39.65
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.
XYZ Holdings (Singapore) Limited | 61
FRS 39.66
FRS 107.AGB5.f
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.16
Summary of significant accounting policies (continued)
Impairment of financial assets (continued)
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. Ž
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.
In the case of debt instruments classified as available-for-sale, impairment is
assessed based on the same criteria as financial assets carried at amortised
cost. However, the amount recorded for impairment is the cumulative loss
measured as the difference between the amortised cost and the current fair
value, less any impairment loss on that investment previously recognised in
profit or loss. Future interest income continues to be accrued based on the
reduced carrying amount of the asset, using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment
loss. The interest income is recorded as part of finance income. If, in a
subsequent year, the fair value of a debt instrument increases and the
increases can be objectively related to an event occurring after the impairment
loss was recognised in profit or loss, the impairment loss is reversed in profit
or loss.
FRS 39.59 and
61
FRS 107.AGB5.f
FRS 39.67 and
68
FRS 39.69
FRS 39.AG93
FRS 39.70
Commentary:
Financial assets that are the subject of renegotiated terms
Ê
When the terms of financial assets that would otherwise be past due or impaired have
been renegotiated, the entity shall disclose the accounting policy for financial assets that
are the subject of renegotiated terms.
FRS 107.AGB5.g
Impairment of financial assets carried at amortised cost
•
When there is an impairment loss, the carrying amount of the asset may be reduced
either directly or through the use of an allowance account.
FRS 39.63
Determination of “significant” or “prolonged” decline in fair value of financial instruments
Ž
The determination of what is “significant” or “prolonged” depends on the circumstances
at the end of the reporting period. This requires judgement and so it varies among
entities.
XYZ Holdings (Singapore) Limited | 62
FRS 39.59 and
61
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.17
Summary of significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and
short-term, highly liquid investments that are readily convertible to known amount of
cash and which are subject to an insignificant risk of changes in value. These also
include bank overdrafts that form an integral part of the Group’s cash management.
2.18
FRS 7.46
FRS 7.6
FRS 7.8
Construction contracts
The Group principally operates fixed price contracts. Contract revenue and contract
costs are recognised as revenue and expenses respectively by reference to the stage of
completion of the contract activity at the end of the reporting period (the percentage
of completion method), when the outcome of a construction contract can be estimated
reliably.
FRS 11.22
FRS 11.25
When the outcome of a construction contract cannot be estimated reliably (principally
during early stages of a contract), contract revenue is recognised only to the extent of
contract costs incurred that are likely to be recoverable and contract costs are
recognised as expense in the period in which they are incurred.
FRS 11.32
An expected loss on the construction contract is recognised as an expense immediately
when it is probable that total contract costs will exceed total contract revenue.
In applying the percentage of completion method, revenue recognised corresponds to
the total contract revenue (as defined below) multiplied by the actual completion rate
based on the proportion of total contract costs (as defined below) incurred to date and
the estimated costs to complete. Ê
FRS 11.36
FRS 11.22
FRS 11.32
FRS 11.30.a
Commentary:
Stage of completion
Ê
2.19
The stage of completion of a contract may be determined in a variety of ways. The entity
uses the method that measures reliably the work performed. Depending on the nature of
the contract, other acceptable methods include surveys of work performed and
completion of a physical proportion of the contract work.
FRS 11.9
Development properties Ê
Development properties are properties acquired or being constructed for sale in the
ordinary course of business, rather than to be held for the Group’s own use, rental or
capital appreciation.
FRS 2.6.a and b
Development properties are held as inventories and are measured at the lower of cost
and net realisable value.
FRS 2.9
Net realisable value of development properties is the estimated selling price in the
ordinary course of business, based on market prices at the reporting date and
discounted for the time value of money if material, less the estimated costs of
completion and the estimated costs necessary to make the sale.
FRS 2.6 and 36.a
The costs of development properties recognised in profit or loss on disposal are
determined with reference to the specific costs incurred on the property sold and an
allocation of any non-specific costs based on the relative size of the property sold.
XYZ Holdings (Singapore) Limited | 63
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.19
Summary of significant accounting policies (continued)
Development properties Ê (continued)
Commentary:
Sale of completed development property and pre-completion contracts for sale of development
property
Ê
In this illustration, the Group does not have any sale of completed development property
and pre-completion contracts for sale of development property.
For illustration of accounting policies relating to sale of completed development property
and pre-completion contracts for sale of development property, please refer to Appendix
A-3 Agreements for the construction of real estate.
2.20
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in
bringing the inventories to their present location and condition are accounted for as
follows:
FRS 2.9, 10 and
36.a
-
Raw materials: purchase costs on a first-in first-out basis. Ê
FRS 2.25
-
Finished goods and work-in-progress: costs of direct materials and labour and a
proportion of manufacturing overheads based on normal operating capacity. These
costs are assigned on a first-in first-out basis.
FRS 2.12 and 13
Where necessary, allowance is provided for damaged, obsolete and slow moving items
to adjust the carrying value of inventories to the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make the sale.
FRS 2.6 and 36.a
Commentary:
Cost formulas
Ê
Alternatively, the costs may be assigned by using the weighted average cost formula. An
entity shall use the same cost formula for all inventories having a similar nature and use
to the entity. For inventories with a different nature or use, different cost formulas may
be justified.
XYZ Holdings (Singapore) Limited | 64
FRS 2.25
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.21
Summary of significant accounting policies (continued)
Provisions Ê
General
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.
FRS 37.14
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.
FRS 37.59
FRS 37.45-47
FRS 37.60
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or
service provided. Initial recognition is based on historical experience. The initial
estimate of warranty-related costs is revised annually.
Additional illustrative disclosures:
Ê
In this illustration, the Group does not have any decommissioning liability or restructuring
provision.
Provision for de-commissioning costs
Illustrative accounting policy for de-commissioning liability when the related asset is
measured using the cost model:
The provision for de-commissioning costs arose on construction of a manufacturing
facility for the production of fire retardant materials. De-commissioning costs are
provided at the present value of expected costs to settle the obligation using
estimated cash flows and are recognised as part of the cost of that particular asset.
The cash flows are discounted at a current pre-tax rate that reflects the risks specific
to the de-commissioning liability. The unwinding of the discount is expensed as
incurred and recognised in profit or loss as a finance cost. The estimated future costs
of decommissioning are reviewed annually and adjusted as appropriate. Changes in
the estimated future costs or in the discount rate applied are added to or deducted
from the cost of the asset.
FRS 16.16.c
FRS 37.45
FRS 37.47
INT FRS 101.8
FRS 37.59
INT FRS 101.5
Restructuring provision
Illustrative accounting policy for restructuring provisions:
Restructuring provisions are only recognised when general recognition criteria for
provisions are fulfilled. Additionally, the Group needs to follow a detailed formal
plan about the business or part of the business concerned, the location and
number of employees affected, a detailed estimate of the associated costs and
appropriate time-line. The people affected have a valid expectation that the
restructuring is being carried out or the implementation has been initiated already.
XYZ Holdings (Singapore) Limited | 65
FRS 37.71
FRS 37.72
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.22
Summary of significant accounting policies (continued)
Government grants
Government grants are recognised when there is reasonable assurance that the grant
will be received and all attaching conditions will be complied with. Where the grant
relates to an asset, the fair value is recognised as deferred capital grant on the balance
sheet and is amortised to profit or loss over the expected useful life of the relevant
asset by equal annual instalments. ÊË
Where loans or similar assistance are provided by governments or related institutions
with an interest rate below the current applicable market rate, the effect of this
favourable interest is regarded as additional government grant.
FRS 20.39.a
FRS 20.7
FRS 20.23 and 24
FRS 20.10A
Commentary:
Government grants related to an asset
Ê
Alternatively, government grants related to an asset may be presented in the balance
sheet by deducting the grant in arriving at the carrying amount of the asset.
FRS 20.24
In this illustration, it is assumed that the Group did not receive non-monetary government
grants. If an entity receives non-monetary government grant, the asset and the grant may
be accounted for either at fair value or at nominal amount.
FRS 20.23
Government grants related to income
•
2.23
Government grant shall be recognised in profit or loss on a systematic basis over the
periods in which the entity recognises as expenses the related costs for which the grants
are intended to compensate. Grants related to income may be presented as a credit in
profit or loss, either separately or under a general heading such as “Other income”.
Alternatively, they are deducted in reporting the related expenses.
Financial guarantee
FRS 20.12
FRS 20.29
FRS 107.21
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due in accordance with the terms of a debt instrument.
Financial guarantees are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the guarantee.
Subsequent to initial recognition, financial guarantees are recognised as income in
profit or loss over the period of the guarantee. If it is probable that the liability will be
higher than the amount initially recognised less amortisation, the liability is recorded at
the higher amount with the difference charged to profit or loss.
XYZ Holdings (Singapore) Limited | 66
FRS 39.9
FRS 39.43
FRS 39.47.c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.24
2.25
Summary of significant accounting policies (continued)
Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are
directly attributable to the acquisition, construction or production of that asset.
Capitalisation of borrowing costs commences when the activities to prepare the asset
for its intended use or sale are in progress and the expenditures and borrowing costs
are incurred. Borrowing costs are capitalised until the assets are substantially
completed for their intended use or sale. All other borrowing costs are expensed in the
period they occur. Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
FRS 23.8
Convertible redeemable preference shares Ê
FRS 107.21
Convertible redeemable preference shares are separated into liability and equity
components based on the terms of the contract.
FRS 32.28
On issuance of the convertible redeemable preference shares, the fair value of the
liability component is determined using a market rate for an equivalent non-convertible
bond. This amount is classified as a financial liability measured at amortised cost (net
of transaction costs) until it is extinguished on conversion or redemption in accordance
with the accounting policy set out in Note 2.15(b).
The remainder of the proceeds is allocated to the conversion option that is recognised
and included in shareholders’ equity. Transaction costs are deducted from equity, net
of associated income tax. The carrying amount of the conversion option is not
remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the
convertible redeemable preference shares based on the allocation of proceeds to the
liability and equity components when the instruments are initially recognised.
FRS 23.17
FRS 23.22
FRS 23.8
FRS 23.5
FRS 32.32
FRS 32.31
FRS 32.38
Additional illustrative disclosures:
Convertible instruments with embedded derivative
Ê
In this illustration, the convertible preference shares are classified as compound financial
instruments with liability and equity components based on the terms of the contract.
Illustrative accounting policy if the convertible instruments are classified as hybrid
instruments with embedded derivative:
Convertible loan with conversion option are accounted for as financial liability with an
embedded equity conversion derivative based on the terms of the contract.
On issuance of convertible loans, the embedded option is recognised at its fair value as
derivative liability with subsequent changes in fair value recognised in profit or loss.
The remainder of the proceeds is allocated to the liability component that is carried at
amortised cost until the liability is extinguished on conversion or redemption.
When an equity conversion option is exercised, the carrying amounts of the liability
component and the equity conversion option are derecognised with a corresponding
recognition of share capital.
XYZ Holdings (Singapore) Limited | 67
FRS 39.AG28
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.26
Summary of significant accounting policies (continued)
Employee benefits ÊÊË
a)
Defined contribution plans
The Group participates in the national pension schemes as defined by the laws
of the countries in which it has operations. In particular, the Singapore
companies in the Group make contributions to the Central Provident Fund
scheme in Singapore, a defined contribution pension scheme. Contributions to
defined contribution pension schemes are recognised as an expense in the
period in which the related service is performed.
b)
FRS 19.51
Employee share option plans •Ž•
Employees of the Group receive remuneration in the form of share options as
consideration for services rendered. The cost of these equity-settled share
based payment transactions with employees is measured by reference to the
fair value of the options at the date on which the options are granted which
takes into account market conditions and non-vesting conditions. Ì This cost is
recognised in profit or loss, with a corresponding increase in the employee
share option reserve, over the vesting period. The cumulative expense
recognised at each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Group’s best estimate of the
number of options that will ultimately vest. The charge or credit to profit or
loss for a period represents the movement in cumulative expense recognised
as at the beginning and end of that period and is recognised in employee
benefits expense.
FRS 102.16
FRS 102.21A
FRS 102.10
FRS 102.19-21
The employee share option reserve is transferred to retained earnings upon
expiry of the share option. •
Commentary:
Defined benefit plan
Ê
In this illustration, the Group does not have any defined benefit plans. For illustration of
change in accounting policies relating to Revised FRS 19 Employee Benefits for defined
benefit plan, please refer to Appendix A-4 Defined benefit plans.
Measurement of unidentifiable goods or services
Ë
In situations where equity instruments are issued and some or all of the goods or services
received by the entity as consideration cannot be specifically identified, the unidentified
goods or services received (or to be received) are measured as the difference between the
fair value of the share-based payment transaction and the fair value of any identifiable
goods or services received at the grant date. This is then capitalised or expensed as
appropriate.
XYZ Holdings (Singapore) Limited | 68
FRS 102.13A
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.26
Summary of significant accounting policies (continued)
Employee benefits ÊÊË (continued)
Commentary (continued):
Vesting and non-vesting conditions
Ì
Vesting condition are conditions that determine whether the entity receives the services
that entitle the counterparty to receive cash, other assets or equity instruments of the
entity under a share-based payment arrangement.
FRS 102.App A
Vesting conditions are limited to two types:
FRS 102.App A
-
Service condition – a vesting condition that requires the counterparty to complete a
specified period of service which services are provided to the entity; and
-
Performance condition – a vesting condition that requires
(a) the counterparty to complete a specified period of service (i.e. a service condition);
the service requirement can be explicit or implicit and
(b) specified performance target(s) to be met while the counterparty is rendering the
required.
Any condition that is neither a service condition nor a performance condition would be
regarded as a non-vesting condition. Examples of non-vesting conditions are:
-
A requirement to make monthly savings during the vesting period
-
A requirement for a commodity index to reach a minimum level
-
Restrictions on the transfer of vested equity instruments
-
An agreement not to work for a competitor after the award has vested
Non-vesting conditions are to be taken into account when estimating the fair value of the
equity instruments granted.
FRS 102.IG24 and
BC171B
FRS 102.21
Transfer of share option reserve
•
The transfer of the employee share option reserve to retained earnings upon expiry of the
option is not mandatory. Alternatively, the employee share option reserve may be kept as a
separate reserve upon expiry of the option.
Additional illustrative disclosures:
Employee leave entitlement
Ê
In this illustration, it is assumed that employee leave entitlement is not significant and is not
included in the list of significant accounting policies.
Illustrative accounting policy for employee leave entitlement (if significant):
Employee entitlements to annual leave are recognised as a liability when they are accrued
to the employees. The undiscounted liability for leave expected to be settled wholly before
twelve months after the end of the reporting period is recognised for services rendered by
employees up to the end of the reporting period. The liability for leave expected to be
settled beyond twelve months from the end of the reporting period is determined using the
projected unit credit method. The net total of service costs, net interest on the liability and
remeasurement of the liability are recognised in profit or loss.
XYZ Holdings (Singapore) Limited | 69
FRS 19.13
FRS 19.155
FRS 19.156
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.26
Summary of significant accounting policies (continued)
Employee benefits ÊÊË (continued)
Additional illustrative disclosures (continued):
Termination benefit
Ë
In this illustration, the Group does not provide any termination benefit to its employees.
Illustrative accounting policy for termination benefit:
Termination benefits are employee benefits provided in exchange for the termination of an
employee’s employment as a result of either an entity’s decision to terminate an
employee’s employment before the normal retirement date or an employee’s decision to
accept an offer of benefits in exchange for the termination of employment.
FRS 19.8
A liability and expense for a termination benefits is recognised at the earlier of when the
entity can no longer withdraw the offer of those benefits and when the entity recognises
related restructuring costs. Initial recognition and subsequent changes to termination
benefits are measured in accordance with the nature of the employment benefits, shortterm employee benefits, or other long-term employee benefits.
FRS 19.165
FRS 19.169
Modification or cancellation of employee share option plan
Ž
In this illustration, there is no modification or cancellation of employee share option plan.
Illustrative accounting policy for modification or cancellation of employee share option plan:
Where the terms of an equity-settled transaction award are modified, the minimum
expense recognised is the expense as if the terms had not been modified, if the original
terms of the award are met. An additional expense is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date of modification.
Where the employee share option plan is cancelled, it is treated as if it vested on the date
of cancellation, and any expense that otherwise would have been recognised for services
received over the remaining vesting period is recognised immediately. This includes any
award where non-vesting conditions within the control of either the entity or the employee
are not met. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new
awards are treated as if they were a modification of the original award, as described in the
previous paragraph. All cancellations of equity-settled transaction awards are treated
equally.
FRS 102.28, B42-B44
FRS 102.28
Cash-settled share-based payment transactions
•
In this illustration, the employee share option plans are equity-settled share-based payment
transactions. Cash-settled share-based payment transactions are not illustrated.
Illustrative accounting policy for cash-settled share-based payment transactions:
The cost of a cash-settled share-based payment transaction is measured initially at fair
value at the grant date. This fair value is recognised in profit or loss over the vesting
period with recognition of a corresponding liability. Until the liability is settled, it is
remeasured at each reporting date with changes in fair value recognised in profit or loss.
XYZ Holdings (Singapore) Limited | 70
FRS 102.30
FRS 102.32
FRS 102.33
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.27
Summary of significant accounting policies (continued)
Leases
a)
As lessee
Finance leases which transfer to the Group substantially all the risks and
rewards incidental to ownership of the leased item, are capitalised at the
inception of the lease at the fair value of the leased asset or, if lower, at the
present value of the minimum lease payments. Any initial direct costs are also
added to the amount capitalised. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are
charged to profit or loss. Contingent rents, if any, are charged as expenses in
the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated
useful life of the asset and the lease term, if there is no reasonable certainty
that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a
straight-line basis over the lease term. The aggregate benefit of incentives
provided by the lessor is recognised as a reduction of rental expense over the
lease term on a straight-line basis.
b)
FRS 17.20
FRS 17.25
FRS 17.27
FRS 17.33
INT FRS 15.5
As lessor
Leases in which the Group does not transfer substantially all the risks and
rewards of ownership of the asset are classified as operating leases. Initial
direct costs incurred in negotiating an operating lease are added to the
carrying amount of the leased asset and recognised over the lease term on the
same bases as rental income. The accounting policy for rental income is set
out in Note 2.29(c). Contingent rents are recognised as revenue in the period
in which they are earned.
2.28
FRS 17.8
FRS 17.8
FRS 17.52
Non-current assets held for sale and discontinued operations
Non-current assets and disposal groups classified as held for sale are measured at the
lower of their carrying amount and fair value less costs to sell. Non-current assets and
disposal groups are classified as held for sale if their carrying amounts will be
recovered principally through a sale transaction rather than through continuing use. A
component of the Group is classified as a ‘discontinued operation’ when the criteria to
be classified as held for sale have been met or it has been disposed of and such a
component represents a separate major line of business or geographical area of
operations or is part of a single coordinated plan to dispose of a separate major line of
business or geographical area of operations.
Property, plant and equipment and intangible assets once classified as held for sale are
not depreciated or amortised.
XYZ Holdings (Singapore) Limited | 71
FRS 105.15
FRS 105.6
FRS 105.32
FRS 105.25
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.29
Summary of significant accounting policies (continued)
Revenue Ê
Revenue is recognised to the extent that it is probable that the economic benefits will
flow to the Group and the revenue can be reliably measured, regardless of when the
payment is made. Revenue is measured at the fair value of consideration received or
receivable, taking into account contractually defined terms of payment and excluding
taxes or duty.
a)
Sale of goods
Revenue from sale of goods is recognised upon the transfer of significant risk
and rewards of ownership of the goods to the customer, usually on delivery of
goods. Revenue is not recognised to the extent where there are significant
uncertainties regarding recovery of the consideration due, associated costs or
the possible return of goods.
b)
FRS 18.14
Rendering of services
Revenue from the installation of fire prevention equipment is recognised by
reference to the stage of completion at the end of the reporting period. Stage
of completion is determined by reference to labour hours incurred to date as a
percentage of total estimated labour hours for each contract. Where the
contract outcome cannot be measured reliably, revenue is recognised to the
extent of the expenses recognised that are recoverable.
c)
FRS 18.14, 20 and 29
FRS 18.35.a
FRS 18.9
FRS 18.20
FRS 18.26
Rental income
Rental income arising from operating leases on investment properties is
accounted for on a straight-line basis over the lease terms. The aggregate
costs of incentives provided to lessees are recognised as a reduction of rental
income over the lease term on a straight-line basis.
FRS 17.50
INT FRS 15.5
Additional illustrative disclosures:
Revenue
Ê
In this illustration, revenue from interest income and dividend income is not significant to
the Group.
Illustrative accounting policy for interest income and dividend income (if significant):
Interest income
Interest income is recognised using the effective interest method.
FRS 18.30.a
Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
XYZ Holdings (Singapore) Limited | 72
FRS 18.30.c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.30
Summary of significant accounting policies (continued)
Taxes
a)
b)
Current income tax
Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted at the end of the reporting period, in
the countries where the Group operates and generates taxable income.
FRS 12.46
Current income taxes are recognised in profit or loss except to the extent that
the tax relates to items recognised outside profit or loss, either in other
comprehensive income or directly in equity. Management periodically
evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.
FRS 12.58 and 61A
Deferred tax
Deferred tax is provided using the liability method on temporary differences at
the end of the reporting period between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except:
-
Where the deferred tax liability arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
-
In respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, where the timing of
the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable
future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and unused tax losses, to the extent
that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised except:
-
Where the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
and
-
In respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures,
deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can
be utilised.
XYZ Holdings (Singapore) Limited | 73
FRS 12.22.c
FRS 12.39
FRS 12.34
FRS 12.24
FRS 12.44
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.30
Summary of significant accounting policies (continued)
Taxes (continued)
b)
Deferred tax (continued)
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at the
end of each reporting period and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to
be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the end of each reporting period.
Deferred tax relating to items recognised outside profit or loss is recognised
outside profit or loss. Deferred tax items are recognised in correlation to the
underlying transaction either in other comprehensive income or directly in
equity and deferred tax arising from a business combination is adjusted against
goodwill on acquisition.
c)
FRS 12.56
FRS 12.37
FRS 12.47
FRS 12.58, 61A and
66
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax
except:
-
Where the sales tax incurred on a purchase of assets or services is not
recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the
expense item as applicable; and
-
Receivables and payables that are stated with the amount of sales tax
included.
XYZ Holdings (Singapore) Limited | 74
FRS 18.8
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
2.
2.31
Summary of significant accounting policies (continued)
Share capital and share issuance expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity.
Incremental costs directly attributable to the issuance of ordinary shares are deducted
against share capital.
2.32
Treasury shares
The Group’s own equity instruments, which are reacquired (treasury shares) are
recognised at cost and deducted from equity. No gain or loss is recognised in profit or
loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.
Any difference between the carrying amount of treasury shares and the consideration
received, if reissued, is recognised directly in equity. Voting rights related to treasury
shares are nullified for the Group and no dividends are allocated to them respectively.
2.33
FRS 32.37
FRS 32.33
Contingencies
A contingent liability is:
a)
a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Group; or
b)
a present obligation that arises from past events but is not recognised because:
(i)
It is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
(ii)
The amount of the obligation cannot be measured with sufficient
reliability.
FRS 37.10
A contingent asset is a possible asset that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group,
except for contingent liabilities assumed in a business combination that are present
obligations and which the fair values can be reliably determined.
XYZ Holdings (Singapore) Limited | 75
FRS 37.27 and 31
FRS 103.23
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
3.
Significant accounting judgements and estimates Ê
The preparation of the Group’s consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the
end of each reporting period. Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the carrying amount of the asset
or liability affected in the future periods.
Additional illustrative disclosures:
Alternative simplified disclosures
Following are illustrative disclosure when management concluded that there are no significant
judgements made in applying accounting policies and no estimation uncertainty that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial period.
Ê
The preparation of the Group’s consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of the
revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the
end of reporting period. Uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount of the asset or
liability affected in the future periods. Management is of the opinion that there is no
significant judgement made in applying accounting policies and no estimation uncertainty
that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial period.
3.1
Judgements made in applying accounting policies Ê
In the process of applying the Group’s accounting policies, management has made the
following judgements which have the most significant effect on the amounts recognised
in the consolidated financial statements:
a)
Impairment of available-for-sale equity investments
The Group records impairment charges on available-for-sale equity
investments when there has been a significant or prolonged decline in the
fair value below their cost. The determination of what is “significant” or
“prolonged” requires judgement. In making this judgement, the Group
evaluates, among other factors, historical share price movements and the
duration and extent to which the fair value of an investment is less than its
cost.
XYZ Holdings (Singapore) Limited | 76
FRS 1.122
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
3.
3.1
Significant accounting judgements and estimates (continued)
Judgements made in applying accounting policies (continued)
Additional illustrative disclosures:
Judgements made in applying accounting policies
Ê
In this illustration, it is assumed that these are the judgements made in applying accounting
policies that has the most significant effect on the amounts recognised in the financial
statements.
Illustrative disclosures of other judgements made in applying accounting policies:
Determination of lease classification
The Group has entered into commercial property leases on its investment properties. The
Group evaluated the terms and conditions of the arrangements and assessed that the
lease term does not constitute a substantial portion of the economic life of the
commercial property and the minimum lease payment is not substantially all of the fair
value of the leased asset. The Group determined that it retains all the significant risks
and rewards of ownership of these properties and so accounts for the contracts as
operating leases.
Determination of functional currency
The Group measures foreign currency transactions in the respective functional
currencies of the Company and its subsidiaries. In determining the functional
currencies of the entities in the Group, judgement is required to determine the
currency that mainly influences sales prices for goods and services and of the country
whose competitive forces and regulations mainly determines the sales prices of its
goods and services. The functional currencies of the entities in the Group are
determined based on management’s assessment of the economic environment in which
the entities operate and the entities’ process of determining sales prices. Management
has assessed that prices are mainly denominated and settled in the respective local
currency of the entities of the Group. In addition, most of the entities’ cost base is
mainly denominated in their respective local currency. Therefore, management
concluded that the functional currency of the entities of the Group is their respective
local currency.
Consolidation of structured entities
In February 2016, the Group and a third party partner formed an entity to acquire land
and construct and operate a fire equipment safety facility. The Group holds a 20%
equity interest in this entity. However, the Group has majority representation on the
entity’s board of directors and is required to approve all major operational decisions.
The operations, once they commence, will be solely used by the Group. Based on these
facts and circumstances, management concluded that the Group controls this entity
and, therefore, consolidates the entity in its financial statements. Additionally, the
Group is effectively guaranteeing the returns to the third party. The shares of the third
party partner are recorded as a long term loan and return on investment is recorded as
interest expense.
XYZ Holdings (Singapore) Limited | 77
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
3.
3.2
Significant accounting judgements and estimates (continued)
Key sources of estimation uncertainty Ê
FRS 1.125
The key assumptions concerning the future and other key sources of estimation
uncertainty at the end of the reporting period are discussed below. The Group based its
assumptions and estimates on parameters available when the financial statements
were prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising beyond the
control of the Group. Such changes are reflected in the assumptions when they occur.
a)
Fair value of unquoted available-for-sale financial assets
The fair values of unquoted available-for-sale financial assets are
determined using valuation techniques including the discounted cash flow
model. The inputs to these models are derived from observable market data
where possible, but where this is not feasible, a degree of judgement is
required in establishing fair values. The assumptions applied in
determination of the valuation of these unquoted available-for-sale
financial assets and a sensitivity analysis are described in more detail in
Note 39.
The carrying amount of the unquoted available-for-sale financial assets as at
31 December 2016 is $1,702,000 (2015: $1,008,000).
b)
Impairment of intangible assets
As disclosed in Note 15 to the financial statements, the recoverable amounts
of the cash generating units which goodwill and brands have been allocated to
are determined based on value in use calculations. The value in use
calculations are based on a discounted cash flow models. The recoverable
amount is most sensitive to the discount rate used for the discounted cash flow
model as well as the expected future cash inflows and the growth rate used for
extrapolation purposes. The key assumptions applied in the determination of
the value in use including a sensitivity analysis, are disclosed and further
explained in Note 15 to the financial statements.
The carrying amount of the intangible assets as at 31 December 2016 is
$1,789,000 (2015: $495,000).
c)
Revaluation of investment properties and property, plant and equipment
The Group carries its investment properties and property, plant and equipment
at fair value, with changes in fair values being recognised in profit or loss and
other comprehensive income respectively. The Group engaged real estate
valuation experts to assess fair value as at 31 December 2016. The fair values
of investment properties and property, plant and equipment are determined by
independent real estate valuation experts using recognised valuation
techniques. These techniques comprise both the Yield Method and the
Discounted Cash Flow Method. The key assumptions used to determine the fair
value of these investment properties and property, plant and equipment and
sensitivity analysis are provided in Note 39.
The carrying amounts of the investment properties and property, plant and
equipment carried at fair value as at 31 December 2016 are $4,645,000
(2015: $3,955,000) and $15,165,000 (2015: $14,300,000) respectively.
XYZ Holdings (Singapore) Limited | 78
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
3.
3.2
Significant accounting judgements and estimates (continued)
Key sources of estimation uncertainty Ê (continued)
FRS 1.125
Additional illustrative disclosures:
Key sources of estimation uncertainty
Ê
In this illustration, it is assumed that these are the key assumptions and estimation
uncertainty that have a significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial year.
Illustrative disclosures of other key sources of estimation uncertainty:
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to the extent that it is
probable that taxable profit will be available against which the losses can be
utilised. Significant management judgement is required to determine the amount of
deferred tax assets that can be recognised, based upon the timing and level of
future taxable profits together with future tax planning strategies. In determining
the timing and level of future taxable profits together with future tax planning
strategies, the Group assessed the probability of expected future cash inflows
based on expected revenues from existing orders and contracts for the next 10
years.
Where taxable profits are expected in the foreseeable future, deferred tax assets
are recognised on the unused tax losses. The carrying value of recognised tax
losses at 31 December 2016 was $XXX (2015: $XXX) and the unrecognised tax
losses at 31 December 2016 was $XXX (2015: $XXX).
If the Group was able to recognise all unrecognised deferred tax assets, profit would
increase by $XXX (2015:$XXX).
Construction contracts
The Group recognises contract revenue by reference to the stage of completion of
the contract activity at the end of each reporting period, when the outcome of a
construction contract can be estimated reliably. The stage of completion is
measured by reference to the proportion that contract costs incurred for work
performed to date to the estimated total contract costs. Significant assumptions
are required to estimate the total contract costs and the recoverable variation
works that affect the stage of completion. In making these estimates, management
has relied on past experience and knowledge of the project engineers. The carrying
amounts of assets and liabilities arising from construction contracts at the end of
each reporting period are disclosed in Note X to the financial statements. If the
estimated total contract cost had been 5% higher than management estimate, the
carrying amount of the assets and liabilities arising from construction contracts
would have been $XXX (2015: $XXX) lower and $XXX (2015: $XXX) higher
respectively.
Provision for decommissioning
As part of the identification and measurement of assets and liabilities for the
acquisition of XXX Limited in 2016, the Group has recognised a provision for
decommissioning obligations associated with a factory owned by XXX Limited. In
determining the fair value of the provision, assumptions and estimates are made in
relation to discount rates, the expected cost to dismantle and remove plant from
the site and the expected timing of those costs. The carrying amount of the
provision as at 31 December was $XXX (2015: $XXX). If the estimated pre-tax
discount rate used in the calculation had been XX% higher than management’s
estimate, the carrying amount of the provision would have been $XXX (2015:
$XXX) lower.
XYZ Holdings (Singapore) Limited | 79
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
3.
3.2
Significant accounting judgements and estimates (continued)
FRS 1.125
Key sources of estimation uncertainty Ê (continued)
Additional illustrative disclosures (continued):
Key sources of estimation uncertainty (continued)
Development costs
Development costs are capitalised in accordance with the accounting policy in Note
X. Initial capitalisation of costs is based on management’s judgement that
technological and economic feasibility is confirmed, usually when a product
development project has reached a defined milestone according to an established
project management model. In determining the amounts to be capitalised,
management makes assumptions regarding the expected future cash generation of
the project, discount rates to be applied and the expected period of benefits. As at
31 December 2016, the carrying amount of development costs capitalised at the
end of the reporting period was $XXX (2015: $XXX). If the expected future cash
generation of the project had been 20% lower than management’s estimate, the
carrying amount of development costs would have been $XXX (2015: $XXX) lower.
Impairment of loans and receivables
The Group assesses at the end of each reporting period whether there is any
objective evidence that a financial asset is impaired. Factors such as the probability
of insolvency or significant financial difficulties of the debtor and default or
significant delay in payments are objective evidence of impairment. In determining
whether there is objective evidence of impairment, the Group considers whether
there is observable data indicating that there have been significant changes in the
debtor’s payment ability or whether there have been significant changes with
adverse effect in the technological, market, economic or legal environment in which
the debtor operates in.
Where there is objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for assets with similar
credit risk characteristics. The carrying amount of the Group’s loans and
receivables at the end of the reporting period is disclosed in Note 21 to the financial
statements. If the present value of estimated future cash flows decrease by 10%
from management’s estimates, the Group’s allowance for impairment will increase
by $XXX (2015: increase by $XXX).
Estimation of net realisable value for development property
Development property is stated at the lower of cost and net realisable value (NRV).
NRV in respect of development property under construction is assessed with
reference to market prices at the reporting date for similar completed property less
estimated costs to complete construction and less an estimate of the time value of
money to the date of completion. The carrying amount of the development property
stated at net realisable value as at 31 December 2016 was $XXX (2015: $XXX). If
the estimated costs to complete construction increase by 20% from management’s
estimate, the carrying amount of development property stated would reduce by
$XXX (2015: $XXX).
XYZ Holdings (Singapore) Limited | 80
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
4.
Revenue
Group
Sale of goods
Construction revenue
5.
2016
2015
$’000
$’000
105,827
104,455
30,893
38,116
136,720
142,571
FRS 18.35.b.i
FRS 11.39.a
Interest income Υ
Group
2016
2015
$’000
$’000
Interest income from:
- Loans and receivables
355
255
FRS 107.20.a.iv
- Available-for-sale financial assets
48
47
FRS 107.20.a.ii
- Held-to-maturity investment
27
25
FRS 107.20.a.iii
430
327
FRS 107.20.a.b
Included in interest income from loans and receivables is interest of $98,000 (2015:
$92,000) from an impaired loan to a fellow subsidiary (Note 21).
6.
Other income •Ì
Group
2016
2015
$’000
$’000
Amortisation of deferred capital grants (Note 29)
239
180
FRS 20.39
Rental income from investment properties (Note 14)
345
291
FRS 40.75.f.i
Net gain from fair value adjustment of investment properties (Note 14)
489
129
FRS 40.76.d
–
120
FRS 1.98.c
135
95
FRS 107.20.a.i
43
56
FRS 107.20.a.i
120
15
FRS 107.20.a.ii
140
–
1,511
886
Net gain on disposal of property, plant and equipment
Net fair value gains on financial instruments:
- Held for trading investment securities
- Derivatives
- Available-for-sale financial assets (transferred from equity on
disposal of investment securities) ‘
Gain on remeasurement of investment in associate to fair value upon
business combination achieved in stages (Note 17(d))
XYZ Holdings (Singapore) Limited | 81
FRS 103.B64.p.ii
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
7.
Finance costs
Group
2016
2015
$’000
$’000
Interest expense on:
- Bank loans, bonds and bank overdrafts
- Obligations under finance leases
- Convertible redeemable preference shares
Provisions discount adjustment (Note 28)
1,640
1,506
75
30
FRS 107.20.a.v
62
59
1,777
1,595
30
10
(57)
(60)
FRS 23.26.a
(33)
FRS 23.26.a
FRS 107.20.a.v
FRS 107.20.b
Less: interest expense capitalised in:
- Plant and equipment (Note 13)
- Development property (Note 24)
(35)
Total finance costs
8.
1,715
1,512
Other expenses •Ì
The following items have been included in arriving at other expenses:
Group
Net loss on disposal of property, plant and equipment
2016
2015
$’000
$’000
76
–
FRS 1.98.c
500
–
FRS 1.98.a
72
65
Fair value adjustment of contingent consideration of business
combination (Note 17) •
235
-
Net foreign exchange loss
136
145
135
115
–
100
FRS 107.20.e
FRS 107.20.e
FRS 24.18.d
198
210
FRS 107.20.e
Impairment loss on property, plant and equipment (Note 13)
Direct operating expenses arising from investment properties (Note 14)
Impairment loss on financial assets Í:
- Trade receivables (Note 21)
- Loan to a fellow subsidiary (Note 21)
- Available-for-sale investment securities (Note 22)
FRS 40.75.f.ii
FRS 1.97
FRS 21.52.a
FRS 107.20.e
XYZ Holdings (Singapore) Limited | 82
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
9.
Profit before tax from continuing operations •
The following items have been included in arriving at profit before tax from continuing
operations:
FRS 1.97 and 104
Group
2016
2015
$’000
$’000
400
400
50
50
250
250
30
30
3,043
2,838
FRS 1.104
Amortisation of intangible assets (Note 15)
220
252
FRS 1.104
Transactions costs incurred in a business combination •
300
–
Employee benefits expense (Note 35)
20,502
19,024
FRS 1.104
Inventories recognised as an expense in cost of sales (Note 25)
80,567
82,122
FRS 2.36.d
484
387
Utility charges •
1,428
1,486
FRS 1.97 and 104
Transportation charges •
2,450
2,584
FRS 1.97 and 104
325
228
FRS 1.97 and 104
Audit fees:
- Auditors of the Company
- Other auditors
Non-audit fees:
- Auditors of the Company
- Other auditors
Depreciation of property, plant and equipment
Operating lease expense (Note 37(b))
Legal and other professional fees •
SGX 1207.6a
SGX 1207.6a
FRS 1.97
FRS 17.35.c
Commentary:
Separate disclosure of income and expenses
Ê
•
FRS 107.20.b only requires total income (calculated using the effective interest method) for
financial assets that are not at fair value through profit or loss to be disclosed.
FRS 107.20.b
In this illustration, we have illustrated interest income aggregated by categories of financial
asset. Although this level of aggregation is optional, when items of income and expense are
material, their nature and amount should be disclosed separately.
FRS 1.97
When items of income and expense are material, their nature and amount should be disclosed
separately. Circumstances that would give rise to the separate disclosure of items of income and
expense include:
FRS 1.97 and 98
(a) Write-downs of inventories to net realisable value or of property, plant and equipment to
recoverable amount, as well as reversals of such write-downs;
(b) Restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring;
(c) Disposals of items of property, plant and equipment;
(d) Disposals of investments;
(e) Discontinued operations;
(f) Litigation settlements; and
(g) Other reversals of provisions.
XYZ Holdings (Singapore) Limited | 83
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
9.
Profit before tax from continuing operations • (continued)
Commentary (continued):
Ž
An entity shall disclose the fee income and expense (other than amounts included in determining
the effective interest rate) arising from financial assets or financial liabilities that are not at fair
value through profit or loss and trust and other fiduciary activities that result in the holding or
investing of assets on behalf of individuals, trusts, retirement benefit plans, and other
institutions, either on the face of the financial statements or in the notes.
FRS 107.20.c
Classes of financial instruments
•
FRS 107 specifies a number of disclosure requirements on the following topics to be
provided by ‘class of financial instruments’:
-
Impairment losses;
FRS 107.20.e
-
Reconciliation of change in allowance account for credit losses if an entity chooses
under FRS 39 to have a separate allowance account;
FRS 107.16
-
Credit risk;
FRS 107.36
-
Fair value of financial instruments;
FRS 107.25
-
Accounting policy for recognising any difference between fair value at initial
recognition and the amount that would be determined at that date using valuation
technique and the aggregate difference yet to be recognised in profit or loss; and
FRS 107.28
-
Transfers of financial assets that are not derecognised in their entirety.
FRS 107.42D
FRS 107 requires an entity to group financial instruments into classes that are
appropriate to the nature of information disclosed and that take into account the
characteristics of those financial instruments. These classes are determined by the
reporting entity and are distinct (usually lower in level) from the categories of financial
instruments (e.g., available-for-sale financial asset, loans and receivables) specified in
FRS 39.
FRS 107.6
In determining classes of financial instruments, an entity shall, at a minimum:
FRS 107.B2
-
Distinguish instruments measured at amortised cost from those measured at fair
value
-
Treat as a separate class or classes those financial instruments outside the scope of
FRS 107
The entity is also required to provide sufficient information to permit reconciliation of
the classes of financial instruments to the line items presented in the balance sheet.
•
These expense items have been disclosed separately as they are considered to be material in the
assumed scenario due to their size or nature.
FRS 107.B1
FRS 107.6
FRS 1.97
Reclassification adjustments
‘
In this illustration, the entity has chosen to disclose the reclassification adjustments and current
year gain or loss in the notes. An entity may choose to present this information in the statement
of comprehensive income itself.
FRS 1.94
Reclassification adjustments are amounts reclassified to profit or loss in the current period that
were recognised in other comprehensive income in the current or previous periods. Such
amounts must be separately disclosed. For example, when an available-for-sale financial asset is
sold, accumulated amounts previously recognised in fair value adjustment reserve will be
reclassified into profit or loss for the period.
FRS 1.7
XYZ Holdings (Singapore) Limited | 84
FRS 1.92
FRS 1.93
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
10. Income tax expense
Major components of income tax expense
The major components of income tax expense for the years ended 31 December 2016
and 2015 are:
Group
2016
2015
$’000
$’000
1,422
1,344
FRS12.80.a
91
FRS 12.80.b
Consolidated income statement:
Current income tax – continuing operations:
- Current income taxation
- (Over)/under provision in respect of previous years
(50)
1,372
1,435
191
260
Deferred income tax – continuing operations (Note 20):
- Origination and reversal of temporary differences
- Benefits from previously unrecognised tax losses
(6)
Income tax attributable to continuing operations
Income tax attributable to discontinued operation (Note 11)
185
252
1,557
1,687
(7)
Income tax expense recognised in profit or loss
FRS 12.80.c
(8)
(5)
1,550
FRS 12.80.f
FRS 12.80.h
1,682
Statement of comprehensive income:
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Deferred tax expense related to other comprehensive
income:
- Net gain on fair value changes of available-forsale financial assets
- Net surplus on revaluation of freehold land and
buildings
- Share of other comprehensive income of
associates
FRS 12.81.ab
56
26
–
–
256
460
–
–
13
2
–
–
325
488
–
–
-
16
–
16
FRS 16.42
Statement of changes in equity:
Deferred tax expense charged directly to equity:
- Convertible redeemable preference shares
XYZ Holdings (Singapore) Limited | 85
FRS 12.81.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
10. Income tax expense (continued)
Relationship between tax expense and accounting profit
A reconciliation between tax expense and the product of accounting profit multiplied by
the applicable corporate tax rate for the years ended 31 December 2016 and 2015 is as
follows: Ê
Group
Profit before tax from continuing operations
Loss before tax from discontinued operation (Note 11)
2016
2015
$’000
$’000
7,057
7,116
(551)
(193)
Accounting profit before tax
6,506
6,923
Tax at the domestic rates applicable to profits in the countries where the
Group operates •
1,322
1,571
Adjustments:
Non-deductible expenses Œ
Income not subject to taxation Œ
Effect of partial tax exemption and tax relief
Deductions on treasury shares issued pursuant to employee share option
plan Ž
Deferred tax on convertible redeemable preference shares
560
473
(170)
(388)
(35)
(20)
(3)
–
(4)
(3)
Benefits from previously unrecognised tax losses
(6)
(8)
Deferred tax assets not recognised
46
21
(Over)/under provision in respect of previous years
Share of results of associates
Others
Income tax expense recognised in profit or loss
(50)
(112)
91
(56)
2
1
1,550
1,682
The above reconciliation is prepared by aggregating separate reconciliations for each
national jurisdiction. •
XYZ Holdings (Singapore) Limited | 86
FRS 12.81.c.i
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
10. Income tax expense (continued)
Commentary:
Presentation of tax reconciliation
Ê
Alternatively, an entity may present a numerical reconciliation between the average effective
tax rate (i.e., tax expense/income divided by the accounting profit) and the applicable tax
rate, disclosing also the basis on which the applicable tax rate is computed.
FRS 12.81.c.ii and 86
Income tax rate for tax reconciliation
•
In explaining the relationship between tax expense/income and accounting profit, an entity
uses an applicable tax rate that provides the most meaningful information to the users of its
financial statements. Often, the most meaningful rate is the domestic rate of tax in the
country in which the entity is domiciled, aggregating the tax rate applied for national taxes
with the rates applied for any local taxes which are computed on a substantially similar level
of taxable profit (tax loss). However, for an entity operating in several jurisdictions, it may be
more meaningful to aggregate separate reconciliations prepared using the domestic rate in
each individual jurisdiction.
Tax deduction for treasury shares transferred under employee share scheme
Ž
A Singapore company is granted a tax deduction for the cost incurred in acquiring treasury
shares which are transferred to any person under a stock option scheme or share award
scheme by reason of any office or employment held in Singapore by that person.
Additional illustrative disclosures:
Disclosure of nature of expenses that are not deductible for income tax purposes
Œ
The nature of :
-
expenses that are not deductible for income tax purposes; and
-
income not subject to taxation
that give rise to a tax effect should be disclosed if the amount was material in accordance
with FRS 1.29
Illustrative note disclosure on the nature of expenses that are not deductible for income tax
purposes :
The nature of expenses that are not deductible for income tax purposes are as follows:
Group
2016
$’000
2015
$’000
Transaction costs related to acquisition of a
subsidiary
XXX
-
Exchange loss arising from revaluation of non-trade
balances
XXX
XXX
Private car expenses
XXX
XXX
Entertainment and transportation expenses incurred
for personal purposes
XXX
XXX
XXX
XXX
XYZ Holdings (Singapore) Limited | 87
FRS 12.85
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
11. Discontinued operation and disposal group classified as held for sale Ê
On 15 May 2016, the Company announced the decision of its board of directors to
dispose of one of its wholly-owned subsidiary, Good Fire Prevention Pte Ltd (GFP), which
was previously reported in the fire prevention equipment and services segment. The
decision is consistent with the Group’s strategy to focus on its core electronics and
property businesses and to divest its fire prevention equipment business, which has been
underperforming for the last five years. As at 31 December 2016, the assets and
liabilities related to GFP have been presented in the balance sheet as “Assets of disposal
group classified as held for sale” and “Liabilities directly associated with disposal group
classified as held for sale”, and its results are presented separately on profit or loss as
“Loss from discontinued operation, net of tax”. The disposal of GFP was completed on 15
February 2017 (Note 44).
FRS 105.41.a, b and d
Balance sheet disclosures
The major classes of assets and liabilities of GFP classified as held for sale and the related
asset revaluation reserve as at 31 December are as follows: ËÌ
Group
2016
$’000
Assets:
Property, plant and equipment
1,016
Inventories
190
Trade and other receivables
814
Cash and short-term deposits
250
Assets of disposal group classified as held for sale
2,270
Liabilities:
Trade and other payables
(1,043)
Deferred tax liabilities
(28)
8.5% p.a. fixed rate SGD bank loan due 1 January 2016
(1,000)
Liabilities directly associated with disposal group classified as held for sale
Net assets directly associated with disposal group classified as held for sale
(2,071)
199
Reserve:
Asset revaluation reserve
128
XYZ Holdings (Singapore) Limited | 88
FRS 105.38 and 40
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
11. Discontinued operation and disposal group classified as held for sale Ê (continued)
Income statement disclosures
The results of GFP for the years ended 31 December are as follows: ËÌÍ
FRS 105.33.b
Group
2016
2015
$’000
$’000
Revenue
13,152
14,598
FRS 105.33.b.i
Expenses
(12,983)
(14,708)
FRS 105.33.b.i
Profit/(loss) from operations
169
Finance costs
(110)
(70)
(83)
Impairment loss on deferred development costs (Note 15)
(200)
–
Loss recognised on remeasurement to fair value less costs to sell
(450)
–
Loss before tax from discontinued operation
(551)
(193)
Taxation:
- Related to loss from ordinary activities of the discontinued operation
4
5
- Related to re-measurement to fair value less costs to sell
3
–
Loss from discontinued operation, net of tax
(544)
FRS 105.33.b.iii
and 41.c
FRS 105.33.b.i
FRS 105.33.b.ii
FRS 12.81.h.ii
FRS 105.33.b.iii
FRS 12.81.h.i
(188)
Cash flow statement disclosures
FRS 105.33.c
The cash flows attributable to GFP are as follows: ËÌÍ
Group
Operating
2016
2015
$’000
$’000
(1,025)
483
Investing
268
(189)
Financing
(137)
(114)
Net cash (outflows)/inflows
(894)
180
Loss per share disclosures
Group
2016
2015
$’000
$’000
Loss per share from discontinued operation attributable to owners of
the Company (cents per share) •
Basic
(2.35)
(0.82)
FRS 33.68
Diluted
(2.30)
(0.80)
FRS 33.68
The basic and diluted loss per share from discontinued operation are calculated by dividing
the loss from discontinued operation, net of tax, attributable to owners of the Company by
the weighted average number of ordinary shares for basic earnings per share computation
and weighted average number of ordinary shares for diluted earnings per share
computation respectively. These loss and share data are presented in the tables in Note
12(a).
XYZ Holdings (Singapore) Limited | 89
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
11. Discontinued operation and disposal group classified as held for sale Ê (continued)
Immediately before the classification of GFP as a discontinued operation, the recoverable
amount was estimated for certain items of property, plant and equipment and no
impairment loss was identified. Following the classification, an impairment loss of
$450,000 (2015: nil) was recognised to reduce the carrying amount of the assets in the
disposal group to the fair value less costs to sell. This amount was included as part of the
“Loss from discontinued operation, net of tax“.
Commentary:
FRS 5.5B clarifies that disclosure requirements in other FRSs do not apply to non-current assets
held for sale (or disposal groups) unless those FRSs explicitly refer to those assets and disposals
groups. Disclosure requirements continue to apply for assets and liabilities that are not within
the scope of the measurement requirements of FRS 105, but within the disposal group.
Ê
FRS 105.5B
FRS 105.5B.b
Discontinued operation and disposal group classified as held for sale
• These analysis/disclosures are not required for disposal groups that are newly acquired
FRS 105.33.b and 39
subsidiaries that meet the criteria to be classified as held for sale on acquisition.
Ž
Alternatively, these analysis/disclosures may be presented on the face of the financial
statements. If so presented for the purposes of the statement of comprehensive income, a
separate section identified as relating to discontinued operations is required.
•
An entity should re-present the disclosures in FRS 105.33 for prior periods presented in the
statement of comprehensive income and cash flow statement so that the disclosures relate to all
operations that have been discontinued by the end of the reporting period for the latest period
presented.
FRS 105.33.b
FRS 105.34
Loss per share from discontinued operation
• In this illustration, loss per share from discontinued operations has been presented in the note.
FRS 33.68
Alternatively, this information may be presented on the face of the statement of comprehensive
income.
12. Earnings per share Ê
a) Continuing operations
Basic earnings per share from continuing operations are calculated by dividing profit
from continuing operations, net of tax, attributable to owners of the Company by the
weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share from continuing operations are calculated by dividing profit
from continuing operations, net of tax, attributable to owners of the Company (after
adjusting for interest expense on convertible redeemable preference shares) by the
weighted average number of ordinary shares outstanding during the financial year plus
the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
The following tables reflect the profit and share data used in the computation of basic
and diluted earnings per share for the years ended 31 December:
XYZ Holdings (Singapore) Limited | 90
FRS 33.10 and 12
FRS 33.31 and 33
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
12. Earnings per share Ê (continued)
a) Continuing operations (continued)
Group
Profit for the year attributable to owners of the Company
Add back: Loss from discontinued operation, net of tax, attributable
to owners of the Company •
Profit from continuing operations, net of tax, attributable to owners
of the Company used in the computation of basic earnings per share
from continuing operations
Interest expense on convertible redeemable preference shares Ž
Profit from continuing operations, net of tax, attributable to owners
of the Company used in the computation of diluted earnings per
share
Weighted average number of ordinary shares for basic earnings per
share computation *
2016
2015
$’000
$’000
4,776
4,841
544
188
5,320
5,029
62
59
5,382
5,088
No. of
shares
‘000
No. of
shares
‘000
23,150
23,055
18
15
505
505
23,673
23,575
Effects of dilution Ž•:
FRS 33.70.a
FRS 33.12
FRS 33.70.b
FRS 33.70.b
- Share options
- Convertible redeemable preference shares
Weighted average number of ordinary shares for diluted earnings per
share computation *
FRS 33.70.b
* The weighted average number of shares takes into account the weighted average
effect of changes in treasury shares transactions during the year.
325,000 (2015: 200,000) share options granted to employees under the existing
employee share option plans have not been included in the calculation of diluted
earnings per share because they are anti-dilutive.
Since the end of the financial year, senior executives have exercised the options to
acquire 2,000 (2015: nil) ordinary shares. There have been no other transactions
involving ordinary shares or potential ordinary shares since the reporting date and
before the completion of these financial statements. •
FRS 33.70.c
FRS 33.70.d
b) Earnings per share computation
The basic and diluted earnings per share are calculated by dividing the p rofit for the year
attributable to owners of the Company by the weighted average number of ordinary
shares for basic earnings per share computation and dividing the profit for the year
attributable to owners of the Company adjusted for interest expense on convertible
redeemable shares by the weighted average number of ordinary shares for diluted
earnings per share computation respectively. These profit and share data are
presented in the tables in Note 12(a) above.
XYZ Holdings (Singapore) Limited | 91
FRS 33.70.a and b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
12. Earnings per share Ê (continued)
Commentary:
Earnings per share
Ê
If the number of ordinary or potential ordinary shares outstanding increases as a result of a
capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the
calculation of basic and diluted earnings per share for all periods presented shall be adjusted
retrospectively. If these changes occur after the end of the reporting period but before the
financial statements are authorised for issue, the per share calculations for current and prior
period presented shall be based on the new number of shares and this fact should be
disclosed. In addition, basic and diluted earnings per share of all periods presented shall be
adjusted for the effects of errors and adjustments resulting from changes in accounting
policies accounted for retrospectively.
•
In this illustration, it is assumed that the profit or loss from discontinued operation is not
attributable to non-controlling interests.
Ì
The objective of diluted earnings per share is consistent with that of basic earnings per share
which is to provide a measure of the interest of each ordinary share in the performance of an
entity while giving effect to all dilutive potential ordinary shares outstanding during the
period. As a result:
FRS 33.64
FRS 33.32
(a) profit or loss attributable to ordinary equity holders of the parent entity is increased by
the after-tax amount of dividends and interest recognised in the period in respect of the
dilutive potential ordinary shares and is adjusted for any other changes in income or
expense that would result from the conversion of the dilutive potential ordinary shares;
and
(b) the weighted average number of ordinary shares outstanding is increased by the
weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
Í
Potential ordinary shares shall be treated as dilutive only when their conversion to ordinary
shares would decrease earnings per share or increase loss per share from continuing
operations.
FRS 33.41
Î
An entity shall disclose a description of ordinary share transactions or potential ordinary
share transactions, other than those resulted from share capitalisation, bonus issue or share
split, that occur after the end of the reporting period and that would have changed
significantly the number of ordinary shares or potential ordinary shares outstanding at the
end of the period if those transactions had occurred before the end of the reporting period.
FRS 33.70.d
Example of such transactions include:
FRS 33.71
-
An issue of shares for cash;
-
An issue of shares when the proceeds are used to repay debt or preference shares
outstanding at the end of the reporting period;
-
The redemption of ordinary shares outstanding;
-
The conversion or exercise of potential ordinary shares outstanding at the end of the
reporting period into ordinary shares;
-
An issue of options, warrants, or convertible instruments; and
-
The achievement of conditions that would result in the issue of contingently issuable
shares.
Earnings per share amounts are not adjusted for such transactions occurring after the end of
the reporting period because such transactions do not affect the amount of capital used to
produce profit or loss for the period.
XYZ Holdings (Singapore) Limited | 92
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
13. Property, plant and equipment ÊÊ
Group
Cost or valuation:
At 1 January 2015
FRS 1.77 and 78.a
Freehold
land
$’000
Buildings
Plant and
equipment
Furniture
and
fixtures
Total
$’000
$’000
$’000
$’000
25,079
2,331
35,953
1,028
441
At valuation
At cost
7,468
1,075
Additions
1,160
1,824
Disposals
–
–
2,128
740
Revaluation surplus
Elimination of accumulated depreciation on
revaluation
Exchange differences
At 31 December 2015 and 1 January 2016
Additions
Transfer from investment properties (Note 14)
Disposals
Acquisition of a subsidiary (Note 17)
Attributable to discontinued operation
(Note 11)
Revaluation surplus
Elimination of accumulated depreciation on
revaluation
Exchange differences
At 31 December 2016
–
(30)
(50)
(15)
(2,054)
–
–
(120)
FRS 16.73.a
4,453
FRS 16.73.e.i
–
(2,054)
FRS 16.73.e.ii
–
2,868
FRS 16.73.e.iv
–
(20)
(50)
(185)
10,726
3,574
23,933
2,752
40,985
4,000
1,194
2,008
1,252
8,454
–
300
–
–
300
(3,068)
–
(1,710)
–
(3,328)
1,111
–
FRS 16.35.b
FRS 16.73.e.viii
FRS 16.73.d
FRS 16.73.e.i
FRS 16.73.e.ix
(8,106)
FRS 16.73.e.ii
158
1,269
FRS 16.73.e.iii
(150)
(1,847)
FRS 16.73.e.ii
1,506
FRS 16.73.e.iv
(1,010)
(310)
1,206
300
–
–
(67)
–
–
–
(377)
FRS 16.73.d
(67)
FRS 16.35.b
20
10
50
12
92
11,874
3,291
23,397
4,024
42,586
FRS 16.73.d
FRS 16.73.e.viii
Accumulated depreciation and impairment loss:
At 1 January 2015
–
–
6,461
1,337
7,798
FRS 16.73.d
Depreciation charge for the year
–
50
2,558
230
2,838
FRS 16.73.e.vii
Disposals
Elimination of accumulated depreciation on
revaluation
–
–
Exchange differences
–
–
–
–
8,364
1,557
9,921
FRS 16.73.d
Depreciation charge for the year
–
115
2,628
300
3,043
FRS 16.73.e.vii
Impairment loss
–
–
500
–
500
Disposals
–
(10)
(1,153)
–
(38)
(245)
–
(67)
At 31 December 2015 and 1 January 2016
Attributable to discontinued operation
(Note 11)
Elimination of accumulated depreciation on
revaluation
Exchange differences
–
(50)
(615)
–
(40)
–
–
(615)
–
(50)
FRS 16.35.b
(50)
FRS 16.73.e.viii
(10)
–
(98)
–
FRS 16.73.e.ii
(381)
FRS 16.73.e.ii
(67)
–
10
5
15
–
–
10,104
1,764
11,868
At 31 December 2015
10,726
3,574
15,569
1,195
31,064
At 31 December 2016
11,874
3,291
13,293
2,260
30,718
Net carrying amount:
XYZ Holdings (Singapore) Limited | 93
FRS 16.73.e.v
(1,163)
–
At 31 December 2016
FRS 16.73.e.ii
FRS 16.35.b
FRS 16.73.e.viii
FRS 16.73.d
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
13. Property, plant and equipment ÊÊ (continued)
Furniture
and fixtures
Company
$’000
Cost:
FRS 16.73.a
At 1 January 2015
1,166
Additions
221
At 31 December 2015 and 1 January 2016
1,387
Additions
626
At 31 December 2016
FRS 16.73.d
FRS 16.73.e.i
FRS 16.73.d
FRS 16.73.e.i
2,013
FRS 16.73.d
669
FRS 16.73.d
115
FRS 16.73.e.vii
784
FRS 16.73.d
150
FRS 16.73.e.vii
934
FRS 16.73.d
Accumulated depreciation:
At 1 January 2015
Depreciation charge for the year
At 31 December 2015 and 1 January 2016
Depreciation charge for the year
At 31 December 2016
Net carrying amount:
At 31 December 2015
603
At 31 December 2016
1,079
Assets under construction
The Group’s plant and equipment included $800,000 (2015: $750,000) which relate to
expenditure for a plant in the course of construction.
FRS 16.74.b
Capitalisation of borrowing costs
The Group’s plant and equipment include borrowing costs arising from bank loans
borrowed specifically for the purpose of the construction of a plant and equipment. During
the financial year, the borrowing costs capitalised as cost of plant and equipment
amounted to $57,000 (2015: $60,000). The rate used to determine the amount of
borrowing costs eligible for capitalisation was 4.5% (2015: 5.0%), which is the effective
interest rate of the specific borrowing. •
FRS 23.26.a
FRS 23.26 b
Revaluation of freehold land and buildings
The Group engaged Chartered Surveyors Pte Ltd, an independent valuer to determine the
fair value of the freehold land and buildings. The date of the revaluation was 31 December
2016 (2015: 31 December 2015). Details of valuation techniques and inputs used are
disclosed in Note 39.
If the freehold land and buildings were measured using the cost model, the carrying
amounts would be as follows:
Group
2016
2015
$’000
$’000
9,560
8,336
2,730
3,048
Freehold land at 31 December:
- Cost and net carrying amount
Buildings at 31 December:
- Cost
- Accumulated depreciation and impairment
- Net carrying amount
(150)
2,580
(200)
2,848
XYZ Holdings (Singapore) Limited | 94
FRS 16.77.a-b
SGX 1207.11
FRS 16.77.e
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
13. Property, plant and equipment ÊÊ (continued)
Assets held under finance leases
During the financial year, the Group acquired plant and equipment and furniture and
fixtures with an aggregate cost of $1,028,000 (2015: $95,000) by means of finance
leases. The cash outflow on acquisition of property, plant and equipment amounted to
$7,426,000 (2015: $4,358,000).
The carrying amount of plant and equipment and furniture and fixtures held under finance
leases at the end of the reporting period were $815,000 (2015: $65,000) and $85,000
(2015: $30,000) respectively.
Leased assets are pledged as security for the related finance lease liabilities.
FRS 7.43
FRS 17.31.a
FRS 16.74.a
Assets pledged as security
In addition to assets held under finance leases, the Group’s freehold land and buildings
with a carrying amount of $7,822,000 (2015: $6,833,000) are mortgaged to secure the
Group’s bank loans (Note 30).
FRS 16.74.a
Impairment of assets
During the financial year, a subsidiary of the Group within the electronic components
segment, XYZ Vietnam Ltd carried out a review of the recoverable amount of its
production equipment because a particular line of specialised electronic component
products had been persistently making losses. An impairment loss of $500,000 (2015:
nil), representing the write-down of these equipment to the recoverable amount was
recognised in “Other expenses” (Note 8) line item of profit or loss for the financial year
ended 31 December 2016. The recoverable amount of the production equipment was
based on its value in use and the pre-tax discount rate used was 12.4% (2015: 11.2%).
FRS 36.126.a,
130.a-c, e and g
Commentary:
Ê
Entities are also encouraged to disclose the following information, which users of financial
statements may find relevant to their needs:
FRS 16.79
- The carrying amount of temporarily idle property, plant and equipment;
- The gross carrying amount of any fully depreciated property, plant and equipment that is still
in use;
- The carrying amount of property, plant and equipment retired from active use and not
classified as held for sale in accordance with FRS 105; and
- When the cost model is used, the fair value of property, plant and equipment when this is
materially different from the carrying amount.
Ë
If the amount of borrowing costs eligible for capitalisation have been determined by applying a
capitalisation rate to the expenditures on a qualifying asset because funds used for the
purpose of obtaining the qualifying asset are borrowed generally (rather than specifically), the
capitalisation rate should be the weighted average of the borrowing costs applicable to the
borrowings of the entity that are outstanding during the period, other than borrowings made
specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs
capitalised during a period should not exceed the amount of borrowing costs incurred during
that period.
XYZ Holdings (Singapore) Limited | 95
FRS 23.14 and
26.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
13. Property, plant and equipment ÊÊ (continued)
Additional illustrative disclosures:
Changes in estimates
Ê
FRS 8.39
FRS 16.76
In this illustration, there was no change in the useful life of property, plant and equipment of
the Group. Where applicable, an entity should disclose the nature and effect of a change in
accounting estimate that has an effect in the current or subsequent periods.
Illustrative note disclosure for change in estimated useful life of equipment:
During the financial year, the Group conducted an operational efficiency review on its
production lines. The Group revised the estimated useful lives of some automation
machines from five to eight years, after refurbishments that will enable these
automation machines to remain in production for an additional three years. The revision
in estimate has been applied on a prospective basis from 1 January 2015. The effect of
the above revision on depreciation charge in current and future periods are as follows:
Decrease in depreciation expense
2016
$’000
2017
$’000
2018
$’000
Later
$’000
(xxx)
(xxx)
(xxx)
(xxx)
14. Investment properties Ê
Group
2016
2015
$’000
$’000
3,955
3,825
Additions (subsequent expenditure) •
500
–
Net gains from fair value adjustments recognised in profit or loss
489
129
FRS 40.76.d
Balance sheet:
FRS 40.76
At 1 January
Transfer to property, plant and equipment (Note 13)
(300)
FRS 40.76a
–
FRS 40.76.f
1
1
FRS 40.76.e
4,645
3,955
324
246
21
45
345
291
- Rental generating properties
(60)
(55)
FRS 40.75.f.ii
- Non-rental generating properties
(12)
(10)
FRS 40.75.f.iii
(72)
(65)
Exchange differences
At 31 December
Income statement:
Rental income from investment properties:
- Minimum lease payments
- Contingent rent based on tenant’s turnover
FRS 17.56.b
FRS 40.75.f.i
Direct operating expenses (including repairs and maintenance) arising
from:
The Group has no restrictions on the realisability of its investment properties and no
contractual obligations to purchase, construct or develop investment property or for
repairs, maintenance or enhancements.
XYZ Holdings (Singapore) Limited | 96
FRS 40.75.g
FRS 40.75.h
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
14. Investment properties Ê (continued)
Valuation of investment properties
Investment properties are stated at fair value, which has been determined based on
valuations Ž performed as at 31 December 2016 and 31 December 2015. The valuations
were performed by Chartered Surveyors Pte Ltd, an independent valuer • with a
recognised and relevant professional qualification and with recent experience in the
location and category of the properties being valued. Details of valuation techniques and
inputs used are disclosed in Note 39.
FRS 40.75.a
FRS 40.75.e
Properties pledged as security
Certain investment properties amounting to $2,145,000 (2015: $2,055,000) are
mortgaged to secure bank loans (Note 30).
FRS 40.75.g
Transfer to property, plant and equipment
On 30 December 2016, the Group transferred one condominium unit that was held as
investment property to owner-occupied property. On that date, the Group has
commenced using the condominium unit for employee accommodation purposes.
The investment properties held by the Group as at 31 December are as follows: •
Description and Location
Existing Use
Tenure
Unexpired
lease term
8-storey shopping podium, 3 basements and twin 27-storey
office towers along South Park, Singapore
Shops
Leasehold
983 years
Five condominium units, River Valley, Singapore
Residential
Leasehold
92 years
18-storey office tower along Xujing Road, Qingpu District,
Shanghai
Offices
Leasehold
58 years
SGX 1207.11.b
Commentary
Contractual obligations relating to investment properties
Ê
Contractual obligations to purchase, construct or develop investment property or for repairs,
maintenance or enhancements should be disclosed, if applicable.
FRS 40.75.h
Additions to investment properties
•
Additions to investment properties resulting from: i) acquisitions of properties; ii) subsequent
expenditure recognised in the carrying amount of an asset; and iii) acquisitions through
business combinations should be disclosed separately.
FRS 40.76.a and
b
Valuation of investment properties
Ž
When a valuation obtained for investment property is adjusted significantly for the purpose of
the financial statements, for example to avoid double-counting of assets or liabilities that are
recognised as separate assets and liabilities, the entity should disclose a reconciliation between
the valuation obtained and the adjusted valuation included in the financial statements, showing
separately the aggregate amount of any recognised lease obligations that have been added
back, and any other significant adjustments.
•
If there has been no such valuation performed by an independent valuer, that fact should be
disclosed.
FRS 40.77
FRS 40.75.e
List of properties held for investment
•
This disclosure is only required for entities listed on the SGX-ST, where the aggregate value for
all properties for development, sale or for investment purposes held by the entity represent
more than 15% of the value of the consolidated net tangible assets, or contribute more than
15% of the consolidated pre-tax operating profit. This disclosure may be included in other parts
of the entity’s annual report instead.
XYZ Holdings (Singapore) Limited | 97
SGX 1207.11
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
15. Intangible assets Ê
Group
Deferred
Development
Costs
Goodwill
Brands
Club
Membership
$’000
$’000
$’000
$’000
$’000
204
240
100
984
1,528
41
-
-
-
41
245
240
100
984
1,569
–
–
–
200
200
Total
FRS 1.77
Cost:
At 1 January 2015 (As previously stated)
Effects of change in accounting policy
(Note 2.2)
At 1 January 2015 (As restated)
Additions – internal development
Exchange differences
At 31 December 2015 and 1 January 2016
5
5
–
12
22
250
245
100
1,196
1,791
FRS 38.118.c
FRS 38.118.e.i
FRS 38.118.e.vii
FRS 38.118.c
Additions:
- Internal development
- Acquisition of a subsidiary (Note 17)
Attributable to discontinued operation
–
–
–
200
200
FRS 38.118.e.i
772
500
–
–
1,272
FRS 38.118.e.i
–
–
–
(250)
(250)
FRS 38.118.e.ii
Exchange differences
15
7
–
14
36
At 31 December 2016
1,037
752
100
1,160
3,049
FRS 38.118.c
–
–
70
131
201
FRS 38.118.c
Amortisation
–
–
10
242
252
FRS 38.118.e.vi
Exchange differences
–
–
–
5
5
FRS 38.118.e.vii
–
–
80
378
458
FRS 38.118.c
Amortisation
–
–
10
210
220
Impairment loss
–
–
–
200
200
FRS 38.118.e.vi
FRS 36.130.b
FRS 38.118.e.iv
Attributable to discontinued operation
–
–
–
(250)
(250)
FRS 38.118.e.ii
Exchange differences
–
–
–
2
2
At 31 December 2016
–
–
90
540
630
At 31 December 2015
250
245
20
818
1,333
At 31 December 2016
1,037
752
10
620
2,419
FRS 38.118.e.vii
Accumulated amortisation and impairment:
At 1 January 2015
At 31 December 2015 and 1 January 2016
FRS 38.118.e.vii
FRS 38.118.c
Net carrying amount:
FRS 38.122.b
Brands and deferred development costs
Brands relate to the “Gao-Feng”, “You-Yue” and “MSAX-Q” (acquired in 2016) brand
names for the Group’s specialised electronic components that were acquired in business
combinations. As explained in Note 2.9(a), the useful life of these brands is estimated to
be indefinite.
Deferred development costs relate to energy efficiency improvement projects for
analogue electronic components and have an average remaining amortisation period of
four years (2015: five years).
All research costs and development costs not eligible for capitalisation have been
expensed and are recognised in ‘Research and development’ line item in profit or loss.
XYZ Holdings (Singapore) Limited | 98
FRS 38.122.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
15. Intangible assets Ê (continued)
Amortisation expense
The amortisation of deferred development costs and club membership is included in the
“Research and development” and “Administrative expenses” line items in profit of loss
respectively.
FRS 38.118.d
Impairment testing of goodwill and brands
Goodwill acquired through business combinations and brands have been allocated to two
cash-generating units (CGU), which are also the reportable operating segments, for
impairment testing as follows:
FRS 36.80.b
- Electronic components segment
- Property segment
The carrying amounts of goodwill and brands allocated to each CGU are as follows: •
Electronic
components
segment
Property
segment
Total
2016
2015
2016
2015
2016
2015
$’000
$’000
$’000
$’000
$’000
$’000
Goodwill
782
–
255
250
1,037
250
FRS 36.134.a
Brands
752
245
–
–
752
245
FRS 36.134.b
The recoverable amounts of the CGUs have been determined based on value in use ŒŽ
calculations using cash flow projections from financial budgets approved by management
covering a five-year period. The pre-tax discount rate applied to the cash flow projections
and the forecasted growth rates used to extrapolate cash flow projections beyond the
five-year period are as follows:
Electronic
components segment
Growth rates •
Pre-tax discount rates
FRS 36.130.e. 134.c
and d.iii
Property
segment
2016
2015
2016
2015
5.1%
4.8%
6.1%
5.5%
FRS 36.134.d.iv
11.3%
11.1%
12.3%
12.8%
FRS 36.134.d.v
Key assumptions used in the value in use calculations
The calculations of value in use for both the CGUs are most sensitive to the following
assumptions: •
FRS 36.134.d.i
Budgeted gross margins – Gross margins are based on average values achieved in the
three years preceding the start of the budget period. These are increased over the budget
period for anticipated efficiency improvements. An increase of 1.5% per annum was
applied for the electronic components segment and 2.2% for the property segment.
FRS 36.134.d.i and ii
Growth rates – The forecasted growth rates are based on published industry research and
do not exceed the long-term average growth rate for the industries relevant to the CGUs.
FRS 36.134.d.i,ii and
iv
XYZ Holdings (Singapore) Limited | 99
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
15. Intangible assets Ê (continued)
Impairment testing of goodwill and brands (continued)
Key assumptions used in the value in use calculations (continued)
Pre-tax discount rates – Discount rates represent the current market assessment of the
risks specific to each CGU, regarding the time value of money and individual risks of the
underlying assets which have not been incorporated in the cash flow estimates. The
discount rate calculation is based on the specific circumstances of the Group and its
operating segments and derived from its weighted average cost of capital (WACC). The
WACC takes into account both debt and equity. The cost of equity is derived from the
expected return on investment by the Group’s investors. The cost of debt is based on the
interest bearing borrowings the Group is obliged to service. Segment–specific risk is
incorporated by applying individual beta factors. The beta factors are evaluated annually
based on publicly available market data.
FRS 36.134.d.i and ii
Market share assumptions – These assumptions are important because, as well as using
industry data for growth rates (as noted above), management assesses how the CGU’s
position, relative to its competitors, might change over the budget period. Management
expects the Group’s share of the electronics and property markets to be stable over the
budget period.
FRS 36.134.d.i and ii
Sensitivity to changes in assumptions •
With regards to the assessment of value in use for the property segment, management
believes that no reasonably possible changes in any of the above key assumptions would
cause the carrying value of the unit to materiality exceed its recoverable amount.
For the electronic components segment, the estimated recoverable amount exceeds its
carrying amount by approximately $200,000 (2015: $150,000) and, consequently, any
adverse change in a key assumption would result in a further impairment loss. The
implication of the key assumption for the recoverable amount is discussed below:
Growth rates – Management recognises that the speed of technological change and the
possibility of new entrance can have a significant impact on growth rate assumptions. The
effect of new entrance is not expected to have an adverse impact on the forecasts, but
could yield a reasonably possible alternative to the estimated long-term growth rate of
5.1% (2015: 4.8%). A reduction of 0.8% (2015: 0.9%) in the long-term growth rate would
result in a further impairment.
FRS 36.134.f.i
FRS 36.134.f.ii
FRS 36.134.f.iii
Impairment loss recognised
During the financial year, an impairment loss was recognised to write-down the carrying
amount of deferred development costs attributable to the fire prevention equipment
segment that has been classified as discontinued operation (Note 11). The impairment
loss of $200,000 (2015: nil) has been recognised in profit or loss under the line item “loss
from discontinued operation, net of tax”.
XYZ Holdings (Singapore) Limited | 100
FRS 36.126.a,
FRS 36.130.a-c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
15. Intangible assets Ê (continued)
Commentary:
Description of intangible assets
Ê
The disclosure of a description, the carrying amount and remaining amortisation period are
required for any individual intangible asset that is material to the entity’s financial
statements.
•
If some or all of the carrying amount of goodwill or intangible assets with indefinite useful
lives is allocated across multiple CGUs (groups of units), and the amount so allocated to each
unit (group of units) is not significant in comparison with the entity’s total carrying amount of
goodwill or intangible assets with indefinite useful lives, that fact shall be disclosed, together
with the aggregate carrying amount of goodwill or intangible assets with indefinite useful
lives allocated to those CGUs (group of units). In addition, if the recoverable amounts of any
of those CGUs (group of units) are based on the same key assumption(s) and the aggregate
carrying amount of goodwill or intangible assets with indefinite useful lives allocated to them
is significant in comparison with the entity’s total carrying amount of goodwill or intangible
assets with indefinite useful lives, an entity shall disclose that fact, together with:
Ž
(a)
The aggregate carrying amount of goodwill allocated to those units (groups of units)
(b)
The aggregate carrying amount of intangible assets with indefinite useful lives allocated
to those units (groups of units)
(c)
A description of the key assumption(s)
(d)
A description of management’s approach to determining the value(s) assigned to the
key assumption(s), whether those value(s) reflect past experience or, if appropriate,
are consistent with external sources of information, and, if not, how and why they differ
from past experience or external sources if information.
(e)
If a reasonably possible change in the key assumption(s) would cause the aggregate of
the units’ (groups of units’) carrying amounts to exceed the aggregate of their
recoverable amounts:
(i)
The amount by which the aggregate of the units’ (group of units’) recoverable
amounts exceeds the aggregate of their carrying amounts.
(ii)
The value(s) assigned to the key assumption(s).
(iii)
The amount by which the value(s) assigned to the key assumption(s) must change,
after incorporating any consequential effects of the change on the other variables
used to measure recoverable amount, in order for the aggregate of the unit’s
(groups of units’) recoverable amounts to be equal to the aggregate of their
carrying amounts.
Provided specified criteria are met, if the most recent detailed calculation made in a
preceding period of the recoverable amount of a CGU (group of units) is used in the
impairment test for that unit (group of units) in the current period, the disclosures required
in the financial statements by paragraphs 134 and 135 relate to the carried forward
calculation of recoverable amount.
FRS 38.122.b
FRS 36.135
FRS 36.136
Sensitivity to changes in assumptions
•
If a reasonably possible change in any key assumptions used by management would cause the
carrying values of CGUs to materially exceed the recoverable amounts, an entity should
disclose
-
the amount by which the CGU’s recoverable amount exceeds its carrying amount,
-
the value assigned to the key assumption,
the amount by which the value assigned to the key assumption must change, after
incorporating any consequential effects of that change on the other variables used to
measure recoverable amount, in order for the CGU’s recoverable amount to be equal to its
carrying amount.
XYZ Holdings (Singapore) Limited | 101
FRS 36.134.f
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
15. Intangible assets Ê (continued)
Additional illustrative disclosures:
Recoverable amount of CGU containing goodwill or intangible assets with indefinite lives
determined based on fair value less costs to sell (continued)
ΠIn this illustration, the recoverable amounts of such CGUs were determined based on value
FRS 36.134.e
in use calculations. If an entity uses fair value less costs of disposal to measure the
recoverable amount of CGU and the fair value less costs of disposal is not determined using
a quoted price, the entity should disclose the valuation technique(s) and other information
including: the key assumption used; a description of management’s approach to each key
assumption (whether those values reflect past experience or are consistent with external
information, and if not, how and why they differ); the level of fair value hierarchy and the
reason(s) for changing valuation techniques, if there is any change, are required to be
provided in the financial statements.
Illustrative note disclosure:
The recoverable amounts of CGU A, CGU B and CGU C are determined based on fair
value less costs of disposal of the CGUs. To calculate these values, an appropriate
multiple was applied to the maintainable operating earnings of the CGUs. The fair value
less costs of disposal of the CGUs are determined by applying an appropriate market
multiple to its earnings before interest, tax, depreciation and amortisation (EBITDA),
which management believes is sustainable in view of the current and anticipated
business conditions.
The fair value less costs of disposal of CGU A, CGU B and CGU C are estimated based
on current EBITDAs and market multiple of X.XX. The market multiples are calculated
based on the median of comparable companies’ indications, after adjustments for
differences in risks and growth. The control premium of XX% was calculated based on
the investment climate, industry dynamic and recent comparable transactions. The
discount rate of XX% has been derived based on studies of liquidity discounts and
adjusted for the size of the Company. The fair value derived is categorises under Level
3 of the fair value hierarchy.
If fair value less costs to sell is determined using discounted cash flow projections, the
following information shall also be disclosed:
-
The period over which management has projected cash flows
-
The growth rate used to extrapolate cash flow projections
-
The discount rate(s) applied to the cash flow projections
Forecasted growth rates used to extrapolate cash flow projections beyond the five-year period
Ë
The entity is required to disclose the justification if the growth rate used to extrapolate
cash flows projections beyond the period covered by the most recent budgets/forecasts
exceeds the long-term average growth rate for the products, industries, or countries in
which the entity operates.
Illustrative note disclosure:
The growth rate used to extrapolate the cash flows of the electronics component
segment exceeds the average growth rate for the industry in which the electronics
segment operates by three quarters of a percentage point. Management of the
electronics component segment believes this growth rate is justified based on the
acquisition of XXX Limited that has resulted in the control of an industry patent,
preventing other entities from manufacturing a specialised product for a period of 10
years with the option for renewal after the 10 years period have expired.
XYZ Holdings (Singapore) Limited | 102
FRS 36.134.d.iv
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
16. Land use rights
Group
2016
2015
$’000
$’000
6,500
6,360
220
140
6,720
6,500
767
630
132
130
Cost:
At 1 January
Exchange differences
At 31 December
Accumulated amortisation:
At 1 January
Amortisation for the year
Exchange differences
10
7
909
767
5,811
5,733
- Not later than one year
137
132
- Later than one year but not later than five years
548
528
5,126
5,073
At 31 December
Net carrying amount
Amount to be amortised:
- Later than five years
The Group has land use rights over two plots of state-owned land in People’s Republic of
China (PRC) where the Group’s PRC manufacturing and storage facilities reside. The land
use rights are not transferable and have a remaining tenure of 43 years (2015: 44 years).
FRS 17.35.a
FRS 17.35.d
17. Investment in subsidiaries Ê•ÑÒ
Company
Shares, at cost
Discount on loans to subsidiaries
Issuance of shares for acquisition of subsidiary
Impairment losses Ž
2016
2015
$’000
$’000
11,132
11,042
540
540
1,475
–
(1,000)
(1,000)
12,147
10,582
XYZ Holdings (Singapore) Limited | 103
FRS 27.10.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries ÊËÑÒ (continued)
a.
Composition of the Group
The Group has the following significant investments in subsidiaries.
Name
Principal
place of
business •
Principal activities
Proportion (%)
of ownership
interest •
2016
2015
FRS 27.43.b
FRS 24.12
Held by the Company:
XYZ Technologies Pte Ltd i
Singapore
Manufacture of electronic
components
100
100
XYZ Investment Pte Ltd i
Singapore
Investment holding
100
100
XYZ Land Pte Ltd i
Singapore
Investment holding
100
100
Good Fire Prevention Pte
Ltd i
Singapore
Installation of fire
prevention equipment
and provision of
installation services
100
100
Held through XYZ Technologies Pte Ltd:
XYZ China Co. Ltd ii
People’s
Republic
of China
Manufacture of electronic
components
75
75
XYZ Vietnam Ltd ii
Vietnam
Manufacture of electronic
components
100
80
MSAX Sdn Bhd ii
Malaysia
Manufacture of electronic
components
80
-*
XYZ Developers Pte Ltd i
Singapore
Property development
100
100
XYZ Constructors Sdn Bhd ii
Malaysia
Property development
100
100
Lion Land Pte Ltd i
Singapore
Property investment
100
100
Held through XYZ Land Pte Ltd:
i
Audited by Ernst & Young LLP, Singapore
ii
Audited by member firms of EY Global in the respective countries
SGX 717
* The Group holds 25% ownership interest in MSAX Sdn Bhd in 2015 and account for it as an associate
(Note 19).
XYZ Holdings (Singapore) Limited | 104
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries ÊËÑÒ (continued)
b.
Interest in subsidiaries with material non-controlling interest (NCI)
FRS 112.12
The Group has the following subsidiaries that have NCI that are material to the
Group.
FRS 112.B10.a
Name of
Subsidiary
Principal
place of
business •
Proportion of
ownership
interest held
by noncontrolling
interest •
Profit/(Loss)
allocated to
NCI during
the reporting
period
$’000
Accumulated
NCI at the
end of
reporting
period
$’000
Dividends
paid to
NCI
25%
120
1,220
100
20%
40
400
30
25%
270
1,200
200
$’000
31 December 2016:
XYZ China
Co. Ltd
MSAX Sdn
Bhd
People’s
Republic of
China
Malaysia
31 December 2015:
XYZ China
Co. Ltd
People’s
Republic of
China
Significant restrictions: ‘
The nature and extent of significant restrictions on the Group’s ability to use or
access assets and settle liabilities of subsidiaries with material non-controlling
interests are:
FRS 112.10.b.i
FRS 112.13
Cash and cash equivalents of $49,000 held in People’s Republic of China are subject
to local exchange control regulations. These regulations places restriction on the
amount of currency being exported other than through dividends.
c.
Summarised financial information about subsidiaries with material NCI ’
Summarised financial information including goodwill on acquisition and consolidation
adjustments but before intercompany eliminations of subsidiaries with material noncontrolling interests are as follows:
Summarised balance sheets
XYZ China Co Ltd
MSAX Sdn Bhd
As at 31
December
2016
As at 31
December
2015
As at 31
December
2016
As at 31
December
2015
$’000
$’000
$’000
$’000
Current
Assets
Liabilities
Net current assets
5,000
(3,022)
4,800
(3,000)
2,082
(582)
2,652
(1,302)
1,978
1,800
1,500
1,350
Non-current
Assets
522
830
886
720
Liabilities
(198)
(366)
(386)
(120)
Net non-current assets
Net assets
324
464
500
600
2,302
2,264
2,000
1,950
XYZ Holdings (Singapore) Limited | 105
FRS 112.12.g
FRS 112.B10.6
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries ÊËÑÒ (continued)
c.
Summarised financial information about subsidiary with material NCI’ (continued)
Summarised statement of comprehensive income
XYZ China Co Ltd
2016
$’000
Revenue
MSAX Sdn Bhd
2015
$’000
867
2016
$’000
953
2015
$’000
554
482
Profit before income tax
260
286
166
145
Income tax expense
(44)
(49)
(28)
(24)
Profit after tax – continuing
operations
216
237
138
121
Other comprehensive income
10
(8)
62
(71)
Total comprehensive income
226
229
200
50
Other summarised information
XYZ China Co Ltd
2016
$’000
MSAX Sdn Bhd
2015
$’000
2016
$’000
2015
$’000
Net cash flows from
operations
186
235
130
42
Acquisition of significant
Property, Plant and
Equipment
(68)
(778)
(229)
(553)
Commentary:
Ê
An entity shall disclose information that enables users of its consolidated financial statements
(a) to understand:
i.
the composition of the group; and
ii. the interest that non-controlling interests have in the group’s activities and cash flows;
and
(b) to evaluate:
i.
the nature and extent of significant restrictions on its ability to access or use assets,
and settle liabilities, of the group
ii. the nature of, and changes in, the risks associated with its interests in consolidated
structured entities
iii. the consequences of changes in its ownership interest in a subsidiary that do not result
in a loss of control; and
iv. the consequences of losing control of a subsidiary during the reporting period.
XYZ Holdings (Singapore) Limited | 106
FRS 112.10
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries ÊËÑÒ (continued)
Commentary (continued):
Ë
An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy the
information needs of users, how much emphasis it places on different aspects of the
requirements and how it aggregates the information. It is necessary to strike a balance between
burdening financial statements with excessive detail that may not assist users of financial
statements and obscuring information as a result of too much aggregation.
FRS 112.B2
Ì
In this illustration, it is assumed that there was no reversal of impairment loss on investment in
subsidiaries. Where applicable, an entity should disclose the events and circumstances that led to
the reversal of such impairment loss.
FRS 36.130.a
Í
An entity shall disclose the country of incorporation if different from the principal place of
business of the subsidiary.
FRS 112.12.b
FRS 27.17.b.ii
Î
An entity shall disclose the proportion of voting rights if different from the proportion of
ownership interests held.
FRS 112.12.d
FRS 27.17.b.iii
Ï
An entity shall disclose:
FRS 112.13
(a) Significant restrictions (e.g. statutory, contractual and regulatory restrictions) on its ability
to access or use the assets and settle the liabilities of the group, such as:
i.
those that restrict the ability of a parent or its subsidiaries to transfer cash or other
assets to (or from) other entities within the group.
ii.
guarantee or other requirements that may restrict dividends and other capital
distributions being paid, or loans and advances being made or repaid, to (or from) other
entities within the group.
(b) The nature and extent to which protective rights of non-controlling interests can significantly
restrict the entity’s ability to access or use the assets and settle the liabilities of the group
(such as when a parent is obliged to settle liabilities of a subsidiary before settling its own
liabilities, or approval of non-controlling interests is required either to access the assets or to
settle the liabilities of a subsidiary).
(c) The carrying amounts in the consolidated financial statements of the assets and liabilities to
which those restrictions apply.
Ð
The summarised financial information presented shall be the amounts before inter-company
eliminations.
XYZ Holdings (Singapore) Limited | 107
FRS 112.B11
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries ÊËÑÒ (continued)
Commentary (continued):
“ Nature of the risks associated with an entity’s interests in consolidated structured entities
In this illustration, the Group does not consolidate any structured entity. If the Group provides
financial support to consolidated structured entities, please refer to the following disclosure
requirements:
An entity shall disclose the terms of any contractual arrangements that could require the parent
or its subsidiaries to provide financial support to a consolidated structured entity, including events
or circumstances that could expose the reporting entity to a loss (e.g. liquidity arrangements or
credit rating triggers associated with obligations to purchase assets of the structured entity or
provide financial support).
FRS 112.14
If during the reporting period a parent or any of its subsidiaries has, without having a contractual
obligation to do so, provided financial or other support to a consolidated structured entity (e.g.
purchasing assets of or instruments issued by the structured entity), the entity shall disclose:
FRS 112.15
(a) the type and amount of support provided, including situations in which the parents or its
subsidiaries assisted the structured entity in obtaining financial support; and
(b) the reasons for providing the support.
If during the reporting period a parent or any of its subsidiaries has, without having a contractual
obligation to do so, provided financial or other support to a previously unconsolidated structured
entity and that provision of support resulted in the entity controlling the structured entity, the
entity shall disclose an explanation of the relevant factors in reaching that decision.
An entity shall disclose any current intentions to provide financial or other support to a
consolidated structured entity, including intentions to assist the structured entity in obtaining
financial support.
FRS 112.16
FRS 112.17
” Investment entities
In this illustration, the Company does not meet the definition of an investment entity and
therefore does not apply the exception to consolidation under FRS 110. When a parent
determines that it is an investment entity in accordance with FRS 110, the following disclosures
are required.
(a) Information about significant judgements and assumptions it has made in determining that it
is an investment entity. If the investment entity does not have one or more of the typical
characteristics of an investment entity, it shall disclose its reasons for concluding that it is
nevertheless an investment entity.
(b) When an entity becomes, or ceases to be, an investment entity, it shall disclose the change of
investment entity status and the reasons for the change. In addition, an entity that becomes
an investment entity shall disclose the effect of the change of status on the financial
statements for the period presented including:
- The total fair value, as of the date of change of status, of the subsidiaries that cease to be
consolidated
- The total gain or loss, if any, calculated in accordance with paragraph B101 of FRS 110
- The line item(s) in profit or loss in which the gain or loss is recognised (if not presented
separately)
XYZ Holdings (Singapore) Limited | 108
FRS 112.9A
FRS 112.9B
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries ÊËÑÒ (continued)
Commentary (continued):
” Investment entities (continued)
(c) For each unconsolidated subsidiary, an investment entity shall disclose:
FRS 112.19B
- the subsidiary’s name;
- the principal place of business (and country of incorporation if different from the principal
place of business) of the subsidiary; and
- the proportion of ownership interest held by the investment entity and, if different, the
proportion of voting rights held.
(d) If an investment entity is the parent of another investment entity, the parent shall also
provide the disclosures in item (c) above for investments that are controlled by its investment
entity subsidiary. The disclosure may be provided by including, in the financial statements of
the parent, the financial statements of the subsidiary (subsidiaries) that contain the above
information.
(e) The nature and extent of any significant restrictions (e.g. resulting from borrowing
arrangements, regulatory requirements or contractual arrangements) on the ability of an
unconsolidated subsidiary to transfer funds to the investment entity in the form of cash
dividends or to repay loans and advances made to the unconsolidated subsidiary by the
investment entity
(f)
Any current commitments or intentions to provide financial or other support to an
unconsolidated subsidiary, including commitments or intentions to assist the subsidiary in
obtaining financial support.
(g) If, during the reporting period, an investment entity or any of its subsidiaries has, or without
having a contractual obligation to do so, provided financial or other support to an
unconsolidated subsidiary (e.g. purchasing assets of, or instruments issued by, the subsidiary
or assisting the subsidiary in obtaining financial support), the entity shall disclose:
-
The type and amount of support provided to each unconsolidated subsidiary
-
The reasons for providing the support
(h) The terms of any contractual arrangements that could require the entity or its
unconsolidated, controlled, structured entity, including events or circumstances that could
expose the reporting entity to a loss (e.g. liquidity arrangements or credit triggers associated
with obligations to purchase assets of the structured entity or to provide financial support).
(i)
If during the reporting period an investment entity or any of its unconsolidated subsidiaries
has, without having a contractual obligation to do so, provided financial or other support to
an unconsolidated, structured entity that the investment entity did not control, and if that
provision of support resulted in the investment entity controlling the structured entity, the
investment entity shall disclose an explanation of the relevant factors in reaching the
decision to provide that support.
XYZ Holdings (Singapore) Limited | 109
FRS 112.19C
FRS 112.19D.a
FRS 112.19D.b
FRS 112.19E
FRS 112.19F
FRS 112.19G
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
d.
Acquisition of subsidiary ÊËÊ••
On 18 October 2016 (the “acquisition date”), the Group’s subsidiary company, XYZ
Technologies Pte Ltd (XYZ Technologies) acquired an additional 55% equity interest
in its 25% owned associate, MSAX Sdn Bhd (“MSAX”), a manufacturer of electronic
components in Malaysia. Upon the acquisition, MSAX became a subsidiary of the
Group.
FRS 103.B64.a-c
The Group has acquired MSAX in order to strengthen its position as a leading
manufacturer of electronic components in the ASEAN region and to enlarge the
range of products it can offer to its clients. The acqusition is also expected to reduce
costs through economies of scale.
FRS 103.B64.d
The Group has elected to measure the non-contolling interest at the non-controlling
interest’s proportionate share of MSAX’s net identifiable assets.
The fair value of the identifiable assets and liabilities of MSAX as at the acquisition
date were:
Fair value
recognised on
acquisition
FRS 103.B64.i
$’000
Property, plant and equipment
1,269
Brand
500
Trade and other receivables
1,089
Inventories
752
Cash and cash equivalents
417
4,027
Trade and other payables
(1,038)
Provision for maintenance warranties
(50)
Deferred tax liability
(48)
Income tax payable
(100)
(1,236)
Total identifiable net assets at fair value
Non-controlling interest measured at the non-controlling interest’s
proportionate share of MSAX’s net idenfiable assets Ì
Goodwill arising from acquisition
2,791
(558)
FRS 103.B64.o
772
FRS 103.B64.k
3,005
Consideration transferred for the acquisition of MSAX
Cash paid
Equity instruments issued (1,305,310 ordinary shares of XYZ Holdings
(Singapore) Limited)
Deferred cash settlement
Contingent consideration recognised as at acquisition date
Total consideration transferred
Fair value of equity interest in MSAX held by the Group immediately
before the acquisition
200
FRS 103.B64.f.i
1,475
FRS 103.B64.f.iv
200
FRS 103.B64.f.iii
450
FRS 103.B64.f.iii,
2,325
FRS 103.B64.g.i
FRS 103.B64.f
680
FRS 103.B64.p.i
3,005
XYZ Holdings (Singapore) Limited | 110
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
d.
Acquisition of subsidiary ÊËÊ•• (continued)
$’000
Effect of the acquisition of MSAX on cash flows
Total consideration for 55% equity interest acquired
2,325
FRS 7.40.a
Less: non-cash consideration
(2,125)
FRS 7.43
Consideration settled in cash
200
Less: Cash and cash equivalents of subsidiay acquired
(417)
FRS 7.40.c
Net cash inflow on acquisition
217
FRS 7.42
FRS 7.40.b
Equity instruments issued as part of consideration transferred
In connection with the acquisition of additional 55% equity interest in MSAX, XYZ
Holdings (Singapore) Limited issued 1,305,310 ordinary shares with a fair value of
$1.13 each. The fair value of these shares is the published price of the shares at the
acquisition date.
The attributable cost of the issuance of the shares as consideration of $50,000 have
been recognised directly in equity as a deduction from share capital.
FRS 103.B64.f.iv
FRS 103.B64.l and m
Contingent consideration arrangement
As part of the purchase agreement with the previous owner of MSAX, a contingent
consideration has been agreed. Additional cash payments shall be payable to the
previous owner of MSAX of:
a)
$385,000, if the entity generates $1,000,000 profit before tax for a period of
12 months after the acquisition date, or
b)
$705,000 if the entity generates $1,500,000 profit before tax for a period of
12 months after the acquisition date.
As at the acquisition date, the fair value of the contingent consideration was
estimated at $450,000.
FRS 103.B64.g.ii
FRS 103.B64.g.iii
FRS 103.B64.g.i
As of 31 December 2016, the key performance indicators of MSAX show clearly that
target (a) will be achieved and the achievement of target (b) is probable due to a
significant expansion of the business and synergies implemented. Accordingly, the
fair value of the contingent consideration has been adjusted to reflect this
development and such change has been recognised through profit or loss.
The fair value of the contingent consideration as at 31 December 2016 has been
increased by $235,000 to $685,000. The fair value of the contingent consideration
was calculated by applying the income approach using the probability-weighted
payout approach and at a discount rate of 8%. This fair value adjustment of
contingent consideration is recognised in the “Other expenses” line item in the
Group’s profit or loss for the year ended 31 December 2016.
FRS 103.58
FRS 103.B67.b
Transaction costs
Transaction costs related to the acquisition of $300,000 have been recognised in the
“Administrative expenses” line item in the Group’s profit or loss for the year ended
31 December 2016.
XYZ Holdings (Singapore) Limited | 111
FRS 103.B64.l and m
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
d. Acquisition of subsidiary ÊËÊ•• (continued)
Gain on remeasuring previously held equity interest in MSAX to fair value at
acquisition date
The Group recognised a gain of $140,000 as a result of measuring at fair value its
25% equity interest in MSAX held before the business combination. The gain is
included in the “Other income” line item in the Group’s profit or loss for the year
ended 31 December 2016.
FRS 103.B64.p.ii
Trade and other receivables acquired
Trade and other receivables acquired comprise of trade receivables and bills of
exchange and promissory notes with fair values of $600,000 and $489,000,
respectively. Their gross amounts are $655,000 and $489,000, respectively. At the
acquisition date, $55,000 of the contractual cash flows pertaining to trade
receivables are not expected to be collected. It is expected that the full contractual
amount of the bills of exchange and promissory notes can be collected.
FRS 103.B64.h
Goodwill arising from acquisition Ž
The goodwill of $772,000 comprises the value of strengthening the Group’s market
position in the ASEAN region, improved resilience to sector specific volatilities, and
cost reduction syngeries expected to arise from the acquisition. It also includes the
value of a customer list, which has not been recognised separately. Goodwill is
allocated entirely to the electronic components segment. Due to the contractual
terms imposed on the acquisition, the customer list is not separable and therefore
does not meet the criteria for recognition as an intangible asset under FRS 38. None
of the goodwill recognised is expected to be deductible for income tax purposes.
FRS 103.B64.e
FRS 103.B64.k
Impact of the acquisition on profit or loss
From the acquisition date, MSAX has contributed $8,000,000 of revenue and
$301,000 to the Group’s profit for the year. If the business combination had taken
place at the beginning of the year, the revenue from continuing operations would
have been $144,720,000 and the Group’s profit from continuing operations, net of
tax would have been $5,801,000.
FRS 103.B64.q.i
FRS 103.B64.q.ii
Provisional accounting of the acquisition of MSAX
A brand has been identified as an intangible asset arising from this acquisition. The
Group has engaged an independent valuer to determine the fair value of the brand.
As at 31 December 2016, the fair value of the brand amounting to $500,000 has
been determined on a provisional basis as the final results of the independent
valuation have not been received by the date the financial statements was authorised
for issue. Goodwill arising from this acquisition, the carrying amount of the brand,
deferred tax liability, and amortisation of the brand will be adjusted accordingly on a
retrospective basis when the valuation of the brand is finalised.
XYZ Holdings (Singapore) Limited | 112
FRS 103.B67.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
e.
Acquisition of ownership interest in subsidiary, without loss of control Í
On 31 March 2016, the Group’s subsidiary company, XYZ Technologies, acquired an
additional 20% equity interest in XYZ Vietnam Ltd (XYZ Vietnam) from its noncontrolling interests for a cash consideration of $800,000. As a result of this
acquisition, XYZ Vietnam became a wholly-owned subsidiary of XYZ Technologies.
The carrying value of the net assets of XYZ Vietnam at 31 March 2016 was
$3,250,000 and the carrying value of the additional interest acquired was
$650,000. The difference of $150,000 between the consideration and the carrying
value of the additonal interest acquired has been recognised as “Premium paid on
acquisition of non-controlling interests“ within equity.
The following summarises the effect of the change in the Group’s ownership interest
in XYZ Vietnam on the equity attributable to owners of the Company:
FRS 112.18
$’000
Consideration paid for acqusition of non-controlling interests
800
Decrease in equity attributable to non-controlling interests
(650)
Decrease in equity attributable to owners of the Company
150
Commentary:
Acquisition of subsidiary
Ê
An entity shall also make disclosures of business combinations in accordance to FRS 103.B64
even if they were effected after the end of the reporting date but before the financial
statements are authorised for issue, unless the initial accounting for the business
combination is incomplete at the time the financial statements are authorised for issue. In
that situation, the entity shall describe which disclosures cannot be made and the reasons
why they cannot be made.
FRS 103.59.b and
B66
•
For individually immaterial business combinations occurring during the reporting period that
are material collectively, an entity shall disclose in aggregate the information required by FRS
103.B64.e-q.
FRS 103.B65
Ž
If the acquisition results in a bargain purchase instead of goodwill recognised, the acquirer
shall disclose the amount of the gain recognised and the line item in the consolidated
statement of comprehensive income in which the gain is recognised, and a description of the
reasons why the transaction resulted in a gain.
FRS 103.B64.n
XYZ Holdings (Singapore) Limited | 113
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
Additional illustrative disclosures:
Acquisition of subsidiary
Œ
An acquirer shall also disclose information that enables users of its financial statements to
evaluate the financial effects of adjustments recognised in the current reporting period
that relate to business combinations that occurred in the current period or previous
reporting periods.
Illustrative disclosure for adjustments to initial accounting for a business combination that
was determined provisionally in the previous reporting period:
FRS 103.61 and
B67
FRS 103.B67.a
The purchase price allocation of the acquisition of Acquiree Group (Acquiree) in the
financial year ended 31 December 2016 were provisional as the Group had sought an
independent valuation for the land and buildings owned by Acquiree. The results of this
valuation had not been received at the date the 2016 financial statements were
authorised for issue. The valuation of the land and buildings was received in April 2016
and showed that the fair value at the date of acquisition was $XXX, an increase of
$XXX compared to the provisional value.
The 2015 comparative information has been restated to reflect this adjustment. The
value of the land and buildings increased by $XXX, there was an increase in the
deferred tax liability of $XXX and an increase in non-controlling interest of $XXX.
There was also a corresponding reduction in goodwill of $XXX, to give total goodwill
arising on the acquisition of $XXX. The depreciation charge on the buildings from the
acquisition date to 31 December 2015 increased by $XXX.
•
In this illustration, no contingent liabilities are recognised in the business combination.
Illustrative note disclosure where an entity recognised contingent liabilities in a business
combination:
A contingent liability at a fair value of $XXX has been determined at the acquisition
date resulting from a claim for payment by a supplier whose shipment has been
rejected and payment has been refused by the Group due to deviations from the
defined technical specifications of the goods. The claim is subject to legal arbitration
and is only expected to be finalised in late 2016. As at the reporting date, the
contingent liability has been reassessed and is determined to be $XXX, which is based
on the expected probable outcome (see Note X on Contingent Liability). The charge
has been recognised in profit or loss.
XYZ Holdings (Singapore) Limited | 114
FRS 103.B64.j
FRS 103.56
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
Additional illustrative disclosures (continued):
Ž
Please refer to commentary no. 4 of Note 2.4 Basis of consolidation and business
combinations.
In this illustration, the Group has elected to measure non-controlling interest arising from
acquisition of MSAX at the non-controlling interest’s proportionate share of MSAX’s
identifiable net assets. The following is an illustrative disclosure when an entity chooses to
measure non-controlling interest arising in a business combination at fair value:
Fair value of non-controlling interest in Acquiree
The fair value of the non-controlling interest in Acquiree, an unlisted company, was
estimated by applying the income approach that is corroborated by market approach.
The fair value estimates are based on:
-
A discount rate range of XX% to XX%;
-
Terminal value, calculated based on the long term sustainable growth rate for the
industry ranging from XX% to XX%, which has been used to determine income for
the future years; and
-
Adjustments because of the lack of control and marketability that market
participants would consider when estimating the fair value of the non-controlling
interest in Acquiree.
FRS 103.B64.o.ii
• Disposal of ownership in interest in subsidiary, without loss of control
In this illustration, the Group does not dispose any ownership in interest in subsidiary,
without loss of control. The following provides illustrative disclosures if the Group disposes
its ownership of interest in subsidiary without loss of control.
On 13 June 2016, the Group disposed of a 5% equity interest in XYZ China Co. Ltd.
Following the disposal, the Group still controls XYZ China Co. Ltd., retaining 70% of the
ownership interests. The transaction has been accounted for as an equity transaction with
non-controlling interests, resulting in:
2016
$’000
Proceeds from sale of 5% ownership interest
Net assets attributable to NCI
Increase in equity attributable to parent
XXX
(XXX)
XXX
Represented by:
Decrease in foreign currency translation reserve
(XXX)
Decrease in asset revaluation reserve
(XXX)
Other reserves
Increase in equity attributable to parent entity
XXX
XXX
XYZ Holdings (Singapore) Limited | 115
FRS 112.10.b.iii
FRS 112.18
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
17. Investment in subsidiaries (continued)
Additional illustrative disclosures (continued):
•
Loss of control in subsidiary
In this illustration, there is no loss of control in subsidiary. Illustrative disclosures when the
Group losses control in its subsidiary
On 27 February 2016, the Group entered into a sale agreement to dispose of 85% of its
interest in its wholly-owned subsidiary, Sun Pte Ltd., at its carrying value. The disposal
consideration was fully settled in cash. The disposal was completed on 30 April 2015,
on which date control of Sun Pte Ltd. passed to the acquirer.
FRS 112.10.b.iv
FRS 7.40.d
The value of assets and liabilities of Sun Pte Ltd. recorded in the consolidated financial
statements as at 27 February 2016, and the effects of the disposal were:
2016
$’000
XXX
Property, plant and equipment
Trade and other receivables
XXX
Inventories
XXX
Cash and short-term deposits
XXX
XXX
Trade and other payables
(XXX)
Income tax payable
(XXX)
Carrying value of net assets
(XXX)
Cash consideration
XXX
Cash and cash equivalents of the subsidiary
(XXX)
Net cash inflow on disposal of a subsidiary
XXX
Gain on disposal:
2016
$’000
Cash received
Net assets derecognised
Fair value of retained interest
Cumulative exchange differences in respect of the net
assets of the subsidiary reclassified from equity on
loss of control of subsidiary
Gain on disposal
XXX
(XXX)
XXX
XXX
XXX
The gain or loss on disposal attributable to measuring the retained interest amounted
to $XXX was included in other income in profit or loss.
XYZ Holdings (Singapore) Limited | 116
FRS 112.19
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
18. Investment in joint venture ÊËÌÍÎ
The Group has 50% (2015: 50%) interest in the ownership and voting rights Ï in a joint
venture, XYZ-ABC JV Co. Ltd that is held through a subsidiary. This joint venture is
incorporated in People’s Republic of China Ð and is a strategic venture in the business or
property investment. The Group jointly controls the venture with other partner under the
contractual agreement and requires unanimous consent for all major decisions over the
relevant activities.
Summarised financial information in respect of XYZ-ABC JV Co. Ltd. based on its FRS
financial statements, and reconciliation with the carrying amount of the investment in the
consolidated financial statements are as follows: Ñ
Summarised balance sheet
Group
2016
2015
$’000
$’000
Cash and cash equivalents
176
132
Trade receivables
542
808
Current assets
718
940
3,220
2,898
100
100
Non-current assets
3,320
2,998
Total assets
4,038
3,938
Non-current assets excluding goodwill
Goodwill
Current liabilities
(200)
(412)
Non-current liabilities (excluding trade, other payables and
provisions)
(490)
(480)
Other non-current liabilities
(100)
(100)
Total non-current liabilities
(590)
(580)
Total liabilities
(790)
(992)
Net assets
3,248
2,946
Net assets excluding goodwill
3,148
2,846
Proportion of the Group’s ownership
Group’s share of net assets
Goodwill on acquisition
Carrying amount of the investment
50%
1,574
50%
1,423
100
100
1,674
1,523
XYZ Holdings (Singapore) Limited | 117
FRS 112.21
FRS 27.17.b
FRS 112.21.b.ii
FRS 112.B12
FRS 112.B13
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
18. Investment in joint venture (continued) ÊËÌÍÎ
Summarised statement of comprehensive income
Group
2016
$’000
2015
$’000
Revenue
Operating expenses
Interest expense
428
(106)
(20)
398
(130)
(12)
Profit before tax
Income tax expense
302
-
256
-
Profit after tax
Other comprehensive income
302
-
256
-
Total comprehensive income
302
256
Dividends of $60,000 (2015: $50,000) were received from XYZ-ABC JV Co.Ltd. XYZABC JV Co. Ltd is restricted by regulatory requirements by paying dividends greater than
50% of the annual profit. Ò
FRS 112.B12.a
FRS 112.22.a
Commentary:
Ê
In this illustration, the Group does not have investment in joint operation.
The following disclosures are required for investments in joint operations:
FRS 112.21.a
(a) the name of the joint operation
(b) the nature of the entity’s relationship with the joint operations, (by, for example,
describing the nature of the activities of the joint operation and whether it is strategic to
the entity’s activities)
Other disclosures required for joint ventures are not applicable for joint operations.
Ë
For interests in joint arrangements, an entity shall disclose information that enables users of
its financial statements to evaluate:
FRS 112.20
(a) the nature, extent and financial effects of its interests in joint arrangements, including
the nature and effects of its contractual relationship with the other investors with joint
control of joint arrangements; and
(b) the nature of, and changes in, the risks associated with its interests in joint ventures.
Ì
If the joint venture is accounted for using the equity method, the entity shall disclose the fair
value of its investment in the joint venture or associate, if there is a quoted market price for
the investment.
Í
In this illustration, the Group have only one investment in joint venture which is material.
The following disclosures are required, in aggregate for all individually immaterial joint
ventures:
(a) the carrying amount of its interests
(b) its share of the joint ventures’
i.
profit or loss from continuing operations
ii. post-tax profit or loss from discontinued operations
iii. other comprehensive income
XYZ Holdings (Singapore) Limited | 118
FRS 112.21.b.iii
FRS 112.B16
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
18. Investment in joint venture (continued) ÊËÌÏÐ
Commentary (continued):
Î
In this illustration, the Group does not have any unrecognised share of losses of its
investment in joint venture.
FRS 112.22.c
If the Group have stopped recognising its share of losses of its joint venture when applying
the equity method, it shall disclose the unrecognised share of losses of the joint venture,
both for the reporting period and cumulatively.
Ï
An entity shall disclose the proportion of voting rights held for each joint arrangement if
different from the proportion of ownership interests held.
FRS 112.21.a.iv
Ð
An entity shall disclose the principal place of business for each joint arrangement if different
from the country of incorporation of the joint arrangement.
FRS 112.21.a.iii
Ñ
An entity may present the summarised financial information on the basis of the joint
venture’s financial statements if:
FRS 112.B15
(a) the entity measures its interest in the joint venture at fair value; and
(b) the joint venture does not prepare FRS financial statements and preparation on that
basis would be impracticable or cause undue cost.
In that case, the entity shall disclose the basis on which the summarised financial information
has been prepared.
In this illustration, the joint venture does not have depreciation and amortisation and interest
income. For each material joint venture, an entity shall disclose the following information:
FRS 112.B13
(a) cash and cash equivalents
(b) current financial liabilities (excluding trade and other payables and provisions)
(c) non-financial liabilities (excluding trade and other payables and provisions)
(d) depreciation and amortisation
(e) interest income
(f)
interest expense
(g) income tax expense or income
Ò
An entity shall also disclose the nature and extent of any significant restrictions (e.g.
resulting from borrowing arrangements, regulatory requirements or contractual
arrangements between investors with joint control of a joint venture) on the ability of joint
ventures to transfer funds to the entity in the form of cash dividends, or to repay loans and
advances.
XYZ Holdings (Singapore) Limited | 119
FRS 112.22.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
19. Investment in associates Ê
The Group’s material investments in associates are summarised below:
FRS 112.21.a.i
2016
2015
$’000
$’000
QSpeed Pte Ltd
4,560
4,465
HKI Pte Ltd
5,576
5,420
459
436
10,595
10,321
FRS 112.B16
10,600
10,400
FRS 112.21.b.iii
Other associates
Fair value of investment in an associate for which there is a
published price quotation •
Name
Country of
incorporation Ž
Principal activities
Proportion (%) of
ownership interest •
2016
2015
FRS 112.21
FRS 27.17.b
Held through subsidiaries:
QSpeed Pte Ltd i
Singapore
Manufacture of
electronic
components
35
35
MSAX Sdn Bhd ii
Malaysia
Manufacture of
electronic
components
–*
25
Heart Land Ltd i
Singapore
Investment properties
45
45
i
Singapore
Investment properties
47
47
Drill Pte Ltd
Singapore
Investment properties
22
22
HKI Pte Ltd
SGX 717
i
Audited by Ernst & Young LLP, Singapore
ii
Audited by member firm of EY Global in Malaysia
*The Group holds 80% of ownership interest in MSAX Sdn Bhd in 2015 and accounts for it as a subsidiary
(Note 17.a).
The activities of the associates are strategic to the Group activities. The Group has not
recognised losses relating to Heart Land Ltd where its share of losses exceeds the Group’s
interest in this associate. The Group’s cumulative share of unrecognised losses at the end
of the reporting period was $50,000 (2015: $35,000), of which $15,000 (2015: $5,000)
was the share of the current year’s losses. The Group has no obligation in respect of these
losses. •
The Group has not recognised its share of the current year profit of $8,000 (2015: nil)
relating to Drill Pte Ltd as the Group’s cumulative share of unrecognised losses with
respect to that associate was $17,000 (2015: $25,000) at the end of the reporting
period. •
Dividends of $40,000 (2015: $30,000) and $60,000 (2015: $50,000) were received
from QSpeed Pte Ltd and HKI Pte Ltd respectively. QSpeed Pte Ltd. is restricted by
regulatory requirements by paying dividends greater than 60% of the annual profit. ‘
XYZ Holdings (Singapore) Limited | 120
FRS 112.21.a.ii
FRS 112.22.c
FRS 112.B12.a
FRS 112.22.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
19. Investment in associates (continued) Ê
Aggregate information about the Group’s investments in associates that are not
individually material are as follows: ’
2016
$’000
Profit or loss after tax from continuing operations
FRS 112.21.c.ii
FRS 112.B16
2015
$’000
1,237
555
Other comprehensive income
223
174
Total comprehensive income
1,460
729
The summarised financial information in respect of QSpeed Pte Ltd and HKI Pte Ltd,
based on its FRS financial statements and a reconciliation with the carrying amount of
the investment in the consolidated financial statements are as follows: “
FRS 112.21.b.i
FRS 112.B12
FRS 112.B14
Summarised balance sheet
QSpeed Pte Ltd
As at
As at
December
December
2016
2015
$’000
$’000
HKI Pte Ltd
As at
As at
December
December
2016
2015
$’000
$’000
Current assets
8,040
8,318
6,987
6,510
Non-current assets excluding
goodwill
8,728
8,510
12,390
10,870
Goodwill
550
550
315
315
Total assets
17,318
17,378
19,692
17,695
Current liabilities
(1,388)
(1,211)
(2,433)
(1,788)
Non- current liabilities
(4,494)
(5,146)
(6,229)
(5,188)
Total liabilities
(5,882)
(6,357)
(8,662)
(6,976)
Net assets
11,436
11,021
11,030
10,719
Net assets excluding goodwill
10,886
10,471
10,715
10,404
Proportion of the Group’s
ownership
35%
35%
47%
47%
3,810
3,665
5,036
4,890
Goodwill on acquisition
550
550
315
315
Other adjustments
200
250
225
215
4,560
4,465
5,576
5,420
Group’s share of net assets
Carrying amount of the
investment
Summarised statement of comprehensive income
QSpeed Pte Ltd
Revenue
Profit after tax from continuing
operations
HKI Pte Ltd
2016
2015
2016
2015
$’000
$’000
$’000
$’000
20,269
18,467
25,202
23,850
(47)
(22)
6
(22)
Other comprehensive income
5
8
2
(3)
Total comprehensive income
(42)
(14)
8
(25)
XYZ Holdings (Singapore) Limited | 121
FRS 112.B14.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
19. Investment in associates (continued) Ê
Commentary:
Investment in associates
Ê
For interests in associates, an entity shall disclose information that enables users of its
financial statements to evaluate:
FRS 112.20
(a) the nature, extent and financial effects of its interests in associates, including the
nature and effects of its contractual relationship with the other investors with
significant influence over associates; and
(b) the nature of, and changes in, the risks associated with its interests in associates.
Ë
If the associate is accounted for using the equity method, the entity shall disclose the fair
value of its investment in the associate, if there is a quoted market price for the
investment.
Ì
An entity shall disclose the principal place of business for each associate if different from
the country of incorporation of the associate.
Í
An entity shall disclose the proportion of voting rights held for each associate if different
from the proportion of ownership interests held.
Î
If the Group have stopped recognising its share of losses of its associate when applying the
equity method, it shall disclose the unrecognised share of losses of the associate, both for
the reporting period and cumulatively.
Ï
An entity shall also disclose the nature and extent of any significant restrictions (e.g.
resulting from borrowing arrangements, regulatory requirements or contractual
arrangements between investors with significant influence over an associate) on the ability
of associates to transfer funds to the entity in the form of cash dividends, or to repay loans
and advances.
Ð
In this illustration, the Group does not have any immaterial associate that is classified as
discontinued operation.
FRS 112.21.b.iii
FRS 112.21.a.iii
FRS 112.21.a.iv
FRS 112.22.c
FRS 112.22.a
FRS 112.B16
The following disclosures are required, in aggregate for all individually immaterial
associates:
(a) the carrying amount of its interests
(b) its share of the associates’
i.
profit or loss from continuing operations
ii.
post-tax profit or loss from discontinued operations
iii.
other comprehensive income
iv.
total comprehensive income
These disclosures above shall be disclosed separately for associates.
Ñ
An entity may present the summarised financial information on the basis of the associate’s
financial statements if:
(a) the entity measures its interest in the associate at fair value
(b) the associate does not prepare FRS financial statements and preparation on that basis
would be impracticable or cause undue cost.
In that case, the entity shall disclose the basis on which the summarised financial
information has been prepared.
XYZ Holdings (Singapore) Limited | 122
FRS 112.B15
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
20. Deferred tax
Deferred tax as at 31 December relates to the following:
Group
Consolidated
income
statement Ê
Consolidated balance sheet
2016
$’000
Deferred tax liabilities:
Differences in depreciation for
tax purposes
Differences in amortisation of
intangible assets
Impairment of intangible
assets
Indefinite life intangible assets
Balance sheet
31
December
2015
1 January
2015
(Restated)
(Restated)
2016
2015
2016
2015
$’000
$’000
$’000
$’000
$’000
(217)
(218)
$’000
(559)
(592)
(719)
143
251
(62)
(111)
(131)
(44)
(20)
(60)
FRS 12.81.g.i and ii
Company
–
-
–
–
60
–
–
–
(42)
(41)
(41)
(1,159)
(903)
(415)
–
–
–
–
(150)
(94)
(68)
–
–
–
–
-
–
–
–
–
(4)
(3)
(9)
Revaluations to fair value:
- Freehold land and buildings
- Available-for-sale financial
assets
Fair value adjustments on
acquisition of subsidiary
Convertible redeemable
preference shares
Undistributed earnings of
associates
Other items
(48)
–
(9)
(13)
(16)
(176)
(145)
(125)
31
20
–
–
(8)
(5)
(2)
3
3
–
–
(2,273)
(1,904)
(1,517)
(226)
(13)
(231)
Deferred tax assets:
Provisions
Unutilised tax losses
Other items
Deferred tax expense
419
427
422
8
(5)
–
–
23
19
18
(4)
(1)
9
8
(8)
7
12
18
21
26
28
17
15
470
463
455
185
252
XYZ Holdings (Singapore) Limited | 123
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
20. Deferred tax (continued)
Unrecognised tax losses
FRS 12.81.e
At the end of the reporting period, the Group has tax losses of approximately $867,000
(2015: $682,000) that are available for offset against future taxable profits of the
companies in which the losses arose, for which no deferred tax asset is recognised due to
uncertainty of its recoverability. The use of these tax losses is subject to the agreement of
the tax authorities and compliance with certain provisions of the tax legislation of the
respective countries in which the companies operate. The tax losses have no expiry date
except for an amount of $101,000 (2015:$101,000) which will expire in 2016.
Unrecognised temporary differences relating to investments in subsidiaries and joint
venture
FRS 12.81.f
At the end of the reporting period, no deferred tax liability (2015: nil) has been
recognised for taxes that would be payable on the undistributed earnings of certain of the
Group’s subsidiaries and joint venture as:
-
The Group has determined that undistributed earnings of its subsidiaries will not be
distributed in the foreseeable future; and
-
The joint venture of the Group cannot distribute its earnings until it obtains the
consent of both the venturers. At the end of the reporting period, the Group does not
foresee giving such consent.
Such temporary differences for which no deferred tax liability has been recognised
aggregate to $450,000 (2015: $340,000). The deferred tax liability is estimated to be
$81,000 (2015: $68,000).
FRS 12.87
Tax consequences of proposed dividends
There are no income tax consequences (2015: nil) attached to the dividends to the
shareholders proposed by the Company but not recognised as a liability in the financial
statements (Note 43).
FRS 12.81.i
Commentary:
Deferred tax income or expense recognised in profit or loss
Ê
This disclosure is required in situations where the amount of the deferred tax income or
expense recognised in profit or loss relating to each type of deferred tax assets/liabilities is
not apparent from the changes in the amounts recognised in the balance sheet.
XYZ Holdings (Singapore) Limited | 124
FRS 12.81.g.ii
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
21. Trade and other receivables ÊËÌ
Group
FRS 1.77-78.b
FRS 107.7 and
31
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Trade and other receivables (current):
Trade receivables
21,694
24,191
–
–
Bills of exchange and promissory notes
540
507
–
–
Amounts due from related companies
361
–
288
300
Staff loans
155
150
50
50
Refundable deposits
102
119
–
–
22,852
24,967
338
350
Amounts due from subsidiaries
–
–
3,409
2,061
FRS 24.18.b
SGD loans to subsidiaries
–
–
10,563
12,574
FRS 24.18.b
SGD loans to associates
1,230
1,230
1,230
1,230
FRS 24.18.b
SGD loan to a fellow subsidiary
1,500
1,500
1,500
1,500
FRS 24.18.b
63
48
51
36
2,793
2,778
16,753
17,401
25,645
27,745
17,091
17,751
6,117
4,858
4,621
4,145
FRS 24.18.b
Other receivables (non-current):
Staff loans
Total trade and other receivables (current and
non-current)
Add: Cash and short-term deposits (Note 27)
Less: Sales tax receivables
Total loans and receivables Í
(15)
31,747
(13)
32,590
(3)
21,709
(2)
21,894
Trade receivables
Trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms.
They are recognised at their original invoice amounts which represent their fair values on
initial recognition.
FRS 107.7 and
31
At the end of the reporting period, trade receivables arising from export sales amounting
to $1,560,000 (2015: $1,750,000) are arranged to be settled via letters of credit issued
by reputable banks in countries where the customers are based. Trade receivables from
first-time customers that are insured by trade credit insurance underwritten by a
reputable insurer in Singapore amount to $520,000 (2015: nil) at the end of the
reporting period.
FRS 107.36.b
Trade receivables denominated in foreign currencies at 31 December are as follows:
Group
FRS 107.34.a
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
United States Dollar
4,128
4,525
–
–
Renminbi
1,567
2,015
–
–
Bills of exchange and promissory notes
These receivables bear interest at market rates and have an average maturity of 30 days
(2015: 20 days) from the end of the reporting period.
XYZ Holdings (Singapore) Limited | 125
FRS 107.7 and
31
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
21. Trade and other receivables ÊËÌ (continued)
Related party balances and staff loans
-
Amounts due from related companies are non-trade related, unsecured, non-interest
bearing, repayable upon demand and are to be settled in cash.
-
Amounts due from subsidiaries and loans to subsidiaries are unsecured, non-interest
bearing and are to be settled in cash. The former are not expected to be repaid within
the next 12 months while the latter are due on 30 June 2019.
-
Loans to associates bear interest at SIBOR + 2% p.a. (2015: SIBOR + 2% p.a.), have an
average maturity of 1.5 years (2015: 2.5 years), secured by corporate guarantees
issued by their respective holding companies and are to be settled in cash.
-
Loan to a fellow subsidiary is unsecured, bears interest at SIBOR + 2% p.a. (2015:
SIBOR + 2% p.a.), repayable on 30 September 2018 and is to be settled in cash.
-
Staff loans are unsecured and non-interest bearing. Non-current amounts have an
average maturity of 1.5 years (2015: 1.5 years). The loans are recognised initially at
fair value. The difference between the fair value and the absolute loan amount
represents payment for services to be rendered during the period of the loan and is
recorded as part of prepaid operating expenses.
FRS 107.7,31
and 36.b
FRS 24.18.b
Receivables that are past due but not impaired
The Group has trade receivables amounting to $5,760,000 (2015: $6,852,000) that are
past due at the end of the reporting period but not impaired. These receivables are
unsecured and the analysis of their aging at the end of the reporting period is as follows:
Group
2016
2015
$’000
$’000
Trade receivables past due but not impaired: Î
Lesser than 30 days
4,105
5,234
30 - 60 days
568
832
61- 90 days
822
524
91-120 days
245
262
20
–
5,760
6,852
More than 120 days
XYZ Holdings (Singapore) Limited | 126
FRS 107.37.a
FRS 107.36.b
FRS 107.IG28
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
21. Trade and other receivables ÊËÌ (continued)
Receivables that are impaired
The Group’s trade receivables that are impaired at the end of the reporting period and the
movement of the allowance accounts Ï used to record the impairment are as follows:
Group
Collectively impaired
Trade receivables – nominal amounts
Less: Allowance for impairment
Individually impaired
2016
2015
2016
2015
$’000
$’000
$’000
$’000
1,220
1,350
150
80
(100)
(50)
(350)
(410)
870
940
50
30
410
510
50
60
95
50
Movement in allowance accounts:
At 1 January
Charge for the year
Written off
Exchange differences
At 31 December
FRS 107 IG29.a
FRS 107.37.b
FRS 107.IG29.b
FRS 107.16
85
(130)
(15)
350
(205)
–
20
(30)
10
–
–
410
100
50
Trade receivables that are individually determined to be impaired at the end of the
reporting period relate to debtors that are in significant financial difficulties and have
defaulted on payments. These receivables are not secured by any collateral or credit
enhancements.
FRS 107.37.b
FRS 107.36.b
Receivables that are impaired
At the end of the reporting period, the Group and the Company have provided an
allowance of $100,000 (2015: $100,000) for impairment of the unsecured loan to a
fellow subsidiary company with a nominal amount of $1,600,000 (2015: $1,600,000).
This related party has been suffering significant financial losses for the current and past
two financial years.
FRS 107.37.b
FRS 107.36.b
FRS 24.18.c
There has been no movement in this allowance account for the financial year ended 31
December 2016 (2015: charge of $100,000 for impairment loss).
FRS 107.16 and 6
FRS 24.18.d
XYZ Holdings (Singapore) Limited | 127
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
21. Trade and other receivables ÊËÌ (continued)
Receivables subject to offsetting arrangements Ð
The Group regularly purchases electronic raw materials from and sell electronic products
to MNO Pte Ltd. Both parties have an arrangement to settle the net amount due to or
from each other on a 30-days term basis.
The Group’s trade receivables and trade payables that are off-set are as follows:
31 December 2016
$‘000
Gross carrying
amounts
Gross amounts
offset in the
balance sheet
Net amounts in the
balance sheet
FRS 107.13C.a
FRS 107.13C.b
FRS 107.13C.c
Description
Trade receivables
Trade payables
6,100
(2,540)
3,560
-
(2,540)
-
31 December 2015
$‘000
Description
Trade receivables
Trade payables
5,450
(1,730)
3,720
-
(1,730)
-
Receivables subject to an enforceable master netting arrangement that are not otherwise
set-off Ð
The Group regularly purchases electronic raw materials from and sell electronic products
to PQR Pte Ltd. Both parties do not have an arrangement to settle the amount due to or
from each other on a net basis but have the right to set off in the case of default and
insolvency or bankruptcy.
FRS 107.13E
The Group’s trade receivables and trade payables subject to an enforceable master
netting arrangement that are not otherwise set-off are as follows:
FRS 107.13C.d.i
FRS 107.13C.e
31 December 2016
$‘000
Gross carrying
amounts
Related amounts
not set off in the
balance sheet
Net amount
Description
Trade receivables
3,560
(1,493)
2,067
Trade payables
1,493
(1,493)
-
31 December 2015
$‘000
Description
Trade receivables
4,230
(1,699)
2,531
Trade payables
1,699
(1,699)
-
XYZ Holdings (Singapore) Limited | 128
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
21. Trade and other receivables ÊËÌ (continued)
Commentary:
Collateral and other credit enhancements
Ê
When an entity holds collateral (of financial or non-financial assets) and is permitted to sell
or repledge the collateral in the absence of default by the owner of the collateral, it shall
disclose: (a) the fair value of the collateral held; (b) the fair value of any such collateral sold
or repledged, and whether the entity has an obligation to return it; and (c) the terms and
conditions associated with its use of the collateral.
•
When an entity obtains financial or non-financial assets during the period by taking
possession of collateral it holds as security or calling on other credit enhancements (e.g.,
guarantees), and such assets meet the recognition criteria under FRS, an entity shall
disclose for such assets held at the reporting date:
FRS 107.15
FRS 107.38
(a) the nature and carrying amount of the assets; and
(b) when the assets are not readily convertible into cash, its policies for disposing of such
assets or for using them in its operations.
The above disclosure required for financial assets obtained by taking possession of collateral
or other credit enhancements are only applicable to assets still held at the reporting date.
Ì
An entity shall disclose a description of collateral held as security and of other credit
enhancements, and their financial effect (e.g. a quantification of the extent to which
collateral or other credit enhancements mitigate credit risk) in respect of the amount that
best represents the maximum exposure to credit risk.
FRS 107.36.b
Categories of financial assets and financial liabilities
Í
Please refer to commentary no. 1 of Note 22 Investment securities.
Ageing analysis of financial assets that are past due but not impaired
Î
FRS 107 requires the disclosure of an analysis by class of the age of financial assets that are
past due but not impaired. Any entity uses its judgement to determine the appropriate time
bands to be disclosed.
FRS 107.37.a and IG
28
Allowance account for credit losses
Ï
FRS 107 requires disclosure requirements where financial assets are impaired by credit
losses and the entity records the impairment in a separate account (e.g., an allowance
account used to record individual impairments or a similar account used to record a
collective impairment of assets) rather than directly reducing the carrying amount of the
asset. In such circumstances, the entity shall disclose a reconciliation of changes in that
account (the “reconciliation”) during the period for each class of financial assets.
In this illustration, the entity has presented the reconciliation of changes in the two
allowance accounts that it has used to record impairment of trade receivables, i.e., trade
receivables that are collectively impaired and those that are individually impaired.
XYZ Holdings (Singapore) Limited | 129
FRS 107.16
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
21. Trade and other receivables ÊËÌ (continued)
Commentary (continued):
FRS 107 Disclosures - Offsetting financial assets and financial liabilities
Ð
FRS 107 requires an entity to disclose information to enable users of its financial
statements to evaluate the effect or potential effect of netting arrangements on the entity’s
financial position which includes the effect or potential effect of rights of set-off associated
with the entity’s recognised financial assets and recognised financial liabilities that are
within the scope of paragraph 13A of FRS 107.
FRS 107.13B
These disclosures are required for all recognised financial instruments that are set off in
accordance with paragraph 42 of FRS 32 and also apply to recognised financial instruments
that are subject to an enforceable master netting arrangement or similar agreement
irrespective of whether they are set off in accordance with paragraph 42 of FRS 32.
FRS 107.13A
To meet the objective above, an entity shall disclose, at the end of the reporting period, the
following quantitative information separately for recognised financial assets and recognised
financial liabilities that are within the scope of paragraph 13A of FRS 107:
FRS 107.13C
(a) the gross amounts of those recognised financial assets and recognised financial
liabilities;
(b) the amounts that are set off in accordance with the criteria in FRS 32.42 when
determining the net amounts presented in the balance sheet;
(c) the net amounts presented in the balance sheet;
(d) the amounts subject to an enforceable master netting arrangement or similar
arrangement that are not otherwise include in (b), including Ñ
i. amounts related to recognised financial instruments that do not meet some or all of
the offsetting criteria of FRS 32.42; and
ii. amounts related to financial collateral (including cash collateral); and
(e) the net amounts after deducting the amounts in (d) from the amounts in (c) above.
The information above shall be presented in a tabular format, separately for financial assets
and financial liabilities, unless another format is more appropriate.
Ñ
The total amount disclosed for an instrument in accordance with (d) above shall be limited to
the net amounts presented in the balance sheet for that instrument.
XYZ Holdings (Singapore) Limited | 130
FRS 107.13D
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
22. Investment securities
FRS 107.7 and 31
Group
2016
2015
$’000
$’000
Current:
FRS 107.8.a.ii
Held for trading investments Ê
- Equity securities (quoted)
1,512
1,260
Non-current:
Available-for-sale financial assets Ê
FRS 107.8.d
- Other debt securities (unquoted)
1,563
980
- Equity securities (quoted)
1,746
848
- Equity securities (unquoted)
139
28
- Equity securities (unquoted), at cost Œ
500
600
3,948
2,456
FRS 107.31
Held-to-maturity investment Ê
- 3% p.a. SGD government bonds due 31 March 2018 (quoted) Ë
660
650
4,608
3,106
FRS 107.8.b
Investments pledged as security
The Group’s investment in government bonds amounting to $660,000 (2015:$650,000)
has been pledged as security for a bank loan (Note 30). Under the terms and conditions of
the loan, the Group is prohibited from disposing of this investment or subjecting it to
further charges without furnishing a replacement security of similar value.
FRS 107.14
Impairment losses
During the financial year, the Group recognised the following impairment losses:
FRS 107.20.e and 37.b
· Impairment loss of $70,000 (2015: $150,000) and $11,000 (2015: $35,000) for
quoted and unquoted equity securities respectively as there were “significant” or
“prolonged” decline in the fair value of these investments below their costs. The Group
treats “significant” generally as X% and “prolonged” as greater than X months. Ž
· Impairment loss of $100,000 (2015: nil) pertaining to unquoted equity securities
carried at cost, reflecting the write-down in the carrying value of this private equity
investment in a Singapore company that was placed under receivership.
· Impairment loss of $17,000 (2015: $25,000) for unquoted other debt securities after
taking into considerations the probability of default or significant delay in repayments
by the debtors.
Commentary:
Categories of financial assets and financial liabilities
Ê
FRS 107 required disclosure of the carrying amounts of financial instruments under each of
the classification in FRS 39, either on the face of the balance sheet or in the notes. The
categories of financial instruments include financial assets and financial liabilities that are
classified as held for trading, those that are designated upon initial recognition as financial
assets or financial liabilities at fair value through profit or loss, held-to-maturity
investments, loans and receivables, available-for-sale financial assets, and financial
liabilities measured at amortised cost. In this illustration, the disclosure requirement is met
in the respective notes to the financial statements (refer to this note, Note 21, 26 and 31).
Alternatively, the disclosure of the carrying amounts of financial instruments under each of
the classifications in FRS 39 may be presented in a separate centralised note.
XYZ Holdings (Singapore) Limited | 131
FRS 107.8
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
22. Investment securities (continued)
Commentary (continued):
Nature and extent of risks arising from financial instruments
•
Information such as the interest rates and maturity dates of the debt securities, and
countries where the equity securities are listed should be disclosed if material and enables
the users of the financial statements to evaluate the nature and extent of the risks arising
from financial instruments to which the entity is exposed to at the reporting date. In this
illustration, the countries where the equity securities are listed are disclosed in Note 40 (e)
Market price risk.
FRS 107.31
Determination of “significant” or “prolonged” decline in fair value of financial instruments
Ž
Please refer to commentary no. 3 of Note 2.16 (c) Impairment of available-for-sale financial
assets.
Additional illustrative disclosures:
Reclassification of financial assets at cost or amortised cost to fair value
Œ
If an entity has reclassified any financial asset measured at cost or amortised cost to fair
value or reclassified any financial asset at fair value, rather than at cost or amortised cost,
FRS 107 requires disclosure of the amount and reason for the reclassification.
FRS 107.12
Illustrative disclosure for reclassification of financial assets at cost to fair value:
On 30 November 2016, the Group reclassified its investment in equity instruments of a
private Singapore company (XXX Pte Ltd) that was previously measured at cost of
$XXX to available-for-sale investments measured at fair value of $XXX, when a reliable
measure of fair value became available upon its listing on the SGX-ST.
23. Gross amount due from/(to) customers for contract work-in-progress Ê
Group
Aggregate amount of costs incurred and recognised profits (less
recognised losses) to date
Less: Progress billings and advances
2016
2015
$’000
$’000
34,089
24,552
(33,796)
(24,740)
FRS 11.40.a
293
(188)
651
398
FRS 11.42.a
(358)
(586)
FRS 11.42.b
293
(188)
Presented as:
Gross amount due from customers for contract work-in-progress
Gross amount due to customers for contract work-in-progress
Advances received included in gross amount due to customers for
contract work
45
60
FRS 11.40.b
Retention sums on construction contract included in trade receivables
65
80
FRS 11.40.c
Commentary:
Advances received before the related work is performed
Ê
Where applicable, an entity is required to disclose the amount of advances received from
customer before the related construction work is performed.
XYZ Holdings (Singapore) Limited | 132
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
24.
Development properties ÊÊ
Group
2016
2015
$’000
$’000
Freehold land
1,800
1,800
Development costs
1,100
850
2,900
2,650
During the financial year, borrowing costs of $35,000 (2015: $33,000), arising from
borrowings obtained specifically for the development property were capitalised under
“Development costs”. The rate used to determine the amount of borrowing costs eligible
for capitalisation was 7.5% (2015: 7.2%), which is the effective interest rate of the specific
borrowing. Ë
FRS 23.26.a and
b
The freehold land under development has been pledged as security for a bank loan (Note
30).
FRS 2.36.h
Commentary:
Ê
In this illustration, the entire amount included in development property is expected to be
recovered or settled no more than twelve months after the reporting period.
FRS 1.61
If the amount includes amounts expected to be recovered more than twelve months after the
reporting period, an entity shall disclose the amount expected to be recovered more than
twelve months after the reporting period.
Borrowing costs capitalised
Ë
Please refer to commentary no. 2 of Note 13 Property plant and equipment.
Additional illustrative disclosures:
List of development properties
Ê
Where the aggregate value for all properties for development, sale or for investment
purposes held by the entity represent more than 15% of the value of the consolidated net
tangible assets, or contribute more than 15% of the consolidated pre-tax operating profit,
entities listed on the SGX-ST are required to disclose further information regarding
development properties.
Illustrative disclosure pursuant to requirements of SGX 1207.11:
Description and location
%
Site area Gross
owned (square floor area
metre) (square
metre)
Stage of completion
as at date of annual
report (expected
year of completion)
An 8-storey luxurious condominium (Snow
Queen Palace) development along Paterson
Road, Singapore
100% 20,500
220,000
60% (2017)
A 35-storey integrated development with
residential apartments, offices and retail
components along Tian Shan Road, Changning
District, Shanghai, People’s Republic of China
100% 98,000
450,000
70% (2017)
A 20-storey luxurious condominium (Link
Spring Tower) along HuBei Road, Hanggu
District, Tianjin, People’s Republic of China
100% 88,000
300,000
30% (2018)
XYZ Holdings (Singapore) Limited | 133
SGX 1207.11
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
25. Inventories
FRS 1.77 and 78.c
Group
2016
2015
$’000
$’000
FRS 2.36.b
Balance sheet:
Raw materials (at cost)
4,994
5,552
Work-in-progress (at cost)
3,823
3,491
15,203
15,357
24,020
24,400
Finished goods (at cost or net realisable value)
FRS 2.36.d
Income statement:
Inventories recognised as an expense in cost of sales
80,567
82,122
352
257
Inclusive of the following charge/(credit):
- Inventories written-down
- Reversal of write-down of inventories
(190)
–
FRS 2.36.e
FRS 2.36.f
The reversal of write-down of inventories was made when the related inventories were
sold above their carrying amounts in 2015.
FRS 2.36.g
The Group has subjected finished goods amounting to $1,500,000 (2015: $1,500,000),
to a floating charge as security for bank overdraft facilities (Note 30).
FRS 2.36.h
XYZ Holdings (Singapore) Limited | 134
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
26. Derivatives
FRS 107.7
and 31
Group
Contract/
Notional
Amount
2016
2015
$’000
$’000
Assets
Forward currency contracts
9,850
150
Interest rate swap
2,500
20
Total derivatives
Add: Held for trading
investments (Note 22)
Add: Contingent consideration
for business combination
(Note 32)
Total financial assets/(liabilities)
at fair value through profit or
loss Œ
Liabilities
(22)
–
Contract/
Notional
Amount
Assets
8,560
60
–
2,500
45
–
170
(22)
105
–
170
(22)
105
–
1,260
–
1,512
–
–
(685)
–
–
1,682
(707)
1,365
–
At the Company level, the carrying amount of financial liability at fair value through profit
or loss Πis the contingent consideration for business combination amounting to
$685,000 as at 31 December 2016 (2015: Nil).
Forward currency contracts are used to hedge foreign currency risk arising from the
Group’s sales and purchases denominated in USD for which firm commitments existed at
the end of the reporting period, extending to March 2016 (2015: March 2015) (Note
40(d)).
The interest rate swap receives floating interest equal to SIBOR + 3% p.a. (2015: SIBOR +
3% p.a.), pays a fixed rate of interest of 7.5% p.a. (2015: 7.5% p.a.) and matures on 30
November 2016 (2015: 30 November 2015).
Commentary:
Categories of financial assets and financial liabilities
Œ
Liabilities
Please refer to commentary no. 1 of Note 22 Investment securities.
XYZ Holdings (Singapore) Limited | 135
FRS 107.8.a
and e
FRS 107.8.e
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
27. Cash and short-term deposits
FRS 107.7 and 31
Group
Cash at banks and on hand
Short-term deposits
Cash and short-term deposits
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
5,697
4,598
4,256
3,985
420
260
365
160
6,117
4,858
4,621
4,145
Cash at banks earns interest at floating rates based on daily bank deposit rates. Shortterm deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group and the Company, and earn
interests at the respective short-term deposit rates. The weighted average effective
interest rates as at 31 December 2016 for the Group and the Company were 2.60%
(2015: 2.80%) and 0.15% (2015: 0.20%) respectively.
Cash and short-term deposits denominated in foreign currencies at 31 December are as
follows:
Group
United States Dollar
Renminbi
FRS 107.7,31 and
34
FRS 107.34.a
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
442
325
108
120
20
15
8
5
For the purpose of the consolidated cash flow statement, cash and cash equivalents
comprise the following at the end of the reporting period:
FRS 7.45
Group
Cash and short-term deposits:
- Continuing operations
- Discontinued operation (Note 11)
2016
2015
$’000
$’000
6,117
4,858
250
–
6,367
Bank overdrafts (Note 30)
Cash and cash equivalents Ê
(498)
5,869
4,858
(1,444)
3,414
Commentary:
Ê
In this illustration, it is assumed that the Group does not have any cash and cash
equivalents that are not available for use by the Group.
Where applicable, disclosure is required, together with a commentary by management, for
the amount of significant cash and cash equivalent balances held by the enterprise that are
not available for use by the Group. There are various circumstances in which cash and cash
equivalent balances held by an enterprise are not available for use by the Group. Examples
include cash and cash equivalent balances held by a subsidiary that operates in a country
where exchange controls or other legal restrictions apply when the balances are not
available for general use by the parent or other subsidiaries.
Cash and cash equivalents which are restricted in its use for more than twelve months shall
be classified as non-current assets.
XYZ Holdings (Singapore) Limited | 136
FRS 7.48
FRS 7.49
FRS 1.66.d
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
28. Provisions Ê•
FRS 1.77 and
78.d
Group
At 1 January 2016
Acquisition of a subsidiary (Note 17)
Arose during the financial year
Utilised
Maintenance
warranties
Legal claim
Total
$’000
$’000
$’000
2,136
–
2,136
FRS 37.84.a
50
–
50
116
420
536
FRS 37.84.b
(415)
–
(415)
FRS 37.84.c
Unused amounts reversed
(60)
–
(60)
FRS 37.84.d
Discount rate adjustment
30
–
30
FRS 37.84.e
Exchange differences
45
4
49
1,902
424
2,326
At 31 December 2016
Current 2016
Non-current 2016
Current 2015
Non-current 2015
377
424
801
1,525
–
1,525
1,902
424
2,326
295
–
295
1,841
–
1,841
2,136
–
2,136
FRS 37.84.a
Maintenance warranties
A provision is recognised for expected warranty claims on certain specialised electronic
components sold during the last two years, based on past experience of the level of
repairs and returns. It is expected that most of these costs will be incurred in the next two
financial years and all will have been incurred within three years from the end of the
reporting period. Assumptions used to calculate the provision for maintenance warranties
were based on current sales levels and current information available about returns based
on the three-year warranty period for the relevant specialised electronic components
sold.
During the financial year, based on the earlier mentioned statistics and warranty claims
experience, management concluded that the provision for maintenance warranties
exceeded the amount necessary to cover warranty claims on products sold during the last
two years. Accordingly, $60,000 (2015: nil) of the warranty provision has been reversed.
FRS 37.85
FRS 1.98.g
Legal claim
On 30 June 2016, a competitor of the Group made a claim against one of the Group’s
subsidiaries for infringing its technology licence from 2015 to 2016. At the end of the
reporting period, the management is in the process of negotiating a settlement
agreement with the plaintiff. The provision made represents the management’s estimate
of the settlement consideration, being the account of profit for the periods covered by the
licence. The settlement and compensation is expected to be concluded in 2017.
FRS 37.85
Commentary:
Comparative of movements in provision
Ê
FRS 37 does not require comparatives of movements in provision to be presented.
XYZ Holdings (Singapore) Limited | 137
FRS 37.84
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
28. Provisions Ê• (continued)
Commentary (continued):
Contingent liability
•
In this illustration, no contingent liabilities are recognised in the business combination.
For contingent liabilities recognised in a business combination, the acquirer is required to
disclose the information required by paragraphs 84 and 85 of FRS 37 Provisions,
Contingent Liabilities and Contingent Assets for each class of provision.
FRS 103.B67.c
29. Deferred capital grants
Group
2016
2015
$’000
$’000
2,694
1,644
2,040
1,030
Cost:
At 1 January
Received during the financial year
Exchange differences
At 31 December
34
20
4,768
2,694
730
540
239
180
11
10
980
730
300
210
3,488
1,754
3,788
1,964
Accumulated amortisation:
At 1 January
Amortisation
Exchange differences
At 31 December
Net carrying amount:
Current
Non-current
Deferred capital grants relate to government grants received for the acquisition of
equipment for research activities undertaken by the Group’s subsidiary in People’s
Republic of China to promote technology advancement and transfer. There are no
unfulfilled conditions or contingencies attached to these grants.
XYZ Holdings (Singapore) Limited | 138
FRS 20.39.b
FRS 20.39.c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
30. Loans and borrowings Ê
Group
Maturity
Maturity
FRS 107.7 and
31
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Current:
Obligations under finance leases (Note
37(d))
Bank overdrafts
6% p.a. fixed rate SGD bank loan
2016
216
16
–
–
On demand
498
1,444
–
–
2016
475
830
–
–
1,189
2,290
–
–
Non-current:
Obligations under finance leases (Note
37(d))
2018-2025
720
160
–
–
7.5% p.a. fixed rate SGD bonds
2018-2022
3,100
3,000
3,100
3,000
Bank loans:
31 July 2022
1,545
–
–
–
- SGD loan at LIBOR + 2.0% p.a.
- 8% p.a. fixed rate USD loan
2018-2022
2,200
2,200
2,200
2,200
- SGD loan at SIBOR + 3.0% p.a.
30 November 2020
5,400
5,400
–
–
–
2,000
–
–
450
428
450
428
13,415
13,188
5,750
5,628
14,604
15,478
5,750
5,628
- 8.5% p.a. fixed rate SGD loan
Convertible redeemable preference shares
Total loans and borrowings
–
2019-2022
Obligations under finance leases
These obligations are secured by a charge over the leased assets (Note 13). The average
discount rate implicit in the leases is 8.5% p.a. (2015: 8.8% p.a.). These obligations are
denominated in the respective functional currencies of the relevant entities in the Group.
Bank overdrafts
Bank overdrafts are denominated in SGD, bear interest at SIBOR + 3.0% p.a. (2015:
SIBOR + 3.0% p.a.) and are secured by a floating charge over certain inventories (Note
25).
6% p.a. fixed rate SGD bank loan
This loan is fully repayable on 30 June 2017 (2015: 30 June 2016) and is secured by a
charge over freehold land under development (Note 24).
7.5% p.a. fixed rate SGD bonds
These bonds with a face value of $3,200,000 are unsecured and are repayable in 5 equal
annual instalments commencing on 1 January 2018.
8% p.a. fixed rate USD bank loan
This loan has been drawn down under a six-year multi-option facility (MOF). The loan is
repayable within 12 months after the reporting date, but has been classified as long-term
because the Group expects and has the discretion to exercise its rights under the MOF to
refinance this funding. Such immediate replacement funding is available until 31 January
2022. The total amount repayable on maturity is $1,600,000. The facility is secured by a
first mortgage over certain freehold land and buildings of the Group (Note 13).
XYZ Holdings (Singapore) Limited | 139
FRS 1.73
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
30. Loans and borrowings Ê (continued)
SGD bank loan at LIBOR + 2.0% p.a.
This loan is secured by a first mortgage over certain investment properties (Note 14) of
the Group and is repayable in two equal instalments due on 31 December 2018 and 31
January 2022. The loan includes a financial covenant which requires the Group to
maintain a gearing ratio not exceeding 50%.
SGD bank loan at SIBOR + 3.0% p.a.
This loan is secured by a first mortgage over certain of the Group’s freehold land and
buildings (Note 13), a charge over certain investment securities (Note 22) of the Group
and corporate guarantee provided by the Company (Note 38(a)). Repayment of this loan
is due on 30 November 2020. The loan includes a financial covenant which requires the
Group to maintain a net current asset and net asset positions throughout the tenure of
the loan.
8.5% p.a. fixed rate SGD loan
As at 31 December 2016, this loan has been presented as part of the liabilities of the
disposal group classified as held for sale (Note 11).
Convertible Redeemable Preference Shares Ë
As at 31 December 2016 and 2015, there were 505,000 Convertible Redeemable
Preference Shares (CRPS) issued and fully paid. The shares were issued at $1 each and
are convertible at the option of the shareholders into ordinary shares of the Company on
1 January 2019 on the basis of one ordinary share for every preference share held. Any
preference shares not converted will be redeemed on 31 December 2021 at a price of
$1.20 per share. The preference shares carry a dividend of 8% p.a., payable half-yearly in
arrears on 30 June and 31 December. The dividend rights are non-cumulative and the
shareholders have no voting rights.
FRS 107.7
FRS 32.28 and 31
The carrying amount of the liability component of CRPS at the end of the reporting period
is arrived at as follows:
Group and Company
2016
2015
$’000
$’000
Face value of CRPS
Equity component
505
(96)
505
(96)
Liability component of CRPS at initial recognition
409
409
FRS 32.28
Add: Accumulated amortisation of discount
- Opening balance at 1 January
19
–
- Amortisation of discount during the financial year
22
19
- Closing balance at 31 December
Liability component of CRPS at the end of the reporting period
41
19
450
428
XYZ Holdings (Singapore) Limited | 140
FRS 32.28
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
30. Loans and borrowings Ê (continued)
Commentary:
Defaults or breaches
Œ
If during the period, there were defaults or breaches of loan agreement terms, the entity
should disclose:
(a)
Details of any defaults during the period of principal, interest, sinking fund, or
redemption terms of those loans payable;
(b)
The carrying amount of the loans payable in default at the reporting date; and
(c)
Whether the default was remedied, or the terms of the loans payable were
renegotiated, before the financial statements were authorised for issue.
These disclosure requirements are also applicable to breaches of loan agreement terms
other than those mentioned above whose breaches permitted the lender to demand
accelerated repayment (unless the breaches were remedied, or the terms of the loan were
renegotiated, on or before the reporting date). Ê
FRS 107.18
FRS 107.19
Compound financial instruments with multiple embedded derivatives
•
If an entity has issued an instrument that contains both a liability and an equity component
and the instrument has multiple embedded derivatives whose values are interdependent
(such as a callable convertible debt instrument), it shall disclose the existence of those
features.
Additional illustrative disclosures:
Defaults or breaches
Ê
Illustrative note disclosure for default on interest payment:
The Company has defaulted in interest payment of $XXX on bank borrowings carried at
$XXX at the end of the reporting period. The Company experienced a temporary
shortage of funds due to decrease in market demand in the Company’s products in the
first two quarters. The interest payable of $XXX which was overdue since October
2016 remained unpaid as at the date when these financial statements were authorised
for issue.
Illustrative note disclosure for breach of loan covenant:
During the current financial year, the Company breached a covenant of a bank loan.
The Company did not fulfil the requirement to maintain gearing ratio at X.XX for a
credit line of $XXX. The credit line was fully drawn down and presented as current
liability at the end of the reporting period. The bank is contractually entitled to request
for immediate repayment of the outstanding loan amount in the event of breach of
covenant.
The bank had not requested for immediate repayment of the outstanding loan amount
as at the date when these financial statements were authorised for issue. Management
commenced renegotiation of the loan agreement terms in December 2016. As of the
date the financial statements were authorised for issue, the renegotiation was still in
progress.
XYZ Holdings (Singapore) Limited | 141
FRS 107.17
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
31. Trade and other payables
FRS 1.77
FRS 107.7 and 31
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Trade payables
15,698
17,426
332
290
Other payables
1,381
1,129
138
124
288
379
–
–
17,367
18,934
470
414
200
–
–
–
17,717
19,140
470
414
Trade and other payables (current):
Amounts due to related companies
FRS 24.18
Other payables (non-current):
Deferred cash settlement (Note 17)
Total trade and other payables
Add:
- Other liabilities (Note 32)
2,974
2,579
481
446
- Loans and borrowings (Note 30)
14,604
15,478
5,750
5,628
Total financial liabilities carried at amortised
cost Ê
35,295
36,197
6,701
6,488
FRS 107.8.f
Trade payables/other payables
These amounts are non-interest bearing. Trade payables are normally settled on 60-day
terms while other payables have an average term of six months.
FRS 107.7 and 31
Trade payables denominated in foreign currencies as at 31 December are as follows:
FRS 107.34.a
Group
United States Dollar
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
3,140
2,962
66
49
Amounts due to related companies Ë
These amounts are trade related, unsecured, non-interest bearing, repayable on demand
and are to be settled in cash.
FRS 107.7 and 31
FRS 24.18
Commentary:
Categories of financial assets and financial liabilities
Ê
Please refer to commentary no. 1 of Note 22 Investment securities.
Ë
Disclosures that related party transactions were made on terms equivalent to those that
prevail in arm’s length transactions are made only if such terms can be substantiated.
XYZ Holdings (Singapore) Limited | 142
FRS 24.23
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
32. Other liabilities
FRS 1.77
FRS 107.7 and 31
Group
Accrued operating expenses
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2,948
2,571
401
346
26
8
80
100
2,974
2,579
481
446
Financial guarantees (Note 38(a))
Contingent consideration for business
combination Ê (Note 17)
Company
685
–
685
–
3,659
2,579
1,166
446
Contingent consideration for business combination
As part of the purchase agreement with the previous owner of MSAX, a contingent
consideration has been agreed. This consideration is dependent on the profit before tax of
MSAX during a 12-month period. The fair value at the acquisition date was $450,000,
which has been adjusted as of 31 December 2016 due to a significantly enhanced
performance compared to budget to a fair value of $685,000. The consideration is due
for final measurement and payment to the former shareholders on 18 October 2016. No
further significant change to the consideration is expected.
Additional illustrative disclosures:
Contingent consideration for business combination
Ê
Illustrative note disclosure for contingent consideration for business combination when the
amount is finalised in 2016:
Note X Other liabilities
As part of the purchase agreement with the previous owners of MSAX dated 18 October
2016, a portion of the consideration was determined to be contingent on the
performance of the acquired entity. At 18 October 2016, a total of $700,000 was paid to
the previous owner of MSAX under this arrangement.
FRS 103.B64
Group
2016
$’000
Initial fair value of the contingent consideration at acquisition date
Fair value adjustment as at 31 December 2016
450
235
Financial liability for the contingent consideration as of 31 December 2016
Fair value adjustment as at 18 October 2016
685
15
Total consideration paid
700
As of 31 December 2016 and prior to payment, the fair value of the contingent
consideration was reassessed which led to additional cost charged to profit or loss.
The initial fair value of the consideration of $450,000 is included in cash flows from
investing activities, the remainder, totalling to $250,000, is recognised in cash flows
from operating activities.
FRS 103.B64.g.i
FRS 103.58
Group
Extract of Consolidated Cash Flow Statement
2016
$’000
Cash flows from operating activities:
Settlement of contingent consideration for business combination
( 250)
Cash flows from investing activities:
Settlement of contingent consideration for business combination
(450)
XYZ Holdings (Singapore) Limited | 143
FRS 7.16
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
33. Share capital and treasury shares
FRS 1.77 and 78.e
a) Share capital
Group and Company
2016
No. of
shares
‘000
FRS 1.79
2015
No. of
shares
‘000
$’000
$’000
Issued and fully paid ordinary shares
At 1 January
Issued for acquisition of a subsidiary
(Note 17)
FRS 1.79.a.ii
23,080
9,665
22,940
9,510
1,305
1,475
–
–
–
–
Share issuance expense (Note 17)
Exercise of employee share options
(Note 35)
At 31 December
–
(50)
–
–
140
155
24,385
11,090
23,080
9,665
FRS 1.79.a. iv
FRS 32.37
FRS 102.50
FRS 1.79.a.ii and
iv
The holders of ordinary shares (except treasury shares) are entitled to receive
dividends as and when declared by the Company. All ordinary shares carry one vote per
share without restrictions. The ordinary shares have no par value.
The Company has two employee share option plans under which options to subscribe
for the Company’s ordinary shares have been granted to employees of the Group.
FRS 1.79.a.v
FRS 1.79.a.iii
FRS 1.79.a.vii
b) Treasury shares
Group and Company
2016
No. of
shares
‘000
At 1 January
Acquired during the financial year
Reissued pursuant to employee share option
plans:
- For cash on exercise of employee share
options (Note 35)
- Transferred from employee share option
reserve
- Gain transferred to gain or loss on reissuance
of treasury shares
–
(200)
$’000
No. of
shares
‘000
$’000
–
–
–
–
–
(254)
75
81
–
–
–
79
–
–
–
(65)
–
–
95
–
–
–
–
75
At 31 December
FRS 1.79.a.vi
2015
(125)
(159)
Treasury shares relate to ordinary shares of the Company that is held by the Company.
The Company acquired 200,000 (2015: nil) shares in the Company through purchases
on the Singapore Exchange during the financial year. The total amount paid to acquire
the shares was $254,000 (2015: nil) and this was presented as a component within
shareholders’ equity.
The Company reissued 75,000 (2015: nil) treasury shares pursuant to its employee
share option plans at a weighted average exercise price of $1.08 (2015: nil) each.
XYZ Holdings (Singapore) Limited | 144
FRS 32.33
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
34.
Other reserves
FRS 1.79.b
a) Fair value adjustment reserve
Fair value adjustment reserve represents the cumulative fair value changes, net of tax,
of available-for-sale financial assets until they are disposed of or impaired.
b) Asset revaluation reserve
The asset revaluation reserve represents increases in the fair value of freehold land
and buildings, net of tax, and decreases to the extent that such decrease relates to an
increase on the same asset previously recognised in other comprehensive income.
c) Statutory reserve fund
In accordance with the Foreign Enterprise Law applicable to the subsidiary in the
People’s Republic of China (PRC), the subsidiary is required to make appropriation to a
Statutory Reserve Fund (SRF). At least 10% of the statutory profits after tax as
determined in accordance with the applicable PRC accounting standards and
regulations must be allocated to the SRF until the cumulative total of the SRF reaches
50% of the subsidiary’s registered capital. Subject to approval from the relevant PRC
authorities, the SRF may be used to offset any accumulated losses or increase the
registered capital of the subsidiary. The SRF is not available for dividend distribution to
shareholders.
d) Foreign currency translation reserve
The foreign currency translation reserve represents exchange differences arising from
the translation of the financial statements of foreign operations whose functional
currencies are different from that of the Group’s presentation currency.
e) Employee share option reserve
Employee share option reserve represents the equity-settled share options granted to
employees (Note 35). The reserve is made up of the cumulative value of services
received from employees recorded over the vesting period commencing from the grant
date of equity-settled share options, and is reduced by the expiry or exercise of the
share options.
f) Gain or loss on reissuance of treasury shares
This represents the gain or loss arising from purchase, sale, issue or cancellation of
treasury shares. No dividend may be paid, and no other distribution (whether in cash or
otherwise) of the Company’s assets (including any distribution of assets to members on
a winding up) may be made in respect of this reserve.
g) Equity component of convertible redeemable preference shares
This represents the residual amount of convertible redeemable preference shares
(CRPS) after deducting the fair value of the liability component. This amount is
presented net of transaction costs and deferred tax liability arising from the CRPS.
XYZ Holdings (Singapore) Limited | 145
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
35.
Employee benefits
Group
2016
2015
$’000
$’000
17,758
16,332
2,107
2,166
Share-based payments (Employee share option plans)
245
150
Other short-term benefits
392
376
20,502
19,024
Employee benefits expense (including directors):
Salaries and bonuses
Central Provident Fund contributions
Employee share option plans Ê
FRS 19.46
FRS 102.51.a
FRS 1.104
FRS 102.44
Senior executive option plan
Under the senior executive option plan (SEOP), share options are granted to senior
executives with more than 12 months’ service. The exercise price of the options is equal
to the market price of the shares on the date of grant. The options vest if and when the
Group’s earnings per share amount increases by 12%, within three years from the date of
grant. If this increase is not met, the options will lapse. The contractual life of each option
granted is five years. There are no cash settlement alternatives. The Group does not have
a past practice of cash settlement for these share options.
FRS 102.45.a
General employee share option plan
All other employees are entitled to a grant of options, under the general employee share
option plan (GESP), once they have been in service for two years. The vesting of the
options is dependent on the total shareholder return (TSR) of the Group as compared to a
group of principal competitors. Employees must remain in service for a period of three
years from the date of grant. The exercise price of the options is equal to the market price
of the shares on the date of grant. The contractual life of the options is five years. There
are no cash settlement alternatives. The Group does not have a past practice of cash
settlement for these awards.
FRS 102.45.a
There has been no cancellation or modification to the SEOP and GEOP during both 2016
and 2015.
Movement of share options during the financial year
The following table illustrates the number (No.) and weighted average exercise prices
(WAEP) of, and movements in, share options during the financial year:
2016
2015
No.
WAEP ($)
No.
WAEP ($)
Outstanding at 1 January
425,000
1.22
480,000
1.20
FRS 102.45.b.i
- Granted
200,000
1.30
125,000
1.26
FRS 102.45.b.ii
- Forfeited
–
(25,000)
1.05
FRS 102.45.b.iii
(75,000)
1.08
(140,000)
1.11
FRS 102.45.b.iv
- Expired
(25,000)
1.16
(15,000)
1.15
FRS 102.45.b.v
Outstanding at 31 December
525,000
1.24
425,000
1.22
FRS 102.45.b.vi
Exercisable at 31 December
200,000
1.18
195,000
1.10
FRS 102.45.b.vii
- Exercised
–
XYZ Holdings (Singapore) Limited | 146
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
35. Employee benefits (continued)
Employee share option plans Ê (continued)
Movement of share options during the financial year (continued)
-
The weighted average fair value of options granted during the financial year was
$1.14 (2015: $1.03).
FRS 102.47.a
-
The weighted average share price at the date of exercise of the options exercised
during the financial year was $1.30 (2015: $1.20). Ë
FRS 102.45.c
-
The range of exercise prices for options outstanding at the end of the year was $1.05
to $1.30 (2015: $1.05 to $1.26). Ì The weighted average remaining contractual life
for these options is 3.90 years (2015: 3.86 years).
FRS 102.45.d
Fair value of share options granted
FRS 102.46
The fair value of the share options granted under the SEOP is estimated at the grant date
using a binomial option pricing model, taking into account the terms and conditions upon
which the share options were granted.
FRS 102.47.a.i
The fair value of share options granted under the GESP is estimated at the date of the
grant using a Monte Carlo simulation model, taking into account the terms and conditions
upon which the options were granted. The model simulates the TSR and compares it
against the group of principal competitors. It takes into account historic dividends, share
price fluctuation covariance of the Company and each entity of the group of competitors
to predict the distribution of relative share performance.
FRS 102.47.a.i and iii
The following table lists the inputs to the option pricing models for the years ended 31
December 2016 and 2015:
SEOP (Binomial)
2016
Dividend yield (%)
2015
GESP (Monte Carlo)
2016
2015
3.13
3.01
3.13
3.01
15.00
16.30
16.00
17.50
Risk-free interest rate (% p.a.)
4.10
4.00
4.10
4.00
Expected life of option (years)
4.05
4.25
4.85
4.65
Weighted average share price ($)
1.30
1.20
1.30
1.20
Expected volatility (%)
FRS 102.47.a.i
The expected life of the share options is based on historical data and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility over a period similar to the life of the options is
indicative of future trends, which may not necessarily be the actual outcome.
XYZ Holdings (Singapore) Limited | 147
FRS 102.47.a.ii
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
35. Employee benefits (continued)
Commentary:
Cash-settled share-based payment transactions
Ê
In this illustration, all the share-based payment transactions are equity-settled. If an entity
has share-based payment transactions that are either cash-settled or with cash alternatives
(for example, share appreciation rights), the entity should disclose:
-
The total expense recognised for the period arising from the share-based payment
transactions;
-
The total carrying amount of liabilities at the end of the period; and
-
The total intrinsic value at the end of the period of liabilities for which the
counterparty’s right to cash or other assets had vested by the end of the period (e.g.,
vested share appreciation rights). Ê
FRS 102.51.a and b
Weighted average share price
Ë
If options were exercised on a regular basis throughout the period, an entity may instead
disclose the weighted average share price during the period.
FRS 102.45.c
Range of exercise prices
Ì
If the range of exercise prices is wide, the outstanding options shall be divided into ranges
that are meaningful for assessing the number and timing of additional shares that may be
issued and the cash that may be received upon exercise of those options.
FRS 102.45.d
Additional illustrative disclosures:
Cash-settled share-based payment transactions
Ê
Illustrative note disclosures:
Share Appreciation Rights (SARs) Plan
Business development managers in the electronic components segment are granted
share options, which can only be settled in cash. These SARs will vest when a specified
target number of new sales contracts are closed. The contractual life of the options is
six years.
The expense recognised in profit or loss granted under the Share Appreciation Rights
Plan during the financial year is $XXX (2015: $XXX).
The carrying amount of the liability recognised in the Group’s and the Company’s
balance sheets relating to such share options at 31 December 2016 is $XXX (2015:
$XXX).
No Share Appreciation Rights granted under this plan had vested at the end of the
reporting period (2015: nil).
XYZ Holdings (Singapore) Limited | 148
FRS 102.45.a
FRS 102.51.a
FRS 102.51.b.i
FRS 102.51.b.ii
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
36. Related party transactions
a) Sale and purchase of goods and services
In addition to the related party information disclosed elsewhere in the financial
statements, the following significant transactions between the Group and related
parties took place at terms agreed between the parties during the financial year: ÊËÌ
FRS 24.18
FRS 24.19
Group
2016
2015
$’000
$’000
700
890
Sale of finished goods to:
- Related companies
- Associates
- A company related to a director
50
30
225
135
1,058
1,200
Purchase of raw materials from:
- Related companies
140
106
Purchase of accounting services from a firm related to a director
- Associates
25
18
Management fees from joint venture
50
60
- Associates
80
76
- A fellow subsidiary
98
92
Interest income from:
Related companies:
These are subsidiaries and associates of Good Group (International) Ltd and its
subsidiaries, excluding entities within the Group.
Company / firm related to a director:
- One of the directors of the Company, through his 25% (2015: 25%) equity interest in
Unik-One Pte Ltd (UOPL), had an interest in a contract for the supply of specialised
digital components to UOPL. During the financial year, the Group sold specialised
digital components of $225,000 (2015: $135,000) to UOPL. No balance with UOPL
was outstanding at the end of the reporting period (2015: nil).
FRS 24.18
- The Group has entered into a contract with LPS Associates LLP, a firm of which the
wife of one of the directors of the Company is the managing partner, for the
provision of consolidation accounting services to the Company for an amount of
$25,000 (2015: $18,000). No balance with the firm was outstanding at the end of
the reporting period (2015: nil).
b) Commitments with related parties
On 1 July 2016, XYZ Technologies Pte Ltd entered into a two-year agreement ending
30 June 2018 with XYZ China Co. Ltd to purchase specific electrical and optional
cables that XYZ Technologies Pte Ltd uses in its production cycle. XYZ Technologies
Pte Ltd expects the potential purchase volume to be $400,000 in 2017 and $300,000
in the first 3 months of 2018. The purchase price is based on XYZ China Co. Ltd’s
actual cost plus 5% margin and will be settled in cash within 30 days after receiving the
inventory.
XYZ Holdings (Singapore) Limited | 149
FRS 24.18.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
36. Related party transactions (continued)
c) Compensation of key management personnel Í
FRS 24.17
Group
Short-term employee benefits
Central Provident Fund contributions
Other short-term benefits
Share-based payments
2016
2015
$’000
$’000
4,938
4,352
355
357
25
80
80
60
5,398
4,849
Directors of the Company
3,470
3,119
Other key management personnel
1,928
1,730
5,398
4,849
Comprise amounts paid to:
Directors’ interests in employee share option plan
FRS 24.18
During the financial year:
- 37,000 (2015: 25,000) share options were granted to two of the Company's
executive directors under the SEOP (Note 35) at an exercise price of $1.30 (2015:
$1.26) each.
- These directors exercised options for 10,000 (2015: 5,000) ordinary shares of the
Company at a price of $1.05 (2015: $1.05) each, with a total cash consideration of
$10,500 (2015: $5,250) paid to the Company.
At the end of the reporting period, the total number of outstanding share options
granted by the Company to the abovementioned directors under the SEOP amount to
120,000 (2015: 93,000). No share options have been granted to the Company's nonexecutive directors.
Commentary:
Related party transactions
Ê
An entity should make disclosures for transactions with related parties separately for each of
the following categories:
(a) the parent;
(b) entities with joint control or significant influence over the entity;
(c) subsidiaries;
(d) associates;
(e) joint ventures in which the entity is a venturer;
(f) key management personnel of the entity or its parent; and
(g) other related parties.
Such categorisation help provide a more comprehensive analysis of related party balances and
transactions.
XYZ Holdings (Singapore) Limited | 150
FRS 24.19 and 20
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
36. Related party transactions (continued)
Commentary (continued):
Related party transactions
Ë
The following are examples of transactions that are disclosed if they are with a related party:
FRS 24.21
(a)
(b)
(c)
(d)
(e)
(f)
(g)
purchases or sales of goods (finished or unfinished);
purchases or sales of property and other assets;
rendering or receiving of services;
leases;
transfers of research and development;
transfers under licence agreements;
transfers under finance arrangements (including loans and equity contributions in cash or
in kind);
(h) provision of guarantees or collateral;
(i) commitments to do something if a particular event occurs or does not occur in the future,
including executor contracts (recognised and unrecognised); and
(j) settlement of liabilities on behalf of the entity or by the entity on behalf of that related
party.
Ì
Items of a similar nature may be disclosed in aggregate except when separate disclosure is
necessary for an understanding of the effects of related party transactions on the financial
statements of the entity.
FRS 24.24
Key management personnel Ê
Í
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity.
FRS 24.9
Additional illustrative disclosures:
Transactions with key management personnel
Ê
In this illustration, the Group does not have any transactions and outstanding balances,
including commitments with key management personnel, close family members of key
management personnel and entities which the key management personnel have control or joint
control.
Illustrative disclosure when the Group have such transactions are as follows:
The transactions and outstanding balances related to key management personnel, close
family members of key management personnel and entities in which the key management
personnel have control or joint control were as follows:
Related parties
Transactions
Mrs. May Lim
Draco Pte. Ltd.
Legal fees
Purchase of office
stationeries
(a)
(b)
Group
Transactions during
Outstanding
the year
balances as at 31
December
2016
2015
2016
2015
$’000
$’000
$’000
$’000
XXX
XXX
XXX
XXX
XXX
FRS 24.18.a,b
-
(a) The Group uses the legal services provided by Mrs. May Lim who is a close family member
of Mr. Goh Hock Inn, a Director of the Company. The legal fees paid were in relation to
purchase of certain non-current assets of the Group. The fees charged were based on
normal market rates for such services and were due and payable under normal payment
terms.
(b) The Group purchases its office stationeries from Draco Pte. Ltd., a Company controlled by
Mr. Goh Hock Inn, a Director of the Company. These purchases are based on normal
market rates for such supplies and were due and payable under normal payment terms.
XYZ Holdings (Singapore) Limited | 151
FRS 24.18.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
37. Commitments
a) Capital commitments
Capital expenditure contracted for as at the end of the reporting period but not
recognised in the financial statements are as follows:
Group
Capital commitments in respect of
property, plant and equipment
Company
2016
$’000
2015
$’000
2016
$’000
2015
$’000
1,690
550
90
55
63
168
–
–
1,753
718
90
55
Share of joint venture’s capital
commitments in relation to investment
properties Ê
FRS 16.74.c
FRS 112.23.a
FRS 40.75.h
b) Operating lease commitments – as lessee
In addition to the land use rights disclosed in Note 16, the Group has entered into
commercial leases on certain motor vehicles and office equipment. These leases have
an average tenure of between three and six years with no renewal option or contingent
rent provision included in the contracts. The Group is restricted from subleasing the
leased equipment to third parties.
FRS 17.35.d
Minimum lease payments, including amortisation of land use rights recognised as an
expense in profit or loss for the financial year ended 31 December 2016 amounted to
$484,000 (2015: $387,000).
FRS 17.35.c
Future minimum rental payable under non-cancellable operating leases (excluding land
use rights) at the end of the reporting period are as follows: Ë
FRS 17.35.a
Group
2016
$’000
2015
$’000
Not later than one year
370
352
Later than one year but not later than five years
800
926
Later than five years
115
126
1,285
1,404
c) Operating lease commitments – as lessor
The Group has entered into commercial property leases on its investment properties.
These non-cancellable leases have remaining lease terms of between two and eight
years. All leases include a clause to enable upward revision of the rental charge on an
annual basis based on prevailing market conditions.
Future minimum rental receivable under non-cancellable operating leases at the end of
the reporting period are as follows: Ë
Group
2016
$’000
2015
$’000
492
440
Later than one year but not later than five years
1,968
1,760
Later than five years
1,400
1,110
3,860
3,310
Not later than one year
XYZ Holdings (Singapore) Limited | 152
FRS 17.56.c
FRS 17.56.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
37. Commitments (continued)
Commentary:
Ê
An entity shall disclose total commitments it has made but not recognised at the reporting date
(including its share of commitments made jointly with other investors with joint control of a
joint venture) relating to its interests in joint ventures. Commitments are those that may give
rise to a future outflow of cash or other resources.
FRS 112.B18
Unrecognised commitments that may give rise to a future outflow of cash or other resources
include:
FRS 112.B19
(a) unrecognised commitments to contribute funding or resources as a result of, for example:
i.
the constitution or acquisition agreements of a joint venture (that, for example,
require an entity to contribute funds over a specific period).
ii. capital-intensive projects undertaken by a joint venture.
iii. unconditional purchase obligations, comprising procurement of equipment, inventory
or services that an entity is committed to purchasing from, or on behalf of, a joint
venture.
iv. unrecognised commitments to provide loans or other financial support to a joint
venture.
v. unrecognised commitments to contribute resources to a joint venture, such as assets
or services.
vi. other non-cancellable unrecognised commitments relating to a joint venture.
(b) Unrecognised commitments to acquire another party’s ownership interest (or a portion of
that ownership interest) in a joint venture if a particular event occurs or does not occur in
the future.
Future minimum lease payments under non-cancellable operating leases
Ë
The disclosure of future minimum lease payments according to time bands relates only to noncancellable operating leases. A non-cancellable lease is a lease that is cancellable only:
(a) upon the occurrence of some remote contingency;
(b) with the permission of the lessor;
(c) if the lessee enters into a new lease for the same or an equivalent asset with the same
lessor; or
(d) upon payment by the lessee of such an additional amount that, at inception of the lease,
continuation of the lease is reasonably certain.
A leasing arrangement where the lessee has the right to terminate lease by providing a written
notice to the lessor without incurring losses significant in comparison to the value of remaining
lease payments is generally not considered a non-cancellable lease and is not included in such
disclosure.
XYZ Holdings (Singapore) Limited | 153
FRS 17.4
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
37. Commitments (continued)
d) Finance lease commitments (continued)
The Group has finance leases for certain items of plant and equipment and furniture
and fixtures. These leases have terms of renewal but no purchase options and
escalation clauses. Renewals are at the option of the specific entity that holds the
lease.
FRS 17.31.e
Future minimum lease payments under finance leases together with the present value
of the net minimum lease payments are as follows:
FRS 17.31.b
Group
2016
2015
$’000
$’000
Minimum
lease
payments
Present
value of
payments
(Note 30)
Not later than one year
251
216
30
16
Later than one year but not later than
five years
392
252
265
120
Later than five years
643
468
117
40
1,286
936
412
176
Total minimum lease payments
Less: Amounts representing finance
charges
Present value of minimum lease
payments
(350)
936
–
936
Minimum
lease
payments
(236)
176
Present
value of
payments
(Note 30)
–
176
XYZ Holdings (Singapore) Limited | 154
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
38.
Contingencies
a) Contingent liabilities
FRS 37.86
Legal claim
On 30 November 2016, a customer has commenced an action against the Group in
respect of construction works claimed to be sub-standard. The estimated payout is
$250,000 should the action be successful. A trial date has not yet been set and
therefore it is not practicable to state the timing of any payment. The Group has been
advised by its legal counsel that it is possible, but not probable, that the action will
succeed and accordingly no provision for any liability has been made in these financial
statements.
FRS 11.45
Guarantees
The Group has provided the following guarantees at the end of the reporting period:
-
It has guaranteed its share of $20,000 (2015: $15,000) of the associate’s
contingent liabilities which have been incurred jointly with other investors.
-
It has guaranteed part of the bank overdraft of the associate to a maximum
amount of $300,000 (2015: nil), which it is severally liable for in the event of
default by the associate.
-
It has guaranteed its interest in its share of the joint venture’s loan of $245,000
(2015: $240,000) (Note 30).
-
It has guaranteed to an unrelated party the performance of a contract for the joint
venture. No liability is expected to arise (2015: nil).
The Company has provided a corporate guarantee to a bank for a $5,400,000 (2015:
$5,400,000) loan (Note 30) taken by a subsidiary.
FRS 24.20.h
FRS 112.23.b
FRS 112.23.b
FRS 112.23.b
FRS 112.23.b
FRS 24.20.h
b) Contingent asset
a) A legal claim for defamation of $500,000 was lodged against one of the Group’s
competitors in October 2015. Based on advice from the legal counsel, the Group is
confident that the dispute will be settled in its favour.
b) The Group is claiming amounts (such as variations and additional works under the
construction contracts) and pending proceedings and disputes with clients. It is not
possible to reasonably determine the extent and timing of possible inflow of
economic benefits. These claims are therefore not recognised in these financial
statements.
XYZ Holdings (Singapore) Limited | 155
FRS 37.89
FRS 11.45
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities Ê
a) Fair value hierarchy
The Group categorises fair value measurements using a fair value hierarchy that is
dependent on the valuation inputs used as follows:
FRS 113.72
-
Level 1 – Quoted prices (unadjusted) in active market for identical assets or
liabilities that the Group can access at the measurement date,
FRS 113.76
-
Level 2 – Inputs other that quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly, and
FRS 113.81
-
Level 3 – Unobservable inputs for the asset or liability.
Fair value measurements that use inputs of different hierarchy levels are categorised in
its entirety in the same level of the fair value hierarchy as the lowest level input that is
significant to the entire measurement.
FRS 113.86
FRS 113.73
Commentary:
Ê
An entity shall disclose information that helps users of its financial statements assess both of
the following:
FRS 113.91
(a) For assets and liabilities that are measured at fair value on a recurring or non-recurring
basis in the balance sheet after initial recognition, the valuation techniques and inputs
used to develop those measurements.
(b) For recurring fair value measurements using significant unobservable inputs (Level 3), the
effect of the measurements on profit or loss or other comprehensive income for the
period.
To meet the objective above, an entity shall consider all the following:
(a) The level of detail necessary to satisfy the disclosure requirements;
(b) How much emphasis to place on each of the various requirements;
(c) How much aggregation and disaggregation to undertake; and
(d) Whether users of financial statements need additional information to evaluate the
quantitative information disclosed.
If the disclosures provided in accordance with FRS 113 and other FRSs are insufficient to meet
the objectives above, an entity shall disclose additional information necessary to meet those
objectives.
XYZ Holdings (Singapore) Limited | 156
FRS 113.92
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
b) Assets and liabilities measured at fair value Ê
The following table shows an analysis of each class of assets and liabilities measured at
fair value at the end of the reporting period: Ê
Group
2016
$’000
Fair value measurements at the end of the reporting period using
Quoted prices in
active markets
for identical
instruments
Significant
observable
inputs other
than quoted
prices
Significant
unobservable
inputs
(Level 1)
(Level 2)
(Level 3)
Total
Assets measured at fair value
Financial assets:
Held for trading financial assets (Note 22)
Quoted equity securities
1,512
—
—
1,512
1,746
—
—
—
1,746
—
139
139
-
-
1,563
1,563
-
150
-
150
Available-for-sale financial assets (Note 22)
Equity securities
Quoted equity securities
Unquoted equity securities
Debt securities
Unquoted debt securities
Derivatives
Forward currency contracts
Interest rate swap
Financial assets as at 31 December 2016
-
20
-
20
3,258
170
1,702
5,130
Non-financial assets: Ë
Investment properties Ì
Commercial
-
-
2,831
2,831
Residential
-
1,814
-
1,814
Freehold land
-
-
11,874
11,874
Buildings
-
-
3,291
3,291
Disposal group classified as held for sale*
-
-
199
199
Non-financial assets as at 31 December 2016
-
1,814
18,195
20,009
Property, plant and equipment Ì
Liabilities measured at fair value Í
Financial liabilities
Derivatives
Forward currency contracts
-
(22)
-
(22)
Contingent consideration for business
combination
-
-
(685)
(685)
Financial liabilities as at 31 December 2016
-
(22)
(685)
(707)
*Disposal group classified as held for sale with a carrying amount of $649,000 were written
down to their fair value of $219,000, less costs to sell of $20,000 (or $199,000), resulting
in a net loss of $450,000, which was included in the profit or loss for the period.
XYZ Holdings (Singapore) Limited | 157
FRS 113.93.a
and b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
b) Assets and liabilities measured at fair value Ê (continued)
FRS 113.93.a
and b
Group
2015
$’000
Fair value measurements at the end of the reporting period using
Quoted prices
in active
markets for
identical
instruments
Significant
observable
inputs other
than quoted
prices
Significant
unobservable
inputs
(Level 1)
(Level 2)
(Level 3)
Total
Assets measured at fair value
Financial assets:
Held for trading financial assets (Note 22)
Quoted equity securities
1,260
—
—
1,260
848
—
—
—
848
—
28
28
-
-
980
980
Forward currency contracts
-
60
-
60
Interest rate swap
-
45
-
45
2,108
105
1,008
3,221
Available-for-sale financial assets (Note 22)
Equity securities
Quoted equity securities
Unquoted equity securities
Debt securities
Unquoted debt securities
Derivatives
Financial assets as at 31 December 2015
Non-financial assets: Ë
Investment properties Ì
Commercial
-
-
2,380
2,380
Residential
-
1,575
-
1,575
Freehold land
-
-
10,726
10,726
Buildings
-
-
3,574
3,574
-
1,575
16,680
18,255
Property, plant and equipment Ì
Non-financial assets as at 31 December 2015
c) Level 2 fair value measurements ÊÎ
The following is a description of the valuation techniques and inputs used in the fair
value measurement for assets and liabilities that are categorised within Level 2 of the
fair value hierarchy:
Derivatives
Forward currency contracts and interest rate swap contracts are valued using a
valuation technique with market observable inputs. The most frequently applied
valuation techniques include forward pricing and swap models, using present value
calculations. The models incorporate various inputs including the credit quality of
counterparties, foreign exchange spot and forward rates, interest rate curves and
forward rate curves.
Residential investment properties
The valuation of residential investment properties are based on comparable market
transactions that consider sales of similar properties that have been transacted in the
open market.
XYZ Holdings (Singapore) Limited | 158
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements
i) Information about significant unobservable inputs used in Level 3 fair value
measurements
The following table shows the information about fair value measurements using
significant unobservable inputs (Level 3)
Description
Fair Value
as at 31
December
2016
Valuation
techniques
Unobservable inputs
Range (weighted
average)
Recurring fair value
measurements
Available-for-sale
financial assets:
Unquoted equity
securities
Unquoted debt
securities
Contingent
consideration for
business combination
139
Discounted
cash flow
Cost of equity
6% to 11% (7.3%)
Dividend yield
3% to 7.5% (4.6%)
Discount for lack of
marketability
5% to 20% (4.6%)
Probability of default
5% to 50% (10%)
Loss severity
40% to 100% (60%)
Probability of meeting
contractual earnings
target
20% to 100% (60%)
Own credit risk
6% to 10% (8%)
Market
comparable
approach
Yield adjustments based
on management’s
assumptions*
10% to 25% (13%)
11,874
Market
comparable
approach
Yield adjustments based
on management’s
assumptions*
15% to 30% (20%)
3,291
Market
comparable
approach
Yield adjustments based
on management’s
assumptions*
10% to 20% (15%)
199
Discounted
cash flow
Weighted average cost of
capital
6% to 12% (10.1%)
Long-term revenue growth
rate
3% to 5.5% (4.2%)
Long-term pre-tax
operating margin
7.5% to 13% (9.2%)
Discount for lack of
marketability
5% to 20% (10%)
1,563
(685)
Discounted
cash flow
Discounted
cash flow
Investment properties
Commercial
2,831
Property, plant and
equipment
Freehold land
Buildings
Non-recurring fair value
measurements
Disposal group
classified as held for
sale
*The yield adjustments are made for any difference in the nature, location or condition of
the specific property.
XYZ Holdings (Singapore) Limited | 159
FRS 113.93.d
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
i) Information about significant unobservable inputs used in Level 3 fair value
measurements (continued)
Description
Fair Value
as at 31
December
2015
Valuation
techniques
Unobservable inputs
FRS 113.93.d
Range (weighted
average)
Recurring fair value
measurements
Available-for-sale
financial assets:
Unquoted equity
securities
Unquoted debt
securities
28
980
Discounted
cash flow
Discounted
cash flow
Cost of equity
6% to 11% (7.3%)
Dividend yield
3% to 7.5% (4.6%)
Discount for lack of
marketability
5% to 20% (4.6%)
Probability of default
5% to 50% (10%)
Loss severity
40% to 100% (60%)
Investment properties
Commercial
2,380
Market
comparable
approach
Yield adjustments based
on management’s
assumptions*
10% to 25% (13%)
10,726
Market
comparable
approach
Yield adjustments based
on management’s
assumptions*
15% to 30% (20%)
3,574
Market
comparable
approach
Yield adjustments based
on management’s
assumptions*
10% to 20% (15%)
Property, plant and
equipment
Freehold land
Buildings
*The yield adjustments are made for any difference in the nature, location or condition of
the specific property.
For unquoted equity securities, a significant increase (decrease) in the expected
dividend yield would result in a significantly higher (lower) fair value measurement. A
significant increase (decrease) in discount for lack of marketability would result in a
significantly lower (higher) fair value measurement. A change in assumption used for
dividend yield may warrant a directionally opposite change in assumption for discount
for lack of marketability.
For unquoted debt securities, significant increases (decreases) in prepayment rates,
probability of default and loss severity in the event of default would result in a
significant lower (higher) fair value measurement. Generally, a change in the
assumption used for the probability of default is accompanied by a directionally
similar change in the assumption used for the loss severity and a directionally
opposite change in the assumption used for prepayment rates.
For contingent consideration, a significant increase (decrease) in the probability of
meeting the contractual earnings target would result in a significantly higher (lower)
fair value measurement.
For freehold land and buildings and commercial investment properties, a significant
increase (decrease) in yield adjustments based on management’s assumptions would
result in a significantly lower (higher) fair value measurement.
XYZ Holdings (Singapore) Limited | 160
FRS 113.93.h.i
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
i) Information about significant unobservable inputs used in Level 3 fair value
measurements (continued)
The following table shows the impact on the Level 3 fair value measurement of assets
and liabilities that are sensitive to changes in unobservable inputs that reflect
reasonably possible alternative assumptions. The positive and negative effects are
approximately the same.
31 December 2016
Effect of reasonably possible
alternative assumptions
Carrying
amount
Profit or loss
Other
comprehensive
income
$’000
$’000
$’000
Recurring fair value measurements
Available-for-sale financial assets:
Unquoted equity securities
Unquoted debt securities
Contingent consideration for business
combination
139
-
15
1,563
-
56
(685)
35
-
31 December 2015
Effect of reasonably possible
alternative assumptions
Carrying
amount
Profit or loss
Other
comprehensive
income
$’000
$’000
$’000
Recurring fair value measurements
Available-for-sale financial assets:
Unquoted equity securities
Unquoted debt securities
28
-
10
980
-
18
In order to determine the effect of the above reasonably possible alternative
assumptions, the Group adjusted the following key unobservable inputs used in the
fair value measurement:
-
For unquoted equity securities, the Group adjusted the discount for lack of
marketability by increasing and decreasing the assumptions by 5% to 8% (2015:
6% to 9%) depending on the individual characteristics of the instrument.
-
For unquoted debt securities, the Group adjusted the probability of default and
loss severity assumptions used to calculate the credit valuation adjustment. The
adjustments made were to increase and decrease the assumptions by 6% (2015:
5%), which is within the range based on the Group’s internal credit risk assessment
for the counterparties.
-
For contingent consideration for business combination, the Group adjusted the
probability of meeting the contractual earnings target by increasing and
decreasing assumption by 10% (2015: 10%).
XYZ Holdings (Singapore) Limited | 161
FRS 113.93.h.ii
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
FRS 113.93.e
ii) Movements in Level 3 assets and liabilities measured at fair value ÊÊ
The following table presents the reconciliation for all assets and liabilities measured
at fair value based on significant unobservable inputs (Level 3):
Group
2016
$’000
Fair value measurements using significant unobservable inputs (Level 3)
Available-for-sale
financial assets
Unquoted
equity
securities
Opening balance
Total gains or losses for
the period
Included in profit or loss
Included in other
comprehensive income
Purchases, issues, sales
and settlements
Purchases
Sales
Transfer from/(to)
investment properties
Exchange differences
Arising from acquisition of
subsidiary
Closing balance
Investment
properties
Contingent
consideration
Total
Unquoted
debt
securities
Commercial
28
980
2,380
-
3,388
-
-
350
(235)
115
FRS 113.93.e.i
42
28
-
-
70
FRS 113.93.e.ii
103
(34)
576
(21)
400
-
-
1,079
(55)
FRS 113.93.e.iii
-
-
(300)
1
-
(300)
1
FRS 113.93.e.iv
-
-
-
(450)
(450)
139
1,563
2,831
(685)
3,848
Group
2015
$’000
Fair value measurements using significant unobservable inputs (Level 3)
Opening balance
Total gains or losses for
the period
Included in profit or loss
Included in other
comprehensive income
Purchases, issues, sales
and settlements
Purchases
Sales
Closing balance
Available-for-sale financial assets
Investment
properties
Unquoted equity
securities
Commercial
Unquoted
debt
securities
Total
40
1,026
2,330
3,396
-
-
50
50
15
9
-
24
FRS 113.93.e.ii
16
(43)
15
(70)
-
31
(113)
FRS 113.93.e.iii
28
980
2,380
3,388
XYZ Holdings (Singapore) Limited | 162
FRS 113.93.e.i
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
ii) Movements in Level 3 assets and liabilities measured at fair value ÊÊ
(continued)
The following table presents the reconciliation for all assets and liabilities measured
at fair value based on significant unobservable inputs (Level 3):
Group
2016
$’000
Fair value measurements using significant unobservable inputs (Level 3)
Available-for-sale financial
assets
Unquoted
equity
securities
Total gains and
losses for the period
included in
Profit or loss:
- Other income
Net gain
from fair
value
adjustment
of
investment
properties (i)
- Other expenses
Fair value
adjustment
of contingent
consideration
of business
combination
(ii)
Unquoted
debt
securities
Property, plant and
equipment
Freehold
land
Buildings
Investment
properties
Contingent
consideration
Total
Commercial
FRS 113.93.e.i
-
-
-
-
350
-
350
-
-
-
-
-
(235)
(235)
Other
comprehensive
income:
- Net gain on fair
value changes
of available-forsale financial
assets
42
28
-
-
-
-
70
- Net surplus on
revaluation of
land and
buildings
-
-
1,001
249
-
-
1250
FRS 113.93.e.ii
(i)
Relates to net gain from fair value adjustment of investment properties held as at 31 December
2016.
(ii)
Relates to unrealised loss from fair value adjustment of contingent consideration for business
combination as at 31 December 2016.
XYZ Holdings (Singapore) Limited | 163
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
ii) Movements in Level 3 assets and liabilities measured at fair value ÊÊ
(continued)
The following table presents the reconciliation for all assets and liabilities measured
at fair value based on significant unobservable inputs (Level 3):
Group
2015
$’000
Fair value measurements using significant unobservable inputs (Level 3)
Available-for-sale
financial assets
Unquoted
equity
securities
Property, plant and
equipment
Unquoted
debt
securities
Freehold
land
Investment
properties
Buildings
Contingent
consideration
Total
Commercial
Total gains and
losses for the period
included in
Profit or loss:
- Other income
Net gain
from fair
value
adjustment
of
investment
properties (i)
Other
comprehensive
income:
- Net gain on fair
value changes
of available-forsale financial
assets
- Net surplus on
revaluation of
land and
buildings
(i)
FRS 113.93.e.i
-
-
-
-
50
-
50
FRS 113.93.e.ii
15
9
-
-
-
-
24
-
-
1,784
620
-
-
2,404
Relates to net gain from fair value adjustment of investment properties held as at 31 December
2015.
XYZ Holdings (Singapore) Limited | 164
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
iii) Valuation policies and procedures Ï
FRS 113.93.g
The Group’s Chief Financial Officer (CFO), who is assisted by the Head of Treasury
and senior controller (collectively referred to as the “CFO office”) oversees the
Group’s financial reporting valuation process and is responsible for setting and
documenting the Group’s valuation policies and procedures. In this regard, the CFO
office reports to the Group’s Audit Committee.
For all significant financial reporting valuations using valuation models and significant
unobservable inputs, it is the Group’s policy to engage external valuation experts who
possess the relevant credentials and knowledge on the subject of valuation, valuation
methodologies and FRS 113 fair value measurement guidance to perform the
valuation.
For valuations performed by external valuation experts, the appropriateness of the
valuation methodologies and assumptions adopted are reviewed along with the
appropriateness and reliability of the inputs (including those developed internally by
the Group) used in the valuations.
In selecting the appropriate valuation models and inputs to be adopted for each
valuation that uses significant non-observable inputs, external valuation experts are
requested to calibrate the valuation models and inputs to actual market transactions
(which may include transactions entered into by the Group with third parties as
appropriate) that are relevant to the valuation if such information are reasonably
available. For valuations that are sensitive to the unobservable inputs used, external
valuation experts are required, to the extent practicable to use a minimum of two
valuation approaches to allow for cross-checks.
Significant changes in fair value measurements from period to period are evaluated
for reasonableness. Key drivers of the changes are identified and assessed for
reasonableness against relevant information from independent sources, or internal
sources if necessary and appropriate.
The CFO office documents and reports its analysis and results of the external
valuations to the Audit Committee on a quarterly basis. The Audit Committee
performs a high-level independent review of the valuation process and results and
recommends if any revisions need to be made before presenting the results to the
Board of Directors for approval.
XYZ Holdings (Singapore) Limited | 165
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
e) Assets and liabilities not measured at fair value, for which fair value is disclosed
ÐÑ
The following table shows an analysis of the Group’s assets and liabilities not measured
at fair value, for which fair value is disclosed:
Group
2016
$’000
Fair value measurements at the end of the reporting period using
Quoted
prices in
active
markets
for
identical
assets
(Level 1)
Significant
observable
inputs other
than quoted
prices
(Level 2)
Significant
unobservable
inputs
(Level 3)
Fair value
Total
Carrying
amount
Assets
Government bonds
675
-
-
675
660
Equity securities, at cost
-
-
-
-*
500
Investment in associates
10,600
-
-
10,600
10,595
Staff loans (non-current)
-
-
60
60
63
Deferred cash settlement
-
-
(205)
(205)
(200)
Financial guarantees
-
-
(29)
(29)
(26)
- Obligations under finance
leases
-
-
(769)
(769)
(720)
- Fixed rate bank loans and
bonds
-
-
(5,183)
(5,183)
(5,120)
- Convertible redeemable
preference shares
-
-
(509)
(509)
(450)
Liabilities:
Loans and borrowings (noncurrent)
Company
Assets
Amounts and loans due from
subsidiaries
-
13,432
-
13,432
13,972
Amount due from associates
-
1,168
-
1,168
1,230
Amounts due from a fellow
subsidiary
-
1,457
-
1,457
1,500
Staff loans (non-current)
-
-
49
49
51
-
-
(85)
(85)
(80)
- Fixed rate bank loans and
bonds
-
-
(3,162)
(3,162)
(3,100)
- Convertible redeemable
preference shares
-
-
(509)
(509)
(450)
Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)
XYZ Holdings (Singapore) Limited | 166
FRS 113.97
FRS 107.25
FRS 107.26
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
e) Assets and liabilities not measured at fair value, for which fair value is disclosed
ÐÑ (continued)
FRS 113.97
FRS 107.25
FRS 107.26
Group
2015
$’000
Fair value measurements at the end of the reporting period using
Quoted
prices in
active
markets
for
identical
assets
Significant
observable
inputs other
than quoted
prices
Significant
unobservable
inputs
(Level 1)
(Level 2)
(Level 3)
Fair value
Total
Carrying
amount
Assets
Government bonds
665
-
-
665
650
Equity securities, at cost
-
-
-
-*
600
Investment in associates
10,400
-
-
10,400
10,321
Staff loans (non-current)
-
-
45
45
48
-
-
(11)
(11)
(8)
- Obligations under finance
lease
-
-
(169)
(169)
(160)
- Fixed rate bank loans and
bonds
-
-
(5,862)
(5,862)
(5,830)
- Convertible redeemable
preference shares
-
-
(459)
(459)
(428)
Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)
Company
Assets
Amounts and loans due from
subsidiaries
-
14,161
-
14,161
14,635
Amount due from associates
-
1,156
-
1,156
1,230
Amounts due from a fellow
subsidiary
-
1,443
-
1,443
1,500
Staff loans (non-current)
-
-
34
34
36
-
-
(105)
(105)
(100)
- Fixed rate bank loans and
bonds
-
-
(3,060)
(3,060)
(3,000)
- Convertible redeemable
preference shares
-
-
(459)
(459)
(428)
Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)
Determination of fair value
Amounts and loans due from subsidiaries, staff loans, deferred cash, fixed rate bank loans
and bonds, and convertible redeemable preference shares
The fair values as disclosed in the table above are estimated by discounting expected
future cash flows at market incremental lending rate for similar types of lending,
borrowing or leasing arrangements at the end of the reporting period.
XYZ Holdings (Singapore) Limited | 167
FRS 113.97
FRS 113.93.d
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
e) Fair value and carrying amount of the Group’s assets and liabilities not measured
at fair value, for which fair value is disclosed ÐÑ (continued)
T Investment in equity securities carried at cost
Fair value information has not been disclosed for the Group’s investments in equity
securities that are carried at cost because fair value cannot be measured reliably.
These equity securities represent ordinary shares in an Israeli high-technology
company that is not quoted on any market and does not have any comparable industry
peer that is listed. In addition, the variability in the range of reasonable fair value
estimates derived from valuation techniques is significant. The Group does not intend
to dispose of this investment in the foreseeable future. The Group intends to eventually
dispose of this investment through sale to institutional investors. ”
Commentary:
Ê
Disclosures in tabular format
An entity shall present the quantitative disclosures required by FRS 113 in a tabular format
unless another format is more appropriate.
Classes of assets and liabilities
An entity shall determine appropriate classes of assets and liabilities on the basis of the
following:
FRS 113.99
FRS 113.94
(a) The nature, characteristics and risks of the asset or liability; and
(b) The level of the fair value hierarchy within which the fair value measurement is
categorised.
The number of classes may need to be greater for fair value measurements categorised
within Level 3 of the fair value hierarchy because those measurements have a greater
degree of uncertainty and subjectivity. Determining appropriate classes of assets and
liabilities for which disclosures about fair value measurements should be provided
requires judgement. A class of assets and liabilities will often require greater
disaggregation than the line items presented in the balance sheet. If another FRS
specifies the class for an asset or a liability, an entity may use that class in providing the
disclosures required in FRS 113 if that class meets the requirements in this paragraph.
Ë
In this illustration, the current use of the non-financial assets does not differ from their highest
and best use. If for recurring and non-recurring fair value measurements, the highest and best
use of a non-financial asset differs from its current use, an entity shall disclose the fact and
why the non-financial asset is being used in a manner that differs from its highest and best use.
Ì
In this illustration, the Group’s commercial properties are categorised within Level 3 of the fair
value hierarchy as the properties’ fair values are determined based on comparable market
transactions adjusted for significant unobservable inputs such as yield adjustments relating to
nature, location and condition of the specific property.
FRS 113.93.i
In this illustration, the Group’s residential investment properties are categorised within Level 2
of the fair value hierarchy as the properties’ fair values are determined solely based on
observable inputs other than quoted prices.
Í
In this illustration, the Group does not have any liability measured at fair value and issued with
an inseparable third-party credit enhancement.
For a liability measured at fair value and issued with an inseparable third-party credit
enhancement, an issuer shall disclose the existence of that credit enhancement and whether it
is reflected in the fair value measurement of the liability.
XYZ Holdings (Singapore) Limited | 168
FRS 113.98
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
Commentary (continued):
•
In this illustration, there has been no change in valuation technique for recurring and nonrecurring fair value measurements categorised within Level 2 and Level 3 of the fair value
hierarchy. If there has been a change in valuation technique (e.g. changing from a market
approach to an income approach or use of an additional valuation technique), the entity shall
disclose that change and the reason(s) for making it.
‘
For recurring and non-recurring fair value measurements categorised within Level 3 of the fair
value hierarchy, a description of valuation processes used by the entity (including, for
example, how an entity decides its valuation policies and procedures and analyses changes in
fair value measurements from period to period.
An entity might disclose the following:
(a)
FRS 113.93.d
FRS 113.93.g
FRS 113.IE65
for the group within the entity that decides the entity’s valuation policies and
procedures:
i.
its description;
ii.
to whom that group reports; and
iii.
the internal reporting procedures in place (e.g. whether and, if so, how pricing, risk
management or audit committees discuss and assess the fair value measurements.
(b)
the frequency and methods for calibration, back testing and other testing procedures of
pricing models;
(c)
the process for analysing changes in fair value measurements from period to period;
(d)
how the entity determined that third-party information, such as broker quotes or pricing
services, used in the fair value measurement was developed in accordance with FRS 113;
and
(e)
the methods used to develop and substantiate the unobservable inputs used in a fair
value measurement.
It is important to note that the illustration on valuation policies and procedures for
recurring and non-recurring fair value measurements categorised within Level 3 of the
fair value hierarchy is based on certain assumed facts regarding circumstances
surrounding XYZ Holdings (Singapore) Limited. The valuation policies and procedures
of other entities may be different and disclosures would have to be customised in the
light of specific facts and circumstances applicable to the entity.
’
In this illustration, investment properties are carried at fair value. For any investment
properties recorded at cost, FRS 40 requires disclosure about fair value. Please refer to
commentary no.2 of Note 2.8 Investment properties.
Where investment properties are carried at cost for which fair value are disclosed, FRS 113.97
requires the disclosures of
FRS 113.97
-
the level of the fair value hierarchy within which the fair value measurements are
categorised in their entirety (Level 1, 2 or 3),
FRS 113.93.b
-
a description of the valuation technique(s) and inputs used in the fair value measurement.
If there has been a change in valuation technique, the entity shall disclose the reason for
making it,
FRS 113.93.d
- the fact and why the non-financial asset is being used in a manner that differs from its
highest and best use if the highest and best use of a non-financial asset differs from its
current use
XYZ Holdings (Singapore) Limited | 169
FRS 113.93.i
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
Commentary (continued):
Fair value of financial assets and liabilities
“
FRS 107.25 requires the fair value of each class of financial assets and liabilities to be
disclosed in a way that permits it to be compared with its carrying amount. However,
disclosures of fair value are not required:
-
When the carrying amount is a reasonable approximation of fair value (e.g., short-term
trade and other receivables and payables, and long-term loans that are re-priced to market
rate);
-
For an investment in equity instrument that do not have a quoted market price in an active
market, or derivatives linked to such equity instruments, that is measured at cost in
accordance with FRS 39 because its fair value cannot be measured reliably; or
-
For a contract containing a discretionary participation feature (as described in FRS 104) if
the fair value of that feature cannot be measured reliably.
FRS 107.25 and 29
In this illustration, in addition to the above exemptions, the comparison between carrying
amount and fair value of financial assets or liabilities that are carried at fair value (e.g., held for
trading investments and derivatives) has not been disclosed as these assets are carried at fair
value.
Financial instruments whose fair value cannot be reliably measured
”
FRS 107 requires the disclosure of fair value information for financial instruments whose fair
value cannot be reliably measured to include disclosure of whether and how the entity intends
to dispose of such financial instruments.
FRS 107.20.d
If financial instruments whose fair value previously could not be reliably measured are
derecognised, that fact, their carrying amounts at the time of de-recognition, and the amount
of gain or loss recognised shall be disclosed.
FRS 107.30.e
XYZ Holdings (Singapore) Limited | 170
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
39. Fair value of assets and liabilities (continued)
Additional illustrative disclosures:
Ê
Transfers between fair value hierarchy
Transfers between Level 1 and Level 2
FRS 113 requires disclosures of the amount of any transfers between Level 1 and Level 2 of
the fair value hierarchy for assets and liabilities held at the end of the reporting period that
are measured at fair value on a recurring basis and the reasons for those transfers. Transfers
into each level shall be disclosed and discussed separately from transfers out of each level.
In this illustration, there were no assets or liabilities transferred between Level 1 and Level 2.
Illustrative disclosure if an entity has transfers of assets or liabilities between Level 1 and
Level 2.
The following table shows transfers from Level 1 to Level 2 of the fair value hierarchy
for assets and liabilities which are recorded at fair value.
FRS 113.93.c
Group
2015
$’000
Financial assets held-for-trading
- Quoted equity securities
Financial investments available-for-sale
- Other debt securities
XXX
XXX
The above financial assets were transferred from Level 1 to Level 2 as they were
delisted from the stock exchange and therefore ceased to be actively traded during the
year and fair values were consequently measured using valuation techniques and using
observable market inputs.
Transfers into or out of Level 3
FRS 113 requires disclosures of the amount of any transfers into or out of Level 3 of the fair
value hierarchy, the reasons for those transfers and the entity’s policy for determining when
transfers between levels are deemed to have occurred. Transfers into Level 3 shall be
disclosed and discussed separately from transfers out of Level 3.
In this illustration, there were no assets or liabilities transferred from Level 1 and Level 2 to
Level 3.
Illustrative disclosure if there were transfers of assets or liabilities into Level 3.
During the financial year ended 31 December 2016, the Group transferred certain
financial instruments from Level 2 to Level 3 of the fair value hierarchy. The carrying
amount of the total financial assets transferred was $XXX.
The reason for the transfers from Level 2 to Level 3 is that inputs to the valuation
models for the other debt securities ceased to be observable. Prior to transfer, the fair
value of the instruments was determined using observable market transactions or
binding broker quotes for the same or similar instruments. Since the transfer, these
instruments have been valued using valuation models incorporating significant non
market-observable inputs.
Illustrative disclosure if there were transfers of assets or liabilities out of Level 3.
The Group transferred an unquoted equity security from Level 3 to Level 1 of the fair
value hierarchy. The carrying amount of the total financial assets transferred was
$XXX.
The security was transferred from Level 3 into Level 1 as it was listed on the stock
exchange during the financial year. Prior to the transfer, the fair value of the security
was determined using valuation model incorporating significant non market-observable
inputs. Since the transfer, the fair value of the security is determined based on market
price quoted in the stock exchange.
XYZ Holdings (Singapore) Limited | 171
FRS 113.93.e.iv
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies ÊËÌÍ
The Group and the Company are exposed to financial risks arising from its operations and
the use of financial instruments. The key financial risks include credit risk, liquidity risk,
interest rate risk, foreign currency risk and market price risk. The board of directors
reviews and agrees on policies and procedures for the management of these risks, which
are executed by the Chief Financial Officer, Head of Treasury and Head of Credit Control.
The Audit Committee provides independent oversight to the effectiveness of the risk
management process. It is, and has been, throughout the current and previous financial
year, the Group’s policy that no trading in derivatives for speculative purposes shall be
undertaken. Ê
FRS 107.7 and 31
FRS 107.31-33
and IG15
The following sections provide details regarding the Group’s and Company’s exposure to
the above-mentioned financial risks and the objectives, policies and processes for the
management of these risks.
Commentary:
Nature and extent of risks arising from financial instruments
Ê
FRS 107 requires an entity to disclose qualitative and quantitative information that enables
users of its financial statements to evaluate the nature and extent of risks arising from
financial instruments to which the entity is exposed at the reporting date, including the
entity’s policies and processes for accepting, measuring, monitoring and controlling such
risks. In addition, an entity is required to disclose any change in the qualitative information
from the previous period and explain the reasons for the change.
The disclosures in response to FRS 107 illustrated in this note are based on assumed
circumstances of XYZ Holdings (Singapore) Limited and may not be applicable or
relevant to other entities. Each entity should customise the information disclosed
according to the specific circumstances, financial risk exposures, and risk
management policies and procedures relevant to the entity.
FRS 107.AGB6
Alternative approaches of disclosure
Ë
FRS 107.33.c
Decentralised disclosures
In this illustration, most of the information regarding the nature and extent of risks arising
from financial instruments required by FRS 107.31-42, has been disclosed in one
centralised note. Alternatively, an entity may disclose such information in the respective
balance sheet item notes where appropriate.
Ì
Incorporating disclosures by cross reference
The disclosures of information regarding the nature and extent of risks arising from
financial instruments may instead be incorporated in the financial statements by crossreference from the financial statements to some other statement, such as management
commentary or risk report, that is available to users of the financial statements on the
same terms as the financial statements and at the same time. Without the information
incorporated by cross-reference, the financial statements are incomplete.
Í
In this illustration, there’s no change to the Group’s exposure to risk arising from financial
instruments. FRS 107 requires disclosures of changes from previous period for
(a) exposures to risk and how they arise; (or)
(b) its objective, policies and processes for managing the risk and the methods used to
measure the risks from the previous period.
XYZ Holdings (Singapore) Limited | 172
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40.
Financial risk management objectives and policies (continued)
Additional illustrative disclosures:
Alternative simplified disclosures
Ê
FRS 107.31, 33 and
IG17
In this illustration, the entity is exposed to all credit risk, liquidity risk, interest rate risk, foreign
currency risk and market price risk.
Example illustrative financial risk management objectives and policies for a non-complex trading
entity which is exposed mainly to credit risk and liquidity risk.
The Group and the Company is exposed to financial risks arising from its operations and the
use of financial instruments. The key financial risks include credit risk and liquidity risk.
The following sections provide details regarding the Group and Company's exposure to the
above-mentioned financial risks and the objectives, policies and processes for the
management of these risks.
a) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should
a counterparty default on its obligations. The Group’s and the Company’s exposure to
credit risk arises primarily from trade and other receivables. For other financial assets
(including investment securities, cash and short-term deposits and derivatives), the
Group and the Company minimise credit risk by dealing exclusively with high credit
rating counterparties.
FRS 107.33.a-b and
IG15
The Group’s objective is to seek continual revenue growth while minimising losses
incurred due to increased credit risk exposure. The Group trades only with recognised
and creditworthy third parties. It is the Group’s policy that all customers who wish to
trade on credit terms are subject to credit verification procedures. In addition,
receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not significant. For transactions that do not occur in the
country of the relevant operating unit, the Group does not offer credit terms without
the approval of the Head of Credit Control.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographical region, or have economic features that
would cause their ability to meet contractual obligations to be similarly affected by
changes in economic, political or other conditions. Concentrations indicate the relative
sensitivity of the Group’s performance to developments affecting a particular industry.
FRS 107.33.a-b
FRS 107.IG15.c
In order to avoid excessive concentrations of risk, the Group’s policies and procedures
include specific guidelines to focus on maintaining a diversified portfolio. Identified
concentrations of credit risks are controlled and managed accordingly. Selective
hedging is used within the Group to manage risk concentrations at both the relationship
and industry levels. The Group does not apply hedge accounting.
Exposure to credit risk ÊË
FRS 107 AGB9-B10
At the end of the reporting period, the Group’s and the Company’s maximum exposure
to credit risk is represented by:
-
A nominal amount of $565,000 (2015: $255,000) relating to a corporate
guarantee provided by the Group to the banks on associates’ and joint venture’s
loans
-
A nominal amount of $5,400,000 (2015: $5,400,000) relating to a corporate
guarantee provided by the Company to a bank on a subsidiary’s bank loan
Information regarding credit enhancements for trade and other receivables is disclosed
in Note 21.
XYZ Holdings (Singapore) Limited | 173
FRS 107.36.b
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
a) Credit risk (continued)
Credit risk concentration profile Ì
The Group determines concentrations of credit risk by monitoring the country and
industry sector profile Í of its trade receivables on an ongoing basis. The credit risk
concentration profile of the Group’s trade receivables at the end of the reporting
period is as follows:
FRS 107.34.a
and AGB8
Group
2016
2015
$’000
% of total
$’000
% of total
10,019
46%
12,950
53%
People’s Republic of China
4,989
23%
4,995
21%
Malaysia
3,467
16%
3,442
14%
Vietnam
1,981
9%
1,619
7%
Other countries
1,238
6%
1,185
5%
21,694
100%
24,191
100%
Multi-industry conglomerates
8,590
39%
9,989
41%
Electronics
7,539
35%
7,496
31%
Property
4,719
22%
5,883
24%
846
4%
823
4%
21,694
100%
24,191
100%
By country:
Singapore
By industry sectors:
Others
At the end of the reporting period, approximately:
-
21% (2015: 19%) of the Group’s trade receivables were due from 5 major
customers who are multi-industry conglomerates located in Singapore.
-
11% (2015: 9%) of the Group’s trade and other receivables were due from related
parties while almost all of the Company’s receivables were balances with related
parties.
Financial assets that are neither past due nor impaired
FRS 107.34.a,
34.c and AGB8
FRS 107.36.c
Trade and other receivables that are neither past due nor impaired are with
creditworthy debtors with good payment record with the Group. Cash and short-term
deposits, investment securities and derivatives that are neither past due nor impaired
are placed with or entered into with reputable financial institutions or companies with
high credit ratings and no history of default.
Financial assets that are either past due or impaired
FRS 107.37
Information regarding financial assets that are either past due or impaired is disclosed
in Note 21 (Trade and other receivables) and Note 22 (Investment securities).
XYZ Holdings (Singapore) Limited | 174
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
a) Credit risk (continued)
Commentary:
Credit risk relating to financial assets or financial liabilities at fair value through profit or loss
Ê
In this illustration, no financial instrument has been designated as financial assets or
financial liabilities at fair value through profit or loss. If an entity has designated a loan or
receivable or financial liability as at fair value through profit or loss, FRS 107 requires
further disclosures regarding the maximum credit risk exposures of such receivables and
the amount by which any related credit derivatives or similar instruments mitigate that
credit risk exposure; changes in fair value during the period and cumulatively, of such loan
or receivable or financial liabilities that is attributable to changes in credit risk (including
the methods of determining such fair value changes) and of any related credit derivatives
or similar instruments; and the difference between the financial liability’s carrying amount
and the contractual repayment amount.
FRS 107.9-11
Disclosure of maximum exposure to credit risk
Ë
For financial instruments where the carrying amount best represents the maximum
exposure to credit risk, the disclosure of the maximum exposure to credit risk is not
required.
FRS 107.36.a
Quantitative disclosures
FRS 107.34.a
Ì
FRS 107 requires the disclosure of summary quantitative data about an entity’s exposure
to financial risk (e.g., credit risk, liquidity risk and market risk) that is based on the
information provided internally to key management personnel of the entity (as defined in
FRS 24, Related Party Disclosures), e.g., the board of directors or CEO. As such, the
disclosures would be defined by the actual information used by management in managing
financial risks, which may be different from those disclosed in this illustration.
In addition, if the above-mentioned quantitative data disclosed as at the end of the
reporting period are unrepresentative of the entity’s exposure to risk during the period, the
entity shall provide further information that is representative e.g., an entity might disclosed
the highest, lowest and average amount of risk to which it was exposed during the period to
meet the disclosure requirement.
Í
The identification of concentrations of credit risk requires judgement taking into account
the circumstances of the entity. Apart from country and industry sectors, other measures
of credit risk concentrations may include credit rating or other measures of credit quality,
limited number of individual counterparties, or groups of closely related counterparties.
XYZ Holdings (Singapore) Limited | 175
FRS 107.35 and
IG20
FRS 107.AGB8 and
IG18
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in
meeting financial obligations due to shortage of funds. The Group’s and the Company’s
exposure to liquidity risk arises primarily from mismatches of the maturities of financial
assets and liabilities. The Group’s and the Company’s objective is to maintain a balance
between continuity of funding and flexibility through the use of stand-by credit
facilities.
FRS 107.33.a-b,
39.c and IG5
The Group’s and the Company’s liquidity risk management policy is that not more than
20% (2015: 20%) of loans and borrowings (including overdrafts and convertible
redeemable preference shares) should mature in the next one year period, and that to
maintain sufficient liquid financial assets and stand-by credit facilities with three
different banks. At the end of the reporting period, approximately 8% (2015: 15%) of
the Group’s loans and borrowings will mature in less than one year based on the
carrying amount reflected in the financial statements, excluding discontinued
operation. None (2015: none) of the Company’s loans and borrowings will mature in
less than one year at the end of the reporting period. Ê•
FRS 107.33.b, 39.c
and AGB11F.e
The Group assessed the concentration of risk with respect to refinancing its debt and
concluded it to be low. Access to sources of funding is sufficiently available and debt
maturing within 12 months can be rolled over with existing lenders.
FRS 107.34.a, 34.c
and AGB8
FRS 107.AGB11F.a
and c
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group’s and the Company’s
financial assets used for managing liquidity risk and financial liabilities at the end of the
reporting period based on contractual undiscounted repayment obligations. Ž
Group
2016
2015
$’000
$’000
One to
One year or five
Over five
less •
years
years
Total
One year One to Over five
or less • five years years
FRS 107.39.a, b and
AGB11D
Total
Financial assets: •
Trade and other
receivables
Cash and short-term
deposits
Derivatives ‘
Total undiscounted
financial assets
24,921
2,984
–
27,905
26,936
2,980
–
29,916
6,117
–
–
6,117
4,858
–
–
4,858
170
–
–
170
105
–
–
105
31,208
2,984
–
34,192
31,899
2,980
–
34,879
Financial liabilities:
Trade and other payables
17,147
250
–
17,397
18,934
–
–
18,934
Other liabilities
2,974
–
–
2,974
2,579
–
–
2,579
Loans and borrowings
1,189
12,817
4,275
18,281
2,290
12,659
3,277
18,226
685
–
–
685
–
–
–
–
22
–
–
22
–
–
–
–
22,017
13,067
4,275
39,359
23,803
12,659
3,277
39,739
9,191
(10,083)
(4,275)
Contingent consideration
for business combination
Derivatives ‘
Total undiscounted
financial liabilities
Total net undiscounted
financial assets/
(liabilities)
(5,167)
8,096
(9,679)
(3,277)
(4,860)
XYZ Holdings (Singapore) Limited | 176
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)
Company
2016
2015
$’000
$’000
One year or One to Over five
less • five years years
Total
One year One to Over five
or less • five years years
Total
Financial assets: •
Trade and other
receivables
Cash and short-term
deposits
338
17,289
4,621
–
Total undiscounted
financial assets
4,959
17,289
Trade and other payables
470
Other liabilities
481
–
17,627
350
17,855
–
18,205
4,621
4,145
–
–
4,145
–
22,248
4,495
17,855
–
22,350
–
–
470
414
–
–
414
–
–
481
446
–
–
446
–
4,682
2,084
6,766
–
3,796
2,540
6,336
951
4,682
2,084
7,717
860
3,796
2,540
7,196
4,008
12,607
(2,084)
14,531
3,635
14,059
(2,540)
15,154
Financial liabilities:
Loans and borrowings
Total undiscounted
financial liabilities
Total net undiscounted
financial assets/
(liabilities)
The table below shows the contractual expiry by maturity of the Group and Company’s
contingent liabilities and commitments. The maximum amount of the financial
guarantee contracts are allocated to the earliest period in which the guarantee could
be called. ’
2016
2015
$’000
$’000
One to
One year or five
Over five
less •
years
years
Total
One year One to Over five
or less • five years years
Total
Group
Financial guarantees
320
245
–
565
15
240
–
255
–
5,400
–
5,400
–
5,400
–
5,400
Company
Financial guarantees
XYZ Holdings (Singapore) Limited | 177
FRS 107.AGB11C.c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)
Commentary:
Quantitative disclosures
Ê
Please refer to commentary no. 3 of Note 40(a) (Credit risk)
Other factors to consider in disclosing liquidity risk
•
The application guidance in FRS 107 illustrates the other factors that an entity might also
consider disclosing which include, but are not limited to, whether the entity:
(a)
has committed borrowing facilities (e.g., commercial paper facilities) or other lines of
credit (e.g., stand-by credit facilities) that it can access to meet liquidity needs;
(b)
holds deposits at central banks to meet liquidity needs;
(c)
has very diverse funding sources;
(d)
has significant concentrations of liquidity risk in either its assets or its funding sources;
(e)
has internal control processes and contingency plans for managing liquidity risk;
(f)
has instruments that include accelerated repayment terms (e.g., on the downgrade of
the entity’s credit rating);
(g)
has instruments that could require the posting of collateral (e.g., margin calls for
derivatives);
(h)
has instruments that allows the entity to choose whether it settles its financial liabilities
by delivering cash (or another financial asset) or by delivering its own shares; or
(i)
has instruments that are subject to master netting agreements.
FRS 107.AGB11F
Maturity analysis for financial liabilities
Ž
In this illustration, certain undiscounted payments presented differ from the carrying amount
included in the balance sheet because the balance sheet amounts are based on discounted
cash flows.
FRS 107.AGB11D
When the amount payable is not fixed, the maturity analysis is determined by reference to the
conditions existing at the reporting date. For example, when the amount payable varies with
changes in an index, the amount disclosed may be based on the level of the index at the
reporting date.
•
The number of time bands illustrated is only an example. An entity should use its judgement
to determine the number of time bands that is suitable for the entity.
When the counterparty has a choice of when an amount is paid, the liability is included on the
basis of the earliest date on which the entity can be required to pay. For example, financial
liabilities that the entity can be required to repay on demand are included in the earliest time
band.
XYZ Holdings (Singapore) Limited | 178
FRS 107.AGB11
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)
Commentary (continued):
Maturities of financial assets held for liquidity purposes
•
FRS 107.39.c requires an entity to describe how it manages the liquidity risk inherent in the
items disclosed in the quantitative disclosures required in FRS 107.39.a and b. If financial
assets are readily saleable or expected to generate cash inflows to meet cash outflows on
financial liabilities and if that information is necessary to enable users of its financial
statements to evaluate the nature and extent of liquidation risk. An entity shall disclose a
maturity analysis of financial assets it holds for managing liquidity risks.
FRS 107.AGB11E
Quantitative liquidity risk disclosures
‘
FRS 107 specifies minimum liquidity risk disclosures, i.e., the contractual maturity analysis of
financial liabilities, required by FRS 107.39.
FRS 107 permits derivative liabilities to be excluded from the paragraph 39 maturity analysis,
unless the “contractual maturities are essential for an understanding of the timing of the cash
flows”. The application guidance cites an interest rate swap designated in a cash flow hedging
relationship as an example of such an essential case. Given that the hedged cash flows are
required to be highly probable, the swap would normally be expected to be held to maturity.
For those derivatives included in the contractual maturity analysis, the guidance still requires
gross cash flows to be disclosed for those derivatives which will involve a gross exchange of
cash flows, such as currency swaps. Œ
FRS 107.AGB11B
FRS 107.AGB11D
Financial guarantees issued
’
FRS 107 requires issued financial guarantee contracts to be recorded in the contractual
maturity analysis based on the maximum amount guaranteed. They are to be allocated to the
earliest date they can be drawn down, irrespective of whether it is likely that those
guarantees will be drawn or the amount that is expected to be paid.
Additional illustrative disclosures:
Quantitative liquidity risk disclosures
Œ
Illustrative disclosure for gross cash flows for those derivatives which will involve gross
exchange of cash flows, such as currency swaps.
Below is an illustration of such a presentation:
Group
$’000
One year One to Over five
or less five years years
Total
Derivatives:
- Interest rate swaps – settled net
XXX
–
–
XXX
- Forward currency contracts – gross payments
XXX
–
–
XXX
(XXX)
–
–
(XXX)
- Forward currency contracts – gross receipts
XYZ Holdings (Singapore) Limited | 179
FRS 107.AGB11C.c
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
c) Interest rate risk Ê
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and
the Company’s financial instruments will fluctuate because of changes in market
interest rates. The Group’s and the Company’s exposure to interest rate risk arises
primarily from their loans and borrowings, interest-bearing loans given to related
parties and investments in debt securities. The Group does not hedge its investment in
fixed rate debt securities as they have active secondary or resale markets to ensure
liquidity. The Company’s loans at floating rate given to related parties form a natural
hedge for its non-current floating rate bank loan. All of the Group’s and the Company’s
financial assets and liabilities at floating rates are contractually re-priced at intervals of
less than 6 months (2015: less than 6 months) from the end of the reporting period.
The Group’s policy is to manage interest cost using a mix of fixed and floating rate
debts. The Group’s policy is to keep 40% to 70% (2015: 40% to 70%) of its loans and
borrowings at fixed rates of interest. To manage this mix in a cost-efficient manner, the
Group enters into interest rate swaps. At the end of the reporting period, after taking
into account the effect of an interest rate swap, approximately 62% (2015: 58%) of the
Group’s borrowings are at fixed rates of interest. Ë
FRS 107.33.a- b
and IG16
FRS 107.33.b
and 34.a
Sensitivity analysis for interest rate risk Ì
At the end of the reporting period, if SGD interest rates Ê had been 75 (2015: 75)
basis points lower/higher with all other variables held constant, the Group’s profit
before tax would have been $20,000 (2015: $18,000) higher/lower, arising mainly as
a result of lower/higher interest expense on floating rate loans and borrowings,
lower/higher interest income from floating rate loans to related parties and
lower/higher positive fair value of an interest rate swap, and the Group’s other reserve
in other comprehensive income would have been $30,000 (2015: $30,000)
higher/lower, arising mainly as a result of an increase/decrease in the fair value of
fixed rate debt securities classified as available-for-sale. The assumed movement in
basis points for interest rate sensitivity analysis is based on the currently observable
market environment, showing a significantly higher volatility as in prior years.
XYZ Holdings (Singapore) Limited | 180
FRS 107.40,
IG36 and AGB18
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
c) Interest rate risk Ê (continued)
Commentary:
Sources of interest rate risk
Ê
Interest rate risk arises on interest-bearing financial instruments recognised in the balance
sheet (e.g., loans and receivables and debt instruments issued) and on some financial
instruments not recognised in the balance sheet (e.g., some loan commitments).
FRS 107.AGB22
Quantitative disclosures
Ë
Please refer to commentary no. 3 of Note 40(a) (Credit risk)
Sensitivity analysis for market risk
Ì
FRS 107 requires disclosure of sensitivity analysis for each type of market risk to which an
entity is exposed at the reporting date, showing how profit or loss and equity would have
been affected by changes in the relevant risk variable that were reasonably possible at that
date. These analyses shall be provided for the whole of an entity’s business. However, an
entity may also “drill down” to provide different types of sensitivity analysis for different
classes of financial instruments.
FRS 107.40.a
The sensitivity analysis should be based on changes in the risk variable that were
reasonably possible at the reporting date having considered the economic environments in
which the entity operates, the type of market risk concerned and the time frame over which
the assessment is being made i.e., the period until the entity will next present the analysis
e.g., next annual reporting period. A reasonably possible change should not include remote
or “worst case” scenarios or “stress test”.
FRS 107.AGB19 and
IG35
An entity should also disclose the methods and assumptions used in preparing the
sensitivity analysis, and changes from the previous period in the methods and assumptions
used, including the reasons for such changes.
FRS 107.40.b and c
Instead of the sensitivity analysis illustrated, FRS 107 permits an entity to use a sensitivity
analysis that reflects interdependencies between risk variables, such as a value-at-risk
methodology, if it uses this analysis to manage its exposure to financial risks. This applies
even if such a methodology measures only the potential for loss and does not measure the
potential for gain. In such cases, the entity should also disclose an explanation of the
method and objective of the analysis (e.g., whether the model relies on Monte Carlo
simulations), the main parameters and assumptions used (e.g., the holding period and
confidence level), and limitations that may result in the information disclosed not fully
reflecting the fair value of assets and liabilities involved.
FRS 107.41 and
AGB20
When the sensitivity analyses disclosed are unrepresentative of a risk inherent in a financial
instrument (e.g., because the end of the reporting period exposure does not reflect
exposure during the financial year), the entity shall disclose that fact and the reason it
believes the sensitivity analyses are unrepresentative, including additional disclosures
regarding the risk inherent in that financial instrument.
FRS 107.42 and
IG37-40
In this illustration, company-level sensitivity analysis has not been disclosed because
according to the assumed scenario, XYZ Holdings (Singapore) Limited is an investment
holding company with no significant net exposure to market price risk. If this is not the
case, the entity should provide company-level disclosures as appropriate.
FRS 107.34.b
XYZ Holdings (Singapore) Limited | 181
FRS 107.AGB21
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
c) Interest rate risk Ê (continued)
Additional illustrative disclosures:
Sensitivity analysis for interest rate risk
Ê
In this illustration, the interest rate risk sensitivity analysis has been performed for the effect of
a change in SGD interest rates because it is relevant to the interest rate risk exposure of XYZ
Holdings (Singapore) Limited. An entity might disclose a sensitivity analysis for interest rate
risk for each currency in which the entity has material exposure to interest rate risk.
Illustrative tabular disclosure of interest rate risk sensitivity analysis where more than one
currency is involved:
The table below demonstrates the sensitivity to a reasonably possible change in interest
rates with all other variables held constant, of the Group’s profit before tax (through the
impact on interest expense on floating rate loans and borrowings) and the Group’s equity
(through the impact on other reserves for fixed rate debt securities classified as availablefor-sale).
Group
$’000
Increase/
decrease in
basis points
Effect on profit
before tax
Effect on
equity
- Singapore dollar
+15
(XX)
(XX)
- US dollar
+20
(XX)
(XX)
- Singapore dollar
-10
XX
XX
- US dollar
-15
XX
XX
- Singapore dollar
+15
(XX)
(XX)
- US dollar
+20
(XX)
(XX)
- Singapore dollar
-10
XX
XX
- US dollar
-15
XX
XX
2016
2015
XYZ Holdings (Singapore) Limited | 182
FRS 107.IG34
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
d) Foreign currency risk Ê
The Group has transactional currency exposures arising from sales or purchases that
are denominated in a currency other than the respective functional currencies of Group
entities, primarily SGD, Malaysian Ringgit (Ringgit) and Renminbi (RMB). The foreign
currencies in which these transactions are denominated are mainly United States
Dollars (USD). Approximately 23% (2015: 25%) of the Group’s sales are denominated in
foreign currencies whilst almost 80% (2015: 83%) of costs are denominated in the
respective functional currencies of the Group entities. The Group’s trade receivable and
trade payable balances at the end of the reporting period have similar exposures.
FRS 107.33.a
and 34.a
The Group and the Company also hold cash and short-term deposits denominated in
foreign currencies for working capital purposes. At the end of the reporting period,
such foreign currency balances are mainly in USD.•
FRS 107.33.a
and 34.a
The Group requires all of its operating entities to use forward currency contracts to
eliminate the currency exposures on any individual transactions in excess of $100,000
for which payment is anticipated more than one month after the Group has entered
into a firm commitment for a sale or purchase. The forward currency contracts must be
in the same currency as the hedged item. It is the Group’s policy not to enter into
forward contracts until a firm commitment is in place. It is the Group’s policy to
negotiate the terms of the forward currency contracts to match the terms of the firm
commitment to maximise hedge effectiveness.
At 31 December 2016, the Group had hedged 75% (2015: 68%) and 70% (2015: 65%)
of its foreign currency denominated sales and purchases respectively, for which firm
commitments existed at the end of the reporting period, extending to March 2017
(2015: March 2016). • The Group does not apply hedge accounting for such foreign
currency denominated sales and purchases.
FRS 107.33.b
FRS 107.34.a
The Group is also exposed to currency translation risk • arising from its net
investments in foreign operations, including Malaysia, People’s Republic of China (PRC)
and Vietnam. The Group’s investment in its Vietnam subsidiary is hedged by a USD
denominated bank loan, which mitigates structural currency exposure arising from the
subsidiary’s net assets. The Group’s net investments in Malaysia and PRC are not
hedged as currency positions in Ringgit and RMB are considered to be long-term in
nature.
Sensitivity analysis for foreign currency risk Ž
The following table demonstrates the sensitivity of the Group’s profit before tax to a
reasonably possible change in the USD, RMB and Ringgit exchange rates against the
respective functional currencies of the Group entities, with all other variables held
constant. •
Group
USD/SGD
USD/RMB
RMB/SGD
2016
2015
$’000
$’000
Profit before tax
Profit before tax
- strengthened 3% (2015: 3%)
–30
–30
- weakened 3% (2015: 3%)
+28
+28
- strengthened 4% (2015: 4%)
–15
–12
- weakened 4% (2015: 4%)
+15
+12
- strengthened 4% (2015: 4%)
+57
+66
- weakened 4% (2015: 4%)
–57
–66
+40
+68
–40
–68
Ringgit/SGD - strengthened 3% (2015: 4%)
- weakened 3% (2015: 4%)
XYZ Holdings (Singapore) Limited | 183
FRS 107.40 and
AGB18
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
d) Foreign currency risk Ê (continued)
Commentary:
Disclosure of amounts denominated in foreign currencies
Ê
The disclosure of exposures to foreign currency amounts is required under the disclosure
principles of FRS 107.31 (nature and extent of risks) as well as the specific requirement in FRS
107.34 to disclose summary quantitative data about the entity's exposure to risks (including
foreign currency risks) arising from financial instruments. In this illustration, most of the
information regarding foreign currency risk exposures is presented in Note 40(d), Note 21,
Note 27 and Note 31. These disclosures include a mixture of quantitative data that are
measured in dollar amounts (e.g., cash and short-term deposits amount denominated in foreign
currency) as well as data that are not measured in dollar amounts, e.g., the exposures arising
from trade receivables are represented by the percentage of total trade receivables
denominated in foreign currencies.
FRS 107.31 and 34
Each entity should customise the information disclosed according to its specific circumstances.
Quantitative disclosures
•
Please refer to commentary no. 3 of Note 40(a) (Credit risk)
Sensitivity analysis for market risk
Ž
Please refer to commentary no. 3 of Note 40(c) (Interest rate risk)
•
According to FRS 107, foreign currency risk arises on financial instruments that are
denominated in a foreign currency i.e., in a currency other than the functional currency in
which they are measured. For the purpose of FRS 107, currency risk does not arise from
financial instruments that are non-monetary items or from financial instruments denominated
in the functional currency. Currency translation risk arising from its net investments in foreign
operations does not fall within the definition of foreign currency risk according to FRS 107. Œ
Additional illustrative disclosures:
Sensitivity analysis for market risk
Œ
In the scenario illustrated, there is no impact (other than those affecting net profit) to equity
arising from exposures to currency risk as defined by FRS 107.
Illustrative disclosure if there are impact to equity arising from exposures to currency risk:
The following table demonstrates the sensitivity of the Group’s profit before tax and equity to
a reasonably possible change in the USD, RMB and Ringgit exchange rates against the
respective functional currencies of the Group entities, with all other variables held constant.
Group
2016
2015
$’000
$’000
Profit
Equity
Profit
Equity
before
before
tax
tax
USD/SGD
USD/RMB
RMB/SGD
Ringgit/SGD
- strengthened X% (2015: X%)
- weakened X% (2015: X%)
- strengthened X% (2015: X%)
- weakened X% (2015: X%)
- strengthened X% (2015: X%)
- weakened X% (2015: X%)
- strengthened X% (2015: X%)
- weakened X% (2015: X%)
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
–XX
+XX
XYZ Holdings (Singapore) Limited | 184
FRS 107.AG B23
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
40. Financial risk management objectives and policies (continued)
e) Market price risk
Market price risk is the risk that the fair value or future cash flows of the Group’s
financial instruments will fluctuate because of changes in market prices (other than
interest or exchange rates). The Group is exposed to equity price risk arising from its
investment in quoted equity securities. These securities are quoted on the Singapore
Exchange Securities Trading Limited (SGX-ST) in Singapore and are classified as held
for trading or available-for-sale financial assets. The Group does not have exposure to
commodity price risk.
The Group’s objective is to manage investment returns and equity price risk using a mix
of investment grade shares with steady dividend yield and non-investment grade
shares with higher volatility. The Group’s policy is to limit its interest in the latter type
of investments to 25% (2015: 25%) of its entire equity portfolio. Any deviation from
this policy is required to be approved by the CEO and audit committee. At the end of
the reporting period, 24% (2015: 19%) of the Group’s equity portfolio consist of noninvestment grade shares of companies operating in PRC and Singapore, while the
remaining portion of the equity portfolio comprise investment grade shares included in
the Straits Times Index (STI). Ê
FRS 107.33.a
FRS 107.33.b
and 34.a
Sensitivity analysis for equity price risk ËÌ
At the end of the reporting period, if the price of the shares held had been 2% (2015:
2%) higher/lower with all other variables held constant, the Group’s profit before tax
would have been $31,000 (2015: $25,000) higher/lower, arising as a result of
higher/lower fair value gains on held for trading investments in equity instruments, and
the Group’s other comprehensive income would have been $35,000 (2015: $17,000)
higher/lower, arising as a result of an increase/decrease in the fair value of equity
securities classified as available-for-sale.
Commentary:
Quantitative disclosures
Ê
Please refer to commentary no. 3 of Note 40(a) (Credit risk)
Sensitivity analysis for market risk
Ë
Please refer to commentary no. 3 of Note 40(c) (Interest rate risk)
Ì
In this illustration, the sensitivity analysis for equity price risk has been performed by
analysing the effect of a reasonably possible change in STI on the fair value of the equity
instruments held by the Group, as it is assumed that all the quoted equity securities held by
the Group are listed in Singapore.
XYZ Holdings (Singapore) Limited | 185
FRS 107.40,
AGB17-18 and
AGB25-27
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
41. Capital management Ê
FRS 1.134
Capital includes debt and equity items as disclosed in the table below.
FRS 1.135.a.i
The primary objective of the Group’s capital management is to ensure that it maintains a
strong credit rating and healthy capital ratios in order to support its business and
maximise shareholder value.
FRS 1.135.a
The Group manages its capital structure and makes adjustments to it, in light of changes
in economic conditions. To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes during the years ended 31
December 2016 and 31 December 2015.
FRS 1.135.a and c
As disclosed in Note 34(c), a subsidiary of the Group is required by the Foreign Enterprise
Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund
whose utilisation is subject to approval by the relevant PRC authorities. This externally
imposed capital requirement has been complied with by the above-mentioned subsidiary
for the financial years ended 31 December 2016 and 2015. Ë
The Group monitors capital using a gearing ratio, which is net debt divided by total capital
plus net debt. The Group’s policy is to keep the gearing ratio between 20% and 40%. The
Group includes within net debt, loans and borrowings (excluding convertible redeemable
preference shares), trade and other payables, less cash and short-term deposits excluding
discontinued operations. Capital includes convertible redeemable preference shares,
equity attributable to the owners of the Company less the fair value adjustment reserve
and the abovementioned restricted statutory reserve fund.
Group
2016
2015
$’000
Loans and borrowings (Note 30)
14,604
15,478
Trade and other payables (Note 31)
17,717
19,140
- Convertible redeemable preference shares (Note 30)
- Cash and short-term deposits (Note 27)
Net debt
Convertible redeemable preference shares
Equity attributable to the owners of the Company
Less:
- Fair value adjustment reserve
- Statutory reserve fund
(450)
(428)
(6,117)
(4,858)
25,754
29,332
450
428
72,774
66,949
(600)
(903)
(426)
(740)
Total capital
71,721
66,211
Capital and net debt
97,475
95,543
26%
31%
Gearing ratio
FRS 1.135.a
FRS 1.135.b
$’000
Less:
FRS 1.135.a.ii and d
XYZ Holdings (Singapore) Limited | 186
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
41. Capital management Ê (continued)
Commentary:
Disclosure of capital management information according to entity specific circumstances
Ê
FRS 1 requires the disclosure of information (as provided to key management personnel) that
enables users of financial statements to evaluate the entity’s objectives, policies and
processes for managing capital, including (but not limited to) a description and summary
quantitative data of what it manages as capital, the presence and impact of externally
imposed capital requirements and how the entity is meeting its objectives for managing
capital etc. This note as well as FRS 1.IG10 provide illustrative examples of such disclosures
of an entity that is not a regulated financial institution.
FRS 1.134 and
135
It is important to note that the illustration provided in this note is based on certain
assumed facts regarding circumstances surrounding XYZ Holdings (Singapore) Limited
and its objectives, policies and processes for managing capital. For example, a gearing
ratio with a specific measurement basis has been disclosed as this is the measure used
to monitor capital. The Group considers both capital and net debt as relevant
components of funding, hence part of its capital management. Other entities may use
different methods to monitor capital or use gearing ratios with different measurement
bases. Disclosures would have to be customised in the light of specific facts and
circumstances applicable to the entity.
Also, an entity may manage capital in a number of ways and be subject to a number of
different capital requirements. For example, a conglomerate may include entities that
undertake insurance and banking activities, and those entities may also operate in several
jurisdictions. When an aggregate disclosure of capital requirements and how capital is
managed would not provide useful information or distorts a financial statement user’s
understanding of an entity’s capital resources, the entity shall disclose separate information
for each capital requirement to which the entity is subject to.
FRS 1.136
Externally imposed capital requirement
Ë
In this illustration, it is assumed that the externally imposed capital requirement has been
complied with. When an entity has not complied with externally imposed capital
requirements, the consequences of such non-compliance shall be disclosed. FRS 1.IG 11 has
an example that illustrates the application of FRS 1.135.e when an entity has not complied
with externally imposed capital requirement during the period.
XYZ Holdings (Singapore) Limited | 187
FRS 1.135.e
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
42. Segment information Ê
FRS 108.20, 21.a
For management purposes, the Group is organised into business units based on their
products and services, and has four reportable segments as follows:
I. The electronic components segment is a supplier of digital and analogue electronic
components for consumer and industrial-grade electronics for manufacturers. This
reportable segment has been formed by aggregating the customer electronic
components segment and the industrial-grade electronics segment, which are
regarded by management to exhibit similar economic characteristics. In making this
judgement, management considers the products and services offered by these
segments such as specialised electronic components, energy efficiency, and electrical
architecture are in the areas of common and the segments share common production
facilities and usage of similar raw materials in the production process. Ë
FRS 108.22
FRS 108.12
FRS 108.22.aa
II. The property segment is in the business of constructing, developing and leasing out of
residential and commercial properties.
III. The corporate segment is involved in Group-level corporate services, treasury
functions and investments in marketable securities.
IV. The fire prevention equipment and services segment produces and installs
extinguishers, fire prevention equipment and fire retardant fabrics. This segment has
been classified as a discontinued operation during the financial year (Note 11).
FRS 108.27
FRS 108.28.b
Except as indicated above, no operating segments have been aggregated to form the
above reportable operating segments.
Management monitors the operating results of its business units separately for the
purpose of making decisions about resource allocation and performance assessment.
Segment performance is evaluated based on operating profit or loss which in certain
respects, as explained in the table below, is measured differently from operating profit or
loss in the consolidated financial statements. Group financing (including finance costs)
and income taxes are managed on a group basis and are not allocated to operating
segments.
Transfer prices between operating segments are on an arm’s length basis in a manner
similar to transactions with third parties.
XYZ Holdings (Singapore) Limited | 188
FRS 108.27.a
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
42.
Segment information Ê (continued)
Electronic
components
Property
Fire prevention
equipment and
services
(Discontinued
operation) Ì
Corporate
Adjustments and
eliminations
Notes
Per consolidated
financial statements
FRS 108.20,21.b
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
105,292
103,965
31,428
38,606
–
–
136,720
142,571
FRS 108.23.a
and 32
FRS 108.23.b
Revenue:
External customers
13,152
14,598
(13,152)
(14,598)
A
B
Inter-segment
–
–
–
–
265
120
–
–
(265)
(120)
Total revenue
105,292
103,965
31,428
38,606
265
120
13,152
14,598
(13,417)
(14,718)
–
–
136,720
142,571
Interest income Í
–
–
–
–
430
327
–
–
–
Dividend income
–
–
–
–
526
406
–
–
–
–
430
327
FRS 108.23.c
–
526
406
FRS 108.23.f
Results:
Fair value gains on investment properties
Depreciation and amortisation
Share of results of joint ventures
Share of results of associates
Impairment of non-financial assets
–
–
489
129
–
–
–
–
2,188
2,092
925
883
150
115
150
125
-
-
151
128
-
-
-
-
–
94
657
234
–
–
–
–
500
–
–
–
–
–
650
–
–
–
(125)
-
-
–
–
(650)
–
129
FRS 108.23.f
3,090
FRS 108.23.e
151
128
FRS 108.23.g
FRS 108.23.g
FRS 36.129.a
FRS 108.23.f
657
328
500
–
–
C
1,538
1,067
FRS 108.23.i
D
7,057
7,116
FRS 108.23
1,674
1,523
FRS 108.24.a
1,121
754
107
95
310
218
6,035
5,698
2,001
2,635
452
438
-
-
1,674
1,523
-
-
-
-
-
-
(880)
489
3,263
A
Segment profit/(loss)
(193)
A
–
Other non-cash expenses
(551)
–
–
(150)
(1,462)
Assets:
Investment in joint ventures
Investment in associates
–
566
10,595
9,755
–
–
–
–
–
–
10,595
10,321
FRS 108.24.a
8,134
2,872
2,803
1,560
758
221
–
–
–
–
E
11,695
4,653
FRS 108.24.b
Segment assets Î
76,689
73,426
20,449
19,200
12,450
11,960
2,270
2,450
12,489
12,128
F
124,347
119,164
FRS 108.23
Segment liabilities Î
16,076
15,748
10,383
8,152
1,314
1,189
1,043
1,130
20,779
24,096
G
49,595
50,315
FRS 108.23
Additions to non-current assets
XYZ Holdings (Singapore) Limited | 189
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
42. Segment information Ê (continued)
Notes
Nature of adjustments and eliminations to arrive at amounts reported in the
consolidated financial statements Ï
A
The amounts relating to the fire prevention equipment and services segment
has been excluded to arrive at amounts shown in profit or loss as they are
presented separately in the statement of comprehensive income within one line
item, “loss from discontinued operation, net of tax”.
B
Inter-segment revenues are eliminated on consolidation.
C
Other non-cash expenses consist of amortisation of land use rights, sharebased payments, inventories written-down, provisions, and impairment of
financial assets as presented in the respective notes to the financial
statements.
FRS 108.28.e
D
The following items are added to/(deducted from) segment profit to arrive at
“profit before tax from continuing operations” presented in the consolidated
income statement:
FRS 108.28.b
Segment results of discontinued operation
Share of results of joint ventures
Share of results of associates
Profit from inter-segment sales
Finance costs
Unallocated corporate expenses
2016
2015
$’000
$’000
551
151
193
128
657
328
(105)
(50)
(1,715)
(1,512)
(419)
(549)
(880)
(1,462)
Additions to non-current assets consist of additions to property, plant and
equipment, investment properties and intangible assets.
F
The following items are added to/(deducted from) segment assets to arrive at
total assets reported in the consolidated balance sheet:
Investment in associates
Deferred tax assets
Inter-segment assets
G
2016
2015
$’000
$’000
1,674
10,595
1,523
10,321
470
463
(250)
(179)
12,489
12,128
The following items are added to/(deducted from) segment liabilities to arrive
at total liabilities reported in the consolidated balance sheet:
2016
Deferred tax liabilities
Income tax payable
Loans and borrowings (including discontinued operation)
Inter-segment liabilities
FRS 108.28.a and b
FRS 108.28.a
E
Investment in joint ventures
FRS 108.21.c
2015
$’000
$’000
2,378
2,927
1,926
6,734
15,604
15,478
(25)
20,779
(20)
24,069
XYZ Holdings (Singapore) Limited | 190
FRS 108.28.c
FRS 108.28.d
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
42. Segment information Ê (continued)
Geographical information ’
FRS 108.33.a and b
FRS 108.20
Revenue and non-current assets information based on the geographical location of
customers and assets respectively are as follows:
Revenues
Non-current assets
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Singapore
76,432
86,464
20,570
19,346
People’s Republic of China
32,970
33,005
15,896
15,591
Malaysia
20,990
20,440
5,061
4,138
Vietnam and others
19,480
17,260
3,082
3,010
Discontinued operation
(13,152)
(14,598)
(1,016)
136,720
142,571
43,593
FRS 108.33.a.i and b.i
42,085
Non-current assets information presented above consist of property, plant and equipment,
investment properties, intangible assets, and land use rights as presented in the
consolidated balance sheet.
Information about a major customer “
Revenue from one major customer amount to $15,102,000 (2015: $16,080,000), arising
from sales by the electronics components segment.
FRS 108.34
Commentary:
Information about segment profit or loss
Ê
In addition to a measure of profit or loss and total assets for each reportable segments, entities FRS 108.23
are required to disclose the following about each reportable segment if the specified amounts
are included in the measure of segment profit or loss reviewed by the chief operating decision
maker (CODM), or are otherwise regularly provided to the CODM, even if not included in that
measure of segment profit or loss:
(a) Revenues from external customers
(b) Revenues from transactions with other operating segments of the same entity
(c) Interest revenue
(d) Interest expense*
(e) Depreciation and amortisation
(f) Material items of income and expense disclosed in accordance with paragraph 86 of FRS 1
Presentation of Financial Statements
(g) The entity’s interest in profit or loss of associates and joint ventures accounted for by the
equity method
(h) Income tax expense or income*
(i) Material non-cash items other than depreciation and amortisation
* In this illustration, interest expense and income tax expense have not been disclosed by
segment as these items are managed on a group basis, and are not provided to the CODM at
the operating segment level.
XYZ Holdings (Singapore) Limited | 191
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
42. Segment information Ê (continued)
Commentary (continued):
Aggregation criteria
Ë
FRS 108 requires disclosures of judgements made by management in applying the aggregation
criteria in paragraph 12, including a brief description of the operating segments that have been
aggregated in this way and the economic indicators that have been assessed in determining that
the aggregated operating segments share similar economic characteristics.
In this illustration, the Group has applied aggregation criteria in FRS 108.12 and the disclosure of
the judgements made by management in aggregating the segments is disclosed accordingly.
Discontinued operation
Ì
FRS 108 does not provide specific disclosure requirements for an operating segment classified as
discontinued operation. An entity is therefore not required to provide such segment information
as long as the classification criteria held for sale is met. It is however allowed to continue to
present segment information as long as the definition as operating segment is met.
FRS 108.13
In this illustration, an entire reportable segment has been classified as discontinued operation in
the current period. As this operating segment still meet the quantitative thresholds for separate
reporting, it continues to be reported in the segment information.
Interest income
Í
An entity shall report interest revenue separately from interest expense for each reportable
segment unless a majority of the segment’s revenues are from interest and the CODM relies
primarily on net interest revenue to assess the performance of the segment and make decisions
about resources to be allocated to the segment. In that situation, an entity may report that
segment’s interest revenue net of its interest expense and disclose that it has done so.
FRS 108.23
Disclosure of operating segment assets and segment liabilities
Î
Disclosure of operating segment assets and liabilities are required only where such measures are
provided to the CODM.
FRS 108.23
Explanation of measurements of segment profit or loss, segment assets and segment liabilities
Ï
If not apparent from the disclosures of reconciliations in this note, entities are required to disclose
further information regarding the nature of differences between the measurements of segment
profit or loss, segment assets, segment liabilities, and the entity’s profit or loss before tax and
discontinued operations, assets and liabilities. Those differences could include accounting policies
and policies for allocation of centrally incurred costs, jointly used assets, jointly utilised liabilities
that are necessary for an understanding of the reported segment information.
The following should also be disclosed, where applicable:
-
The nature of any changes from prior periods in the measurement methods used to
determine reported segment profit or loss and the effect, if any, of those changes on the
measure of segment profit or loss.
-
The nature and effect of any asymmetrical allocations to reportable segments. For example,
an entity might allocate depreciation expense to a segment without allocating the related
depreciable assets to that segment.
XYZ Holdings (Singapore) Limited | 192
FRS 108.27.b-d
FRS 108.27.e-f
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
42. Segment information Ê (continued)
Commentary (continued):
Information about segment profit or loss
’
An entity should disclose:
(a)
Revenues from external customers (i) attributed to the entity’s country of domicile; and
(ii) attributed to all foreign countries in total from which the entity derives revenues. If
revenues from external customers attributed to an individual foreign country are
material, those revenues should be disclosed separately. An entity should disclose the
basis for attributing revenues from external customers to individual countries.
(b)
Non-current assets other than financial instruments, deferred tax assets, postemployment benefit assets, and rights arising under insurance contracts (i) located in the
entity’s country of domicile and (ii) located in all foreign countries in total in which the
entity holds assets. If assets in an individual foreign country are material, those assets
should be disclosed separately.
FRS 108.33
Information about major customers
“
For the purposes of disclosing information about major customers, a group of entities known to
a reporting entity to be under common control shall be considered a single customer, and a
government (national, state, provincial, territorial, local or foreign) and entities known to the
reporting entity to be under the control of that government shall be considered a single
customer.
FRS 108.34
43. Dividends
Group and Company
2016
2015
$’000
$’000
1,001
1,025
612
557
1,613
1,582
1,008
1,001
Declared and paid during the financial year:
Dividends on ordinary shares:
- Final exempt (one-tier) dividend for 2015: 4.34 cents (2014: 4.45 cents)
per share
- Interim exempt (one-tier) dividend for 2016: 2.49 cents (2015: 2.41
cents) per share
Proposed but not recognised as a liability as at 31 December:
Dividends on ordinary shares, subject to shareholders’ approval at the AGM:
- Final exempt (one-tier) dividend for 2016: 4.10 cents (2015: 4.34 cents)
per share
XYZ Holdings (Singapore) Limited | 193
FRS 1.137.a,
FRS 10.12
XYZ Holdings (Singapore) Limited and its subsidiaries
Notes to the financial statements
For the financial year ended 31 December 2016
44. Events occurring after the reporting period
On 14 January 2017, a building of the Group, with net carrying value of $900,000, was
severely damaged by fire and inventories with net carrying value of $157,000 were lost.
It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of
inventories by $250,000. The financial statements for the year ended 31 December 2016
have not been adjusted for the financial effect of this incident.
On 15 February 2017, the Company completed the disposal of one of its wholly-owned
subsidiary, Good Fire Prevention Pte Ltd (GFP), which has been classified as discontinued
operation (Note 11) as at 31 December 2016, for a cash consideration of $199,000.
FRS 10.21 and 22.d
FRS 10.21 and 22.a
45. Authorisation of financial statements for issue
The financial statements for the year ended 31 December 2016 were authorised for issue
in accordance with a resolution of the directors on 27 February 2017.
XYZ Holdings (Singapore) Limited | 194
FRS 10.17
XYZ Holdings (Singapore) Limited
Appendix A-1
Consolidated statement of comprehensive
income in one statement – illustrating the
analysis of expenses by nature
Illustrating the Statement of Comprehensive Income in one statement with the analysis of
expenses by nature:
2016
$’000
2015
$’000
X
136,720
142,571
X
430
526
1,511
327
406
886
Note
Continuing operations
Revenue
Other items of income
Interest income
Dividend income from investment securities
Other income
Items of expense
Raw materials and consumables used
Changes in inventories of finished goods and work-in-progress
Employee benefits expense
Depreciation and amortisation expense
Impairment losses
Net foreign exchange loss
Finance costs
Other expenses
Share of results of joint venture
Share of results of associates
Profit before tax from continuing operations
Income tax expense
Profit from continuing operations, net of tax
Discontinued operation
Loss from discontinued operation, net of tax
Profit for the year
X
X
X
X
X
(98,607)
(2,203)
(20,502)
(3,113)
(833)
(136)
(1,715)
(5,829)
(92,367)
(16,631)
(19,024)
(2,965)
(425)
(145)
(1,512)
(4,461)
151
657
7,057
(1,557)
5,500
128
328
7,116
(1,687)
5,429
(544)
4,956
(188)
5,241
1,250
62
1,312
2,404
10
2,414
FRS 1.81A.a, FRS 1.102
FRS 1.82.a, FRS 1.102
FRS 1.102
FRS 18.35.b.iii
FRS 18.35.b.v
FRS 1.99
FRS 1.102
FRS 1.102
FRS 1.102
FRS 1.102
FRS 1.85
FRS 21.52.a
FRS 1.82.b
FRS 1.102
FRS 1.82.c
FRS 1.82.c
FRS 1.85
FRS 1.82.d, FRS 12.77
FRS 1.85
FRS 1.82.ea, FRS 105.33.a &
33A
FRS 1.81A.a
Other comprehensive income: Œ
Items that will not be reclassified to profit or loss:
Net surplus on revaluation of freehold land and buildings
Share of gain on property revaluation of associates Ë
Items that may be reclassified subsequently to profit or loss:
Net gain on fair value changes of available-for-sale financial assets
Foreign currency translation
174
(181)
(7)
98
(82)
16
FRS 1.82A.a
FRS 1.82A.a, FRS 16.77.f
FRS 1.82A.a, FRS 28.39
FRS 1.82A.b
FRS 1.82A.b
FRS 1.82A.b, FRS 21.52.b
Other comprehensive income for the year, net of tax
1,305
2,430
FRS 1.81A.b
Total comprehensive income for the year
6,261
7,671
FRS 1.81A.c
5,320
(544)
4,776
5,029
(188)
4,841
FRS 105.33.d
FRS 105.33.d
FRS 1.81B.a.ii
180
180
400
400
FRS 1.81B.a.i
6,091
170
6,261
7,211
460
7,671
FRS 1.81B.b.ii
FRS 1.81B.b.i
6,585
(494)
6,091
7,379
(168)
7,211
FRS 105.33.d
FRS 105.33.d
Profit for the year attributable to:
Owners of the Company
Profit from continuing operations, net of tax
Loss from discontinued operation, net of tax
Non-controlling interests
Profit from continuing operations, net of tax
Loss from discontinued operation, net of tax
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Attributable to:
Owners of the Company
Total comprehensive income from continuing operations, net of tax
Total comprehensive income from discontinued operations, net of tax
X
X
XYZ Holdings (Singapore) Limited | 195
XYZ Holdings (Singapore) Limited
Appendix A-1
Consolidated statement of comprehensive
income in one statement – illustrating the
analysis of expenses by nature
Illustrating the Statement of Comprehensive Income in one statement with the analysis of
expenses by nature (continued):
Note
2016
$’000
2015
$’000
FRS 1.81A.a, FRS 1.102
Earnings per share from continuing operations attributable to owners
of the Company (cents per share)
Basic
Diluted
X
X
22.98
22.73
21.81
21.58
FRS 33.66
FRS 33.66
Earnings per share (cents per share)
Basic
Diluted
X
X
20.63
20.17
21.00
20.53
FRS 33.66
FRS 33.66
Commentary:
Tax effects related to each component of other comprehensive income
Œ
An entity may present components of other comprehensive income either:
FRS 1.91
(a) net of related tax effects, as illustrated in the statement of comprehensive income,
or
(b) before related tax effects with one amount shown for the aggregate amount of
income tax relating to those items.
If an entity elects alternative (b), it shall allocate the tax between the items that might be
reclassified subsequently to the profit or loss section and those that will not be
reclassified subsequently to the profit or loss section.
Ë
In this illustration, the share of other comprehensive income of associates relates to
property revaluation attributable to owners of the associates, an item which will not be
reclassified to profit or loss subsequently.
If an entity has share of other comprehensive income of associates which relates to items
that may be reclassified subsequently to profit or loss, the item shall be presented under
the group of items that may be reclassified subsequently to profit or loss.
XYZ Holdings (Singapore) Limited | 196
FRS 1.82A
XYZ Holdings (Singapore) Limited
Appendix A-2
Hedge accounting
Extracts of summary of significant accounting policies illustrating accounting policies relating to
hedge accounting:
X.
X.X
Summary of significant accounting policies
Hedge accounting
The Group applies hedge accounting for certain hedging relationships which qualify for
hedge accounting.
FRS 107.21
For the purpose of hedge accounting, hedges are classified as:
§
§
§
fair value hedges when hedging the exposure to changes in the fair value of a
recognised asset or liability or an unrecognised firm commitment
FRS 39.86.a
cash flow hedges when hedging exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a
highly probable forecast transaction or the foreign currency risk in an unrecognised
firm commitment; or
FRS 39.86.b
hedges of a net investment in a foreign operation.
FRS 39.86.c
Fair value hedges
The change in the fair value of a hedging derivative is recognised in profit or loss in
finance costs. The change in the fair value of the hedged item attributable to the risk
hedged is recorded as a part of the carrying value of the hedged item and is also
recognised in profit or loss.
For fair value hedges relating to items carried at amortised cost, the adjustment to
carrying value is amortised through profit or loss over the remaining term of the hedge
using the effective interest rate method. Effective interest rate amortisation may begin
as soon as an adjustment exists and no later than when the hedged item ceases to be
adjusted for changes in its fair value attributable to the risk being hedged. If the hedged
item is derecognised, the unamortised fair value is recognised immediately in profit or
loss.
When an unrecognised firm commitment is designated as a hedged item, the subsequent
cumulative change in the fair value of the firm commitment attributable to the hedged
risk is recognised as an asset or liability with a corresponding gain or loss recognised in
profit or loss.
FRS 39.89
FRS 39.92
FRS 39.93
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised directly
in other comprehensive income in the cash flow hedge reserve, while any ineffective
portion is recognised immediately in profit or loss.
FRS 39.95
The Group uses forward currency contracts as hedges of its exposure to foreign currency
risk in forecasted transactions and firm commitments, as well as forward commodity
contracts for its exposure to volatility in the commodity prices. The ineffective portion
relating to foreign currency contracts and the ineffective portion relating to commodity
contracts is recognised in profit or loss. Refer to Note X for more details.
Amounts recognised as other comprehensive income are transferred to profit or loss
when the hedged transaction affects profit or loss, such as when the hedged financial
income or financial expense is recognised or when a forecast sale occurs. Where the
hedged item is the cost of a non-financial asset or non-financial liability, the amounts
recognised as other comprehensive income are transferred to the initial carrying amount
of the non-financial asset or liability.
FRS 39.97, 98 and
100
If the forecast transaction or firm commitment is no longer expected to occur, the
cumulative gain or loss previously recognised in equity is transferred to profit or loss. If
the hedging instrument expires or is sold, terminated or exercised without replacement
or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss
previously recognised in other comprehensive income remains in other comprehensive
income until the forecast transaction or firm commitment affects profit or loss.
FRS 39.101
XYZ Holdings (Singapore) Limited | 197
XYZ Holdings (Singapore) Limited
Appendix A-2
Hedge accounting
Extracts of summary of significant accounting policies illustrating accounting policies relating to
hedge accounting (continued):
X.
X.X
Summary of significant accounting policies (continued)
Hedge accounting (continued)
Hedges of a net investment
Hedges of a net investment in a foreign operation, including a hedge of a monetary item
that is accounted for as part of the net investment, are accounted for in a way similar to
cash flow hedges. Gains or losses on the hedging instrument relating to the effective
portion of the hedge are recognised as other comprehensive income while any gains or
losses relating to the ineffective portion are recognised in profit or loss. On disposal of
the foreign operation, the cumulative value of any such gains or losses recorded in equity
is transferred to profit or loss.
FRS 39.102
Extracts of notes to the financial statements illustrating the disclosures of fair value hedge
accounting:
X.
X.X
Hedging activities
Fair value hedges Ê
At 31 December 2016, the Group had an interest rate swap agreement in place with a
notional amount of $XXX (2015: nil) whereby the Group receives a fixed rate of interest
of X.XX% and pays a variable rate equal to LIBOR+X% on the notional amount. The swap
is being used to hedge the exposure to changes in the fair value of its X.XX% secured
loan.
FRS 107.22
FRS 107.24.a
The decrease in fair value of the interest rate swap of $XXX (2015: nil) has been
recognised in finance costs and offset with a similar gain on the bank borrowings. The
ineffectiveness recognised in 2016 was immaterial.
Commentary:
Disclosure requirement regarding fair value hedges
Ê
FRS 107 requires separate disclosures of the amount of gain or loss on the hedging instrument
and on the hedged item attributable to the hedged risk in a fair value hedge relationship.
XYZ Holdings (Singapore) Limited | 198
FRS 107.24.a
XYZ Holdings (Singapore) Limited
Appendix A-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
X.X
Hedging activities
Cash flow hedges Ê
Foreign currency risk
Foreign currency forward contracts measured at fair value through other
comprehensive income are designated as hedging instruments in cash flow hedges of
forecast sales in the United States and forecast purchases in the United Kingdom.
These forecast transactions are highly probable, and they comprise about 25% of the
Group’s total expected sales and about 65% of its total expected purchases.
FRS 107.23.a
While the Group also enter into other foreign exchange forward contracts with the
intention to reduce the foreign exchange risk of expected sales and purchases, these
other contracts are not designated in hedge relationships and are measured at fair
value through profit and loss.
The foreign exchange forward contract balances vary with the level of expected foreign
currency sales and purchases and changes in foreign exchange forward rates.
2016
Group
2015
Assets
Liabilities
Assets
Liabilities
$’000
$’000
$’000
$’000
XXX
(XXX)
XXX
(XXX)
Foreign currency forward contracts
Fair value
The terms of the foreign currency forward contracts have been negotiated for the
expected highly probable forecast transactions. As a result, no hedge ineffectiveness
arises requiring recognition through profit or loss. Notional amounts are as provided in
Note X.
FRS 107.24.b
The cash flow hedges of the expected future sales in January 2017 were assessed to be
highly effective and a net unrealised gain of $XXX, with a deferred tax liability of $XXX
relating to the hedging instruments, is included in other comprehensive income.
FRS 107.23.c
The cash flow hedges of the expected future purchases in February and March 2017
were assessed to be highly effective, and as at 31 December 2016, a net unrealised
loss of $XXX, with a related deferred tax asset of $XXX was included in other
comprehensive income in respect of these contracts.
FRS 107.23.c
At the end of December 2015, the cash flow hedges of the expected future sales in the
first quarter of 2016 were assessed to be highly effective and an unrealised gain of
$XXX with a deferred tax liability of $XXX was included in other comprehensive income
in respect of these contracts. The cash flow hedges of the expected future purchases in
the first quarter of 2016 were also assessed to be highly effective and an unrealised
loss of $XXX, with a deferred tax asset of $XXX was included in other comprehensive
income in respect of these contracts.
FRS 107.23.c
The amount removed from other comprehensive income during the year and included in
the carrying amount of the hedging items as a basis adjustment was immaterial for both
2016 and 2015. The amounts retained in other comprehensive income at 31 December
2016 are expected to mature and affect profit or loss in 2017.
FRS 107.23.d, e and
a
XYZ Holdings (Singapore) Limited | 199
XYZ Holdings (Singapore) Limited
Appendix A-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
X.X
Hedging activities
Cash flow hedges Ê (continued)
Commodity price risk
The Group purchases copper on an ongoing basis as its operating activities in the
electronic division require a continuous supply of copper for the production of its
electronic devices. The increased volatility in copper price over the past 12 months has
led to the decision to enter into commodity forward contracts
These contracts, which commenced on 1 July 2016, are expected to reduce the
volatility attributable to price fluctuations of copper. Hedging the price volatility of
forecast copper purchases is in accordance with the risk management strategy outlined
by the Board of Directors. The hedging relationships are for a period between 3 to 12
months based on existing purchase agreements. The Group designated only the spot-tospot movement of the entire commodity purchase price as the hedged risk. The
forward points of the commodity forward contracts are therefore excluded from the
hedge designation. Changes in fair value of the forward points are recognised in profit
or loss in ‘Other expenses’ were immaterial during the year.
As at 31 December 2016, the fair value of outstanding commodity forward contracts
amounted to a liability of $XXX. The ineffectiveness recognised in ‘Other expenses’ in
profit or loss for the current year was $XXX (see Note X). The cumulative effective
portion of $XXX is reflected in other comprehensive income and will affect the profit or
loss in the first six months of 2017.
XYZ Holdings (Singapore) Limited | 200
XYZ Holdings (Singapore) Limited
Appendix A-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting: (continued)
X.
X.X
Hedging activities
Cash flow hedges Ê (continued)
Hedging reserve
The cash flow hedge reserve contains the effective portion of the cash flow hedge
relationships incurred as at the reporting date. $XXX are made up of the net
movements in cash flow hedges and the effective portion of the forward commodity
contract, net of tax.
X.X
FRS 1.79.b
Components of other comprehensive income
Group
FRS 1.97
2016
2015
$’000
$’000
Net movement on cash flow hedges:
Gain/ (losses) arising during the year
– Commodity forward contracts
(XXX)
(XXX)
– Foreign currency forward contracts
(XXX)
–
Reclassification adjustments for gains included in the statement of
comprehensive income •
XXX
XXX
(XXX)
XXX
FRS 1.92,
FRS 107.23.d
Commentary:
Disclosure requirements regarding cash flow hedges
Ê
Where applicable, FRS 107 requires the disclosure of the ineffectiveness recognised in profit or
loss that arises from cash flow hedges.
FRS 107.24.b
•
FRS 107 requires the disclosure of the amount of gain or loss on a hedging instrument in a cash
flow hedge relationship reclassified from equity to profit or loss, showing the amount included in
each line in the statement of comprehensive income.
FRS 107.23.d
XYZ Holdings (Singapore) Limited | 201
XYZ Holdings (Singapore) Limited
Appendix A-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of hedge of net
investments in foreign operations:
X.
X.X
Hedging activities
Hedge of net investments in foreign operations
Included in loans at 31 December 2016 was a borrowing of USDXXX which has been
designated as a hedge of the net investment in the two subsidiaries in the United
States, XX Inc. and XXX Inc. This borrowing is being used to hedge the Group’s
exposure to foreign exchange risk on these investments. Gains or losses on the
retranslation of this borrowing are transferred to other comprehensive income to offset
any gains or losses on translation of the net investments in the subsidiaries. There is no
ineffectiveness in the years ended 31 December 2016 and 2015. Ê
X.X
Foreign currency translation reserve
The foreign currency translation reserve is also used to record the effect of hedging of
net investments in foreign operations.
X.X
FRS 107.22
FRS 1.79.b
Components of other comprehensive income
Group
Net gains/(losses) on hedge of net investment
2016
2015
$’000
$’000
XXX
(XXX)
FRS 1.97
Commentary:
Disclosure requirement regarding hedges of net investments in foreign operations
Ê
Where applicable, FRS 107 requires the disclosure of the ineffectiveness recognised in profit or
loss that arises from hedges of net investments in foreign operations.
XYZ Holdings (Singapore) Limited | 202
FRS 107.24.c
XYZ Holdings (Singapore) Limited
Appendix A-3
Agreements for the construction of real
estate
Extract of summary of significant accounting policies illustrating accounting policies relating to
agreements for the construction of real estate:
X.
X.X
Significant accounting policies
Revenue
X) Sale of completed development property
A development property is regarded as sold when the significant risks and returns have
been transferred to the buyer, which is normally on unconditional exchange of contracts.
For conditional exchanges, sales are recognised only when all the significant conditions
are satisfied.
FRS 18.14
Non-refundable commissions paid to sales or marketing agents on the sale of real estate
units are expensed when incurred. Œ
XX) Sale of development property under construction
Where development property is under construction and agreement has been reached to
sell such property when construction is complete, the Directors consider whether the
contract comprises:
-
A contract to construct a property; or
-
A contract for the sale of completed property
a)
Where a contract is judged to be for the construction of a property, revenue is
recognised using the percentage of completion method as construction progresses.
b)
Where the contract is judged to be for the sale of a completed property, revenue is
recognised when the significant risks and rewards of ownership of the real estate
have been transferred to the buyer (i.e. revenue is recognised using the completed
contract method).
i)
ii)
If, however, the legal terms of the contract are such that the construction
represents the continuous transfer of work in progress to the purchaser, the
percentage of completion method of revenue recognition is applied and
revenue is recognised as work progresses.
In Singapore context, INT FRS 115 includes an accompanying note on the
application of INT FRS 115 in Singapore which requires the percentage of
completion method of revenue recognition to be applied to sale of private
residential properties in Singapore prior to completion of the properties that
are regulated under the Singapore Housing Developers (Control and Licensing)
Act (Chapter 130) and uses the standard form of sale and purchase
agreements (SPAs) prescribed in the Housing Developers Rules. The
accompanying note to INT FRS 115 does not address the accounting
treatment for other SPAs, including SPAs with a Deferred Payment Scheme
feature in Singapore.
In the above situations (i) and (ii), the percentage of work completed is measured
based on the costs incurred up until the end of the reporting periods as a proportion
of total costs expected to be incurred. Ê
FRS 18.14
INT FRS 115.13
INT FRS 115.17
INT FRS 115.20.a
INT FRS 115.17,
INT FRS 115.20.c
Commentary:
Stage of completion
Ê
The stage of completion of a contract may be determined in a variety of ways. The entity uses
the method that measures reliably the work performed. Depending on the nature of the contract,
other acceptable methods include surveys of work performed and completion of a physical
proportion of the contract work.
XYZ Holdings (Singapore) Limited | 203
INT FRS 115.17
FRS 11.30
XYZ Holdings (Singapore) Limited
Appendix A-3
Agreements for the construction of real
estate
Extract of summary of significant accounting policies illustrating accounting policies relating to
agreements for the construction of real estate:
Additional illustrative disclosures:
ΠAlternatively, the Group can capitalise commission paid on real estate as an asset and amortise it
as the entity expects to recognise the related revenue.
Illustrative accounting policy for capitalisation of commission paid on real estate contracts.
Non-refundable commissions paid to sales or marketing agents on the sale of real estate units
are capitalised and amortised to profit or loss as the Group expects to recognise the related
revenue.
Extract of summary of significant accounting judgements and estimates relating to revenue
recognition on development property under construction:
X.
X.X
Significant accounting judgements and estimates
Key sources of estimation uncertainty
X) Revenue recognition on development property under construction
The Group recognises revenue for pre-completion sales of certain types of properties
by reference to the stage of completion using the percentage of completion method.
The stage of completion is measured based on the costs incurred up until the end of the
reporting periods as a proportion of total costs expected to be incurred. Significant
assumptions are required to estimate the total contract costs and the recoverable
variation works that affect the stage of completion and the revenue respectively. In
making these estimates, management has relied on past experience and knowledge of
the project engineers. The carrying amounts of assets and liabilities as well as the
revenue from sale of development property (recognised on percentage of completion
basis) are disclosed in Note X (Development Property) and Note Y (Revenue) to the
financial statements respectively.
FRS 1.125
Extract of notes to financial statements illustrating the disclosure of revenue from sale of
development property:
X.
Revenue
Group
2016
2015
$’000
$’000
Revenue from sale of development properties (recognised on
completed contract basis)
XXX
XXX
FRS 18.35.b.i
Revenue from sale of development properties (recognised on
percentage of completion basis)
XXX
XXX
FRS 18.35.b.i,
INT FRS 115.20.b
XYZ Holdings (Singapore) Limited | 204
XYZ Holdings (Singapore) Limited
Appendix A-3
Agreements for the construction of real
estate
Extract of notes to the financial statements illustrating the disclosure of development property:
X.
Development property
The Group includes a division that develops residential property, which it sells in the
ordinary course of business and has entered into contracts to sell certain of these
properties on completion of construction.
The Group has considered the application of INT FRS 15 to these contracts and concluded
that there pre-completion contracts were not, in substance, construction contracts.
However, where the legal terms were such that the construction represented the
continuous transfer of work in progress to the purchaser, the percentage of completion
method of revenue recognition has been applied and revenue recognised as work
progressed. Development expenditure incurred in respect of inventory property dealt with
under the percentage of completion method is recognised in profit or loss in the period
incurred.
INT FRS 115.20
Revenue from sales of residential property where the contracts are not in substance
construction contracts and do not lead to a continuous transfer of work in progress, is
recognised when both: (i) construction is complete; and (ii) either legal title to the property
has been transferred or there has been an unconditional exchange of contracts.
Construction and other expenditure attributable to such property is included in inventory
property until disposal. During the year, the Group transferred the remaining unsold units
of a residential property to investment property, in conjunction with the commencement of
operating lease of these units to a third party.
The amount recognised in costs of sales for the year in respect of inventory property is:
FRS 2.36(d)
Group
2016
2015
$’000
$’000
In respect of sales recognised on a percentage of completion
basis
XXX
XXX
In respect of other inventory property sales
XXX
XXX
INT FRS 115.21
Group
2016
2015
$’000
$’000
At 1 January
XXX
XXX
Construction costs incurred
XXX
XXX
Interest capitalised
XXX
XXX
Transfer to completed investment property
XXX
XXX
Disposals (recognised in cost of sales)
(XXX)
-
At 31 December
(XXX)
(XXX)
XYZ Holdings (Singapore) Limited | 205
FRS 11.40(a)
FRS 23.26(a)
FRS 40.57(d)
XYZ Holdings (Singapore) Limited
Appendix A-3
X.
Agreements for the construction of real
estate
Development property
The following table provides information about such continuous transfer agreements that
are in progress at the reporting date:
Group
2016
2015
$’000
$’000
Aggregate costs incurred and recognised to date
XXX
XXX
Profit before tax recognised to date
XXX
XXX
Advances received
XXX
XXX
XYZ Holdings (Singapore) Limited | 206
INT FRS 115.21
XYZ Holdings (Singapore) Limited
Appendix A-4
Defined benefit plans ’“
Extract of summary of significant accounting policies illustrating accounting policies relating to
defined benefit plan
X.
X.X
Summary of significant accounting policies (continued)
Defined benefit plan
The net defined benefit liability or asset is the aggregate of the present value of the
defined benefit obligation (derived using a discount rate based on high quality
corporate bonds) at the end of the reporting period reduced by the fair value of plan
assets (if any), adjusted for any effect of limiting a net defined benefit asset to the
asset ceiling. The asset ceiling is the present value of any economic benefits available in
the form of refunds from the plan or reductions in future contributions to the plan.
FRS 19.8
The cost of providing benefits under the defined benefit plans is determined separately
for each plan using the projected unit credit method.
FRS 19.67
Defined benefit costs comprise the following:
FRS 19.120
-
Service cost
-
Net interest on the net defined benefit liability or asset
-
Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses
on non-routine settlements are recognised as expense in profit or loss. Past service
costs are recognised when plan amendment or curtailment occurs.
FRS 19.8
FRS 19.103
Net interest on the net defined benefit liability or asset is the change during the period
in the net defined benefit liability or asset that arises from the passage of time which is
determined by applying the discount rate based on high quality corporate bonds to the
net defined benefit liability or asset. Net interest on the net defined benefit liability or
asset is recognised as expense or income in profit or loss.
FRS 19.8
FRS 19.123
Remeasurements comprising actuarial gains and losses, return on plan assets and any
change in the effect of the asset ceiling (excluding net interest on defined benefit
liability) are recognised immediately in other comprehensive income in the period in
which they arise. Remeasurements are recognised in retained earnings within equity
and are not reclassified to profit or loss in subsequent periods.
FRS 19.127
FRS 19.122
Plan assets are assets that are held by a long-term employee benefit fund or qualifying
insurance policies. Plan assets are not available to the creditors of the Group, nor can
they be paid directly to the Group. Fair value of plan assets is based on market price
information. When no market price is available, the fair value of plan assets is estimated
by discounting expected future cash flows using a discount rate that reflects both the
risk associated with the plan assets and the maturity or expected disposal date of those
assets (or, if they have no maturity, the expected period until the settlement of the
related obligations).
FRS 19.8
FRS 19.113
The Group’s right to be reimbursed of some or all of the expenditure required to settle a
defined benefit obligation is recognised as a separate asset at fair value when and only
when reimbursement is virtually certain.
FRS 19.116
XYZ Holdings (Singapore) Limited | 207
XYZ Holdings (Singapore) Limited
Appendix A-4
Defined benefit plans ’“
Extracts of summary of significant accounting estimates and judgements relating to defined
benefit plan
X.
X.X
Significant accounting judgements and estimates
Key sources of estimation uncertainty
The cost of defined benefit pension plans and other post-employment medical benefits
as well as the present value of the pension obligation are determined using actuarial
valuations. The actuarial valuation involves making various assumptions. These include
the determination of the discount rates, expected rates of return of assets, future
salary increases, mortality rates and future pension increases. Due to the complexity of
the valuation, the underlying assumptions and its long-term nature, defined benefit
obligations are highly sensitive to changes in these assumptions. All assumptions are
reviewed at each reporting date. The net benefit liability as at 31 December 2016 is
$XXX (2015: $XXX). Further details are provided in Note X.
In determining the appropriate discount rate, management considers the interest rates
of high quality corporate bonds in the respective currencies with at least AA rating,
with extrapolated maturities corresponding to the expected duration of the defined
benefit obligation. The underlying bonds are further reviewed for quality, and those
having excessive credit spreads are removed from the population of bonds on which the
discount rate is based, on the basis that they do not represent high quality bonds.
The mortality rate is based on publicly available mortality tables for the specific country
and is modified accordingly with estimates of mortality improvements. Future salary
increases and pension increases are based on expected future inflation rates for the
specific country.
Further details about the assumptions used are provided in Note X.
XYZ Holdings (Singapore) Limited | 208
FRS 1.125
XYZ Holdings (Singapore) Limited
Appendix A-4
Defined benefit plans ’“
Extracts of notes to the financial statements illustrating the disclosures relating to defined benefit plan:
X.
Defined benefit plan Ê
The Group operates two defined benefit pension plans, both of which require contributions to be made to separately administered funds. One provides a pension
of 2% of final salary for each year of service (Singapore plan), while the other provides 2.5% of average salary (US plan). Both benefit plans become vested after
five years of service and require contributions to be made to separately administered funds. •
The Group also provides additional post employment healthcare benefits to certain senior employees in Singapore. These benefits are unfunded.
The amount included in the consolidated balance sheet arising from the entity’s obligation in respect of its defined benefit plans is as follows:
Unfunded
post-employment medical
benefits
Funded pension plans
Singapore plan
US plan
Total
31
December
2016
$’000
31
December
2015
$’000
31
December
2016
$’000
31
December
2015
$’000
31
December
2016
$’000
31
December
2015
$’000
31
December
2016
$’000
31
December
2015
$’000
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
–
-
XXX
(XXX)
XXX
XXX
XXX
XXX
XXX
XXX
Restrictions on asset recognised
-
XXX
-
-
-
XXX
-
Net liability arising from defined
benefit obligation
XXX
(XXX)
XXX
XXX
XXX
XXX
XXX
Present value of defined benefit
obligation
Fair value of plan assets
XYZ Holdings (Singapore) Limited | 209
XXX
FRS 19.135.a
FRS 19.139.a.i
XYZ Holdings (Singapore) Limited
Appendix A-4
X.
Defined benefit plans ’“
Defined benefit plan Ê (continued)
Changes in present value of the defined benefit obligations are as follow: Ž
Unfunded
post-employment
medical
benefits
Funded pension plans
Singapore plan
2016
$’000
US plan
2015
$’000
2016
$’000
Total
2015
2016
$’000
$’000
FRS 19.140.a.ii
FRS 19.141
2015
$’000
2016
$’000
2015
$’000
At 1 January
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Interest cost
XXX
XXX
XXX
XXX
XXX
XXX
-
-
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
XXX
XXX
XXX
XXX
XXX
XXX
-
-
(XXX)
XXX
(XXX)
XXX
(XXX)
XXX
XXX
XXX
-
-
-
-
-
-
XXX
XXX
-
-
(XXX)
-
(XXX)
-
-
-
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
XXX
(XXX)
-
-
XXX
(XXX)
-
-
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Current service cost
Remeasurement
(gains)/losses
Actuarial gains and
losses arising from
changes in
demographic
assumptions
Actuarial gains and
losses arising from
changes in financial
assumptions
Past service cost •
(Gains)/Losses on
settlements •
Contributions from
plan participants
Liabilities extinguished
on settlements
Benefits paid
Effects of business
combinations and
disposal
Exchange differences
At 31 December
XYZ Holdings (Singapore) Limited | 210
XYZ Holdings (Singapore) Limited
Appendix A-4
X.
Defined benefit plans ’“
Defined benefit plan Ê (continued)
Changes in fair value of plan assets are as follow:
FRS 19.140.a.i
FRS 19.141
Funded pension plans
Singapore plan
US plan
Total
2016
2015
2016
2015
2016
2015
$’000
$’000
$’000
$’000
$’000
$’000
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Return on plan assets
XXX
XXX
XXX
XXX
XXX
XXX
Contributions by employer
XXX
-
-
-
XXX
-
At 1 January
Interest income
Remeasurement
gains/(losses)
Contributions from plan
participants
Benefits paid
Assets distributed on
settlements
Effects of business
combinations and disposal
Exchange differences
At 31 December
XXX
XXX
XXX
XXX
-
XXX
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
(XXX)
-
-
(XXX)
-
(XXX)
-
XXX
(XXX)
-
-
XXX
(XXX)
–
–
XXX
(XXX)
XXX
(XXX)
XXX
XXX
XXX
XXX
XXX
XXX
Changes in the effect of the asset ceiling are as follow:
FRS 19.140.a.iii
FRS 19.141
Funded pension plans
Singapore plan
At 1 January
Interest income
2016
2015
$’000
$’000
XXX
-
XXX
-
Remeasurement gains/(losses)
Changes in the effect of
limiting to asset ceiling1
Exchange differences
At 31 December
(XXX)
XXX
–
–
-
XXX
1
The maximum economic benefit available is a combination of expected refunds from the plan and
reductions in future contributions.
XYZ Holdings (Singapore) Limited | 211
XYZ Holdings (Singapore) Limited
Appendix A-4
X.
Defined benefit plans ’“
Defined benefit plan Ê (continued)
The fair value of plan assets by each classes as at the end of the reporting period are as follow:
FRS 19.142
Funded pension plans
Singapore plan
Cash and cash equivalents
US plan
31 December
2016
31 December
2015
31 December
2016
$’000
$’000
$’000
Total
31 December
2015
$’000
31 December
2016
31 December
2015
$’000
$’000
XXX
XXX
XXX
XXX
XXX
XXX
- Manufacturing
XXX
XXX
XXX
XXX
XXX
XXX
- Financial institutions
XXX
XXX
XXX
XXX
XXX
XXX
- Telecommunications
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
- Government securities
XXX
XXX
XXX
XXX
XXX
XXX
- AAA rated debt securities
XXX
XXX
XXX
XXX
XXX
XXX
- Not rated debt securities
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
- Singapore
XXX
XXX
XXX
XXX
XXX
XXX
- Australia
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
- Interest rate swaps
XXX
XXX
XXX
XXX
XXX
XXX
- Forward currency contracts
XXX
XXX
XXX
XXX
XXX
XXX
Equity instruments
Debt instruments
Property
Derivatives
XXX
XXX
XXX
XXX
XXX
XXX
Asset-backed securities
XXX
XXX
XXX
XXX
XXX
XXX
Structured debts
XXX
XXX
XXX
XXX
XXX
XXX
Fair value of plan assets
XXX
XXX
XXX
XXX
XXX
XXX
All equity and debt instruments held have quoted prices in active market. The remaining plan assets do not have quoted market prices in active market. The
plan assets include a property occupied by a subsidiary of the Group with a fair value of $XXX (2015: $XXX) and ordinary shares of XYZ Holdings Limited with a
fair value of $XXX (2015: $XXX).
XYZ Holdings (Singapore) Limited | 212
FRS 19.143
XYZ Holdings (Singapore) Limited
Appendix A-4
X.
Defined benefit plans ’“
Defined benefit plan Ê (continued)
The cost of defined benefit pension plans and other post-employment medical benefits as
well as the present value of the pension obligation are determined using actuarial
valuations. The actuarial valuation involves making various assumptions. The principal
assumptions used in determining pension and post-employment medical benefit obligations
for the defined benefit plans are shown below:
2016
2015
%
%
Singapore plan/ post employment medical plan
XX
XX
US plan
XX
XX
Singapore plan
XX
XX
US plan
XX
XX
Singapore plan
XX
XX
US plan
XX
XX
Male
XX
XX
Female
XX
XX
Male
XX
XX
Female
XX
XX
XX
XX
Discount rates:
Future salary increases:
Future pension increases:
Post retirement mortality for pensioners at 65:
Singapore plan/ post employment medical plan
US plan
Healthcare cost increase rate:
XYZ Holdings (Singapore) Limited | 213
FRS 19.144
XYZ Holdings (Singapore) Limited
Appendix A-4
X.
Defined benefit plans ’“
Defined benefit plan Ê (continued)
The sensitivity analysis below has been determined based on reasonably possible changes of
each significant assumption on the defined benefit obligation as of the end of the reporting
period, assuming if all other assumptions were held constant: •‘
FRS 19.145
31 December 2016
Discount rates
Future salary increases
Future pension increases
Increase/(decrease)
Singapore
Plan
US Plan
Unfunded
postemployment
medical
benefits
+XX basis points
(XXX)
(XXX)
(XXX)
- XX basis points
XXX
XXX
XXX
+XX %
XXX
XXX
XXX
- XX %
(XXX)
(XXX)
(XXX)
+XX %
XXX
XXX
XXX
- XX %
(XXX)
(XXX)
(XXX)
Post retirement mortality for
pensioners at 65:
Male
Female
Healthcare cost increase rate
+XX %
XXX
XXX
XXX
- XX %
(XXX)
(XXX)
(XXX)
+XX %
XXX
XXX
XXX
- XX %
(XXX)
(XXX)
(XXX)
+XX %
XXX
XXX
XXX
- XX %
(XXX)
(XXX)
(XXX)
The management performed an Asset-Liability Matching Study (ALM) annually. The principal
technique of the Group’s ALM is to ensure the expected return on assets to be sufficient to
support the desired level of funding arising from the defined benefit plans. The Group’s
current strategic investment strategy consists of 50% of equity instruments, 30% of debt
instruments, 15% of investment properties and 5% of cash. The use of debt instruments in
combination with interest rate swaps will reduce the sensitivities caused by the term of the
defined benefit obligation by 25%. ‘
The Group’s defined benefit pension plans are funded by its subsidiaries. The employees of
the Group contribute 6% of the pensionable salary and the remaining residual contributions
are paid by the subsidiaries of the Group. ‘
The Group expects to contribute $XXX (2015: $XXX) to the defined benefit pension plans in
2016.
The average duration of the defined benefit obligation at the end of the reporting period is
18.4 years (2015: 17.5 years).
XYZ Holdings (Singapore) Limited | 214
FRS19.146
FRS19.147.a
FRS19.147.b
FRS19.147.c
XYZ Holdings (Singapore) Limited
Appendix A-4
Defined benefit plans ’“
Commentary:
Ê
To meet the disclosure objective of Revised FRS 19 for defined benefit plans, an entity shall
consider all the following:
FRS 19.136
(a) the level of detail necessary to satisfy the disclosure requirements,
(b) how much emphasis to place on each of the various requirements,
(c) how much aggregation or disaggregation to undertake; and
(d) whether users of financial statements need additional information to evaluate the
quantitative information disclosed.
If the disclosures provided in accordance with the specific requirements of Revised FRS 19
are insufficient to meet the objectives above, the entity shall disclose additional information
necessary to meet those objectives. For example, an entity may present an analysis of the
present value of defined benefit obligation that distinguishes the nature, characteristics and
risks of the obligation. Such a disclosure could distinguish:
-
between amounts owing to active members, deferred members, and pensioners
-
between vested benefits and accrued but not vested benefits
-
between conditional benefits, amounts attributable to future salary increases and other
benefits
An entity shall assess whether all or some disclosures should be disaggregated to
distinguish plans or groups of plans with materially different risks. For example, an entity
may disaggregate disclosure about plans showing one or more of the following features:
•
-
different geographical locations
-
different characteristics such as flat salary pension plans, final salary pension plans or
post-employment medical plans
-
different regulatory environments
-
different reporting segments
-
different funding arrangements (e.g. wholly unfunded, wholly or partly funded)
When disclosing the characteristics of defined benefit plans and risks associated with them,
an entity shall disclose:
FRS 19.137
FRS 19.138
FRS 19.139
(a) information about the characteristics including
-
the nature of benefits provided by the plan (e.g. final salary defined benefit plan or
contribution-based plan with guarantee).
-
a description of the regulatory framework in which the plan operates, for example
the level of any minimum funding requirements, and any effect of the regulatory
framework on the plan, such as the asset ceiling.
-
a description of any other entity’s responsibilities for the governance of the plan,
for example responsibilities of trustees or of board members of the plan.
(b) a description of the risks to which the plan exposes the entity, focused on any unusual
entity-specific or plan-specific risks, and of any significant concentrations of risk. For
example, if plan assets are invested primarily in one class of investments, e.g. property,
the plan may expose the entity to a concentration of property market risk.
(c) a description of any plan amendments, curtailments and settlements.
Ž
An entity shall provide reconciliation from the opening balance to the closing balance for
any reimbursement rights and the related obligation, if applicable.
XYZ Holdings (Singapore) Limited | 215
FRS 19.140.b
XYZ Holdings (Singapore) Limited
Appendix A-4
Defined benefit plans ’“
Commentary (continued):
Í
Past service cost and gains and losses arising from settlements need not be distinguished if
they occur together.
FRS 19.141.d
Î
In the financial statements for periods beginning before 1 January 2014, an entity need not
present comparative information for the disclosures about the sensitivity of the defined
benefit obligation.
FRS 19.173.b
Ï
Revised FRS 19 introduces a number of new disclosure requirements. These include:
Sensitivity analysis
-
A sensitivity analysis for each significant assumption as of the end of the reporting
period, showing how the defined benefit obligation would have been affected by
changes in the relevant assumption that were reasonably possible at that date.
FRS 19.145.a
-
The method and assumptions used in preparing the sensitivity analyses and the
limitation of those methods.
FRS 19.145.b
-
Changes from the previous period in the methods and assumptions used in preparing
the sensitivity analyses, and the reasons for such changes.
FRS 19.145.c
Asset-liability matching strategies
-
A description of any asset-liability matching strategies used by the plan or the entity,
including the use of annuities and other techniques, such as longevity swaps, to
manage risk.
FRS 19.146
Cash flow information
Ð
-
A description of any funding arrangements, and funding policy that affect future
contributions to the defined benefit plan.
FRS 19.147.a
-
Expected contributions to the plan for the next annual reporting period.
FRS 19.147.b
-
Information about the maturity profile of the defined benefit obligation (including,
but not limited to, weighted average duration of the defined benefit obligation).
FRS 19.147.c
Multi-employer plans
In this illustration, we do not illustrate multi-employer plans. If the Group participates in a
multi-employer plan and accounts for that plan as a defined benefit plan, it shall disclose the
following in addition to information required by paragraphs 135-147 of the Revised FRS 19:
(a) a description of the funding arrangements, including the method used to determine the
entity’s rate of contributions and any minimum funding requirements.
(b) a description of the extent to which the entity can be liable to the plan for other
entities’ obligations under the terms and conditions of the multi-employer plan.
(c) a description of any agreed allocation of a deficit or a surplus on:
i.
wind-up of the plan; or
ii.
the entity’s withdrawal from the plan.
(d) if the entity accounts for that plan as if it were a defined contribution plan, it shall
disclose the following, in addition to the information required by (a) – (c) and instead of
the information required by paragraph 139 to 147 of the Revised FRS 19:
i.
the fact that the plan is a defined benefit plan.
ii.
the reason why sufficient information is not available to enable the entity to
account for the plan as a defined benefit plan.
XYZ Holdings (Singapore) Limited | 216
FRS 19.33.b
FRS 19.148
XYZ Holdings (Singapore) Limited
Appendix A-4
Defined benefit plans ’“
Commentary (continued):
’
Ñ
Multi-employer plans (continued)
iii.
the expected contributions to the plan for the next annual reporting period.
iv.
information about any deficit or surplus in the plan that may affect the amount of
future contributions, including the basis used to determine that deficit or surplus
and the implications, if any, for the entity.
v.
an indication of the level of participation of the entity in the plan compared with
other participating entities. Examples of measures that might provide such an
indication include the entity’s proportion of the total contributions to the plan or
the entity’s proportion of the total number of active members, retired members,
and former members entitled to benefits, if that information is available.
FRS 19.148
Defined benefit plans that share risks between entities under common control
In this illustration, we do not illustrate defined benefit plans that share risks between
entities under common control. If an entity participates in a defined benefit plan that shares
risks between entities under common control, it shall disclose:
FRS 19.149
(a) the contractual agreement or stated policy for charging the net defined benefit cost or
the fact that there is no such policy.
(b) the policy for determining the contribution to be paid by the entity.
(c) if the entity accounts for an allocation of the net defined benefit cost as noted in
paragraph 41 of Revised FRS 19 ”, all the information about the plan as a whole
required by paragraph 135-147 of Revised FRS 19.
(d) if the entity accounts for the contribution payable for the period as noted in paragraph
41 of Revised FRS 19 ”, the information about the plan as a whole required by
paragraphs 135 – 137, 142 - 144 and 147 (a) and (b) of Revised FRS 19.
The information required by (c) and (d) can be disclosed by cross-reference to disclosures in
another group entity’s financial statements if:
FRS 19.150
(a) that group entity’s financial statements separately identify and disclose the information
required about the plan; and
(b) that group entity’s financial statements are available to users of the financial
statements on the same terms as the financial statements of the entity and at the same
time as, or earlier than, the financial statements of the entity.
Ò
Paragraph 41 of Revised FRS 19 requires an entity participating in a defined benefit plan
that share risks between entities under common control to obtain information about the
plan as a whole measured in accordance with Revised FRS 19 on the basis of assumptions
that apply to the plan as a whole. If there is a contractual agreement or stated policy for
charging to individual group entities the net defined benefit cost for the plan as a whole
measured in accordance with Revised FRS 19, the entity shall, in its separate or individual
financial statements, recognise the net defined benefit cost so charged. If there is no such
agreement or policy, the net defined benefit cost shall be recognised in the separate or
individual financial statements of the group entity that is legally the sponsoring employer
for the plan. The other group entities shall, in their separate or individual financial
statements, recognise a cost equal to their contribution payable for the period.
XYZ Holdings (Singapore) Limited | 217
FRS 19.41
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
FRS 109 Financial Instruments is effective for annual periods beginning on or after 1 January
2018. The following is an illustration of disclosures relating to financial instruments, assuming
FRS 109 has been early adopted for the year ending 31 December 2016.
The illustrative disclosures in this Appendix are based on the assumed scenario of XYZ
Holdings (Singapore) Limited and are confined to disclosures relating to financial instruments
only. Other non-financial instruments related disclosures are illustrated in the main body of this
publication.
Extract of summary of significant accounting policies illustrating changes in accounting policies
on adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies
Changes in accounting policies
FRS 109 Financial Instruments ŒŽ•
On 1 January 2016, the Group early adopted FRS 109 Financial instruments, which is
effective for annual periods beginning on or after 1 January 2018.
FRS 8.28.a
Classification and measurement
FRS 109 requires debt instruments to be classified either at amortised cost, fair value
through other comprehensive income (FVOCI) or fair value through profit or loss (FVPL).
Classification under FRS 109 for debt instruments depends on the entity’s business
model for managing the financial assets and whether the contractual cash flows
represent solely payments of principal and interest (‘SPPI’). An entity’s business model is
how an entity manages its financial assets in order to generate cash flows and create
value for the entity either from collecting contractual cash flows, selling financial assets
or both. If a debt instrument is held to collect contractual cash flows, it is classified as
amortised cost if it also meets the SPPI requirement. Debt instruments that meet the
SPPI requirement that are held both to collect the assets’ contractual cash flows and to
sell the assets are classified as FVOCI. Under the new model, FVPL is the residual
category – financial assets should therefore be classified as FVPL if they do not meet the
criteria of FVOCI or amortised cost. Regardless of the business model assessment, an
entity can elect to classify a financial asset at FVPL if doing so eliminates or significantly
reduces a measurement or recognition inconsistency.
The Group has a mixed business model. The Group holds its currently held-to-maturity
debt instruments to collect contractual cash flows, and accordingly measured at
amortised under FRS 109. For its available-for-sale debt securities, the Group’s business
model is to hold the debt instrument to collect contractual cash flows and sell, and
accordingly measured at FVOCI when it applies FRS 109. The is no significant impact
arising from measurement of these instruments under FRS 109.
FRS 109 requires all equity instruments to be carried at fair value through profit or loss,
unless an entity chooses, on an instrument-by-instrument basis on initial recognition, to
present fair value changes in OCI.
XYZ Holdings (Singapore) Limited | 218
FRS 8.28.c
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies
on adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial InstrumentsŒŽ• (continued)
For equity securities, the Group continues to measure its currently held-for-trading
equity securities and one of its available-for-sale quoted equity securities at fair value
though profit or loss (FVTPL). There is no significant impact arising from these changes.
The Group elects to measure its currently held available-for-sale unquoted equity
securities at fair value through other comprehensive income. In addition, the Group
currently measures one of its investments in unquoted equity securities at cost. Upon
adoption of FRS 109, the Group measures the unquoted equity securities at fair value
through other comprehensive income.
Derivatives and hybrid contracts with financial asset hosts where contractual cash flows
are not solely payments of principal and interest are required to be classified at fair value
through profit or loss.
Impairment
FRS 109 requires the Group to record expected credit losses on all of its financial assets
measured at amortised cost or FVOCI, lease receivable and financial guarantee. The
Group previously recorded impairment based on the incurred loss model when there is
objective evidence that a financial asset is impaired.
Transition •
The changes in accounting policies have been applied retrospectively.The Group has
elected to apply the limited exemption in FRS 109 and has not restated comparative
periods in the year of initial application. The impact arising from FRS 109 adoption were
included in the opening retained earnings at the date of initial application, 1 January
2016.
The effects of early adoption to opening retained earnings on the financial statements
are as follows:
1 January 2016
$’000
XXX
Opening retained earnings (as previously stated)
Reclassify from available-for-sale to fair value through profit or
loss
XXX
Reversal of impairment for available-for-sale equity
instruments
XXX
Increase in loss allowance
XXX
Adjustment to retained earnings from adoption of FRS 109
XXX
Opening retained earnings (as restated)
XXX
XYZ Holdings (Singapore) Limited | 219
FRS 8.28.b, d
FRS 109.7.2.15
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies on adoption of FRS 109.
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial Instruments ŒŽ• (continued)
On 1 January 2016, the Group has assessed which business model apply to the financial assets held by the Group at the date of initial application of
FRS 109 and has classified its financial instruments into the appropriate FRS 109 categories. The main effects resulting from this reclassification are
as follows: •
Financial assets:
Group
Measurement category
Fair value through profit or loss
Reclassified from available-for-sale
FRS 39
carrying
amount on
31 December
2015
$’000
Reclassifica
tions
Remeasure
ments
$’000
$’000
XXX
-
-
FRS 109
carrying
amount on
1 January
2016
$’000
Retained
earnings
effect on 1
January
2016
$’000
AFS
reserves
effect on 1
January
2016
$’000
FVOCI
reserves
effect on 1
January
2016
$’000
XXX
-
-
-
-
XXX
-
XXX
XXX
(XXX)
-
Fair value through profit or loss balances, reclassifications and
remeasurements at 1 January 2016
XXX
XXX
-
XXX
XXX
(XXX)
-
Fair value through other comprehensive income
XXX
-
-
XXX
-
-
-
Reclassified from available-for-sale carried at cost
-
XXX
XXX
XXX
-
-
XXX
Reclassified to fair value through profit or loss
-
(XXX)
-
(XXX)
XXX
(XXX)
-
Reversal of impairment losses for equity instruments
-
-
XXX
-
XXX
(XXX)
-
XXX
(XXX)
XXX
XXX
XXX
(XXX)
XXX
Fair value through other comprehensive income balances,
reclassifications, remeasurements at 1 January 2016
The initial application of FRS 109 does not have any reclassification effect to the Company’s financial statements.
XYZ Holdings (Singapore) Limited | 220
FRS 107.42I
FRS 107.42L
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies
on adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial Instruments ŒŽ• (continued)
The following are the qualitative information regarding the reclassification between
categories of financial instruments at the date of initial application of FRS 109.
(i) Reclassification of quoted equity securities from available-for-sale to fair value
through profit or loss
At the date of initilal application of FRS 109, the Group has elected to reclassify its
quoted equity securities to fair value through profit or loss, the default classification
for investments in equity instruments. The cumulative fair value changes previously
recognised in the other comprehensive income are reclassified to opening retained
earnings on 1 January 2016.
(ii) Reclassification of unquoted equity securities from available-for-sale to fair value
through other comprehensive income
The Group has elected to measure its unquoted equity securities at fair value through
comprehensive income. Impairment losses previously recognised in profit or loss were
reversed and recognised in opening retained earnings on 1 January 2016.
(iii) Reclassification from unquoted equity securities carried at cost to fair value through
other comprehensive income
The Group has elected to measure its unquoted equity securities previously carried at
cost under FRS 39 at fair value through other comprehensive income. At the day of
initial application, the unquoted equity securities were remeasured to fair value. The
difference between the fair value and the previous carrying amount at 1 January
2016 were recognised in other comprehensive income. Impairment losses previously
recognised in profit or loss were reversed and recognised in opening retained earnings
on 1 January 2016.
XYZ Holdings (Singapore) Limited | 221
FRS 107R.42J
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies on
adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial Instruments ŒŽ• (continued)
On the date of initial application of FRS 109, the financial instruments of the Group were as
follows, with any reclassifications noted:
Group
Measurement category
FRS 39
Non-current financial
assets
Unquoted debt
securities
Quoted equity
securities
Unquoted equity
securities
Unquoted equity
securities at cost
SGD government bonds
Loans to associates
Loans to a fellow
subsidiary
Staff loans
Current financial assets
Quoted equity
securities
Trade receivables
Bills of exchange and
promissory notes
Staff loans
Refundable deposits
Cash and short-term
deposits
Derivatives
Non-current liabilities
7.5% p.a. fixed rate
SGD bonds
Bank loans
Convertible
redeemable preference
shares
Current liabilities
Bank overdrafts
Bank loans
FRS 109
Differences
Carrying
amount
FRS
39
FRS
109
Available-for-sale (at
FVOCI)
Available-for-sale (at
FVOCI)
Available-for-sale (at
FVOCI)
Available-for-sale (at
FVOCI)
Held to maturity (at
amortised cost)
Loans and receivables
(at amortised cost)
Loans and receivables
(at amortised cost)
Loans and receivables
(at amortised cost)
FVOCI
XXX
XXX
-
FVPL
XXX
XXX
-
FVOCI
XXX
XXX
XXX
FVOCI
XXX
XXX
XXX
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
FVPL
FVPL
XXX
XXX
-
Loans and receivables
(at amortised cost)
Loans and receivables
(at amortised cost)
Loans and receivables
(at amortised cost)
Loans and receivables
(at amortised cost)
Loans and receivables
(at amortised cost)
FVPL
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
FVPL
XXX
XXX
-
Financial liabilities at
amortised cost
Financial liabilities at
amortised cost
Financial liabilities at
amortised cost
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
Financial liabilities at
amortised cost
Financial liabilities at
amortised cost
Amortised cost
XXX
XXX
-
Amortised cost
XXX
XXX
-
XYZ Holdings (Singapore) Limited | 222
FRS 107R.42I
FRS 107R.42O
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies on
adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial Instruments ŒŽ• (continued)
On the date of initial application of FRS 109, the financial instruments of the Company were
as follows, with any reclassifications noted:
Company
Measurement category
FRS 39
Carrying
amount
FRS 109
FRS
39
FRS
109
Differences
Non-current financial
assets
Amounts due from
subsidiaries
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Loans to subsidiaries
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Loans to associates
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Loans to a fellow
subsidiary
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Staff loans
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Trade receivables
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Bills of exchange and
promissory notes
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Refundable deposits
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Cash and short-term
deposits
Loans and receivables
(at amortised cost)
Amortised
cost
XXX
XXX
-
Derivatives
FVPL
FVPL
XXX
XXX
-
7.5% p.a. fixed rate SGD
bonds
Financial liabilities at
amortised cost
Amortised
cost
XXX
XXX
-
Bank loans
Financial liabilities at
amortised cost
Amortised
cost
XXX
XXX
-
Current financial assets
Amount due from
related companies
Staff loans
Non-current liabilities
XYZ Holdings (Singapore) Limited | 223
FRS 107R.42I
FRS 107R.42O
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies
on adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial Instruments ŒŽ• (continued)
Impairment
The Group and Company has the following types of financial assets subject to FRS 109
expected credit loss model: •
(i)
Trade receivables, bills of exchange and promissory notes
(ii)
Debt instruments measured at amortised cost
(iii)
Debt instruments measured at FVOCI
(iv) Loans to subsidiaries, associates and fellow subsidiary carried at amortised cost
(v)
Other receivables at amortised cost comprising of staff loans and refundable deposits
(vi) Financial guarantee
The Group was required to revise its impairment methodology under FRS 109 for each of
these classes of assets.
(i)
Trade receivables, bills of exchange and promissory notes
For trade receivables, bill of exhange and promissory notes, the Group measures loss
allowance at an amount equal to lifetime ECL.
(ii) Debt instruments measured at amortised cost:
Debt instruments measured at amortised cost are considered as low risk, and thus the
loss allowance is determined at an amount equal to 12 months ECL.
(iii) Debt instruments measured at FVOCI
Debt instruments measured at FVOCI are considered as assets with significant increase
in credit risk at transition. The significant increase in credit risk is due to significant
delay in interest receivables which are more than 30 days past due, and thus the loss
allowance is determined at an amount equal to lifetime ECL.
(iv) Loans to subsidiaries, associates and fellow subsidiary carried at amortised cost
Loans to subsidiaries, associates and fellow subsidiary carried at amortised cost are
considered as assets with no significant increase in credit risk at transition and hence
the loss allowance is determined at an amount equal to 12-month ECL.
(v) Other receivables
Other receivables such as staff loans and refundable deposits are considered to be low
risk, and the loss allowance is determined at an amount equal to 12-month ECL.
(vi) Financial guarantee
Provision for financial guarantee was previously accounted for under FRS 37. Upon
adoption of FRS 109, financial guarantee is considered to be low risk and hence the loss
allowance is determined at an amount equal to 12-month ECL.
XYZ Holdings (Singapore) Limited | 224
FRS 107R.42P
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies on
adoption of FRS 109
X.
X.X
X
Summary of significant accounting policies (continued)
Changes in accounting policies (continued)
FRS 109 Financial Instruments ŒŽ• (continued)
Impairment
The reconciliation for loss allowances are as follow:
FRS 107R.42P
Group
Trade
receivables,
bills of
exchange
and
promissory
notes
Debt
instruments
carried at
amortised
cost
Debt
instruments
carried at
FVOCI
Loans to
subsidiaries,
associates
and fellow
subsidiaries
carried at
amortised
cost
Other
receivables
Financial
guarantee
$’000
$’000
$’000
$’000
$’000
$’000
Closing loss
allowance (based
on FRS 39)
XXX
XXX
XXX
XXX
XXX
-
Closing loss
allowance (based
on FRS 37)
-
-
-
-
-
XXX
Amount restated
through opening
retained earnings
XXX
XXX
XXX
XXX
XXX
XXX
Opening loss
allowance (based
on FRS 109)
XXX
XXX
XXX
XXX
XXX
XXX
Company
Loans to
subsidiaries,
associates and
fellow
subsidiaries
carried at
amortised cost
Other
receivables
Financial
guarantee
$’000
$’000
$’000
Closing loss allowance (based on FRS 39)
XXX
XXX
-
Closing loss allowance (based on FRS 37)
-
-
XXX
Amount restated through opening retained
earnings
XXX
XXX
XXX
Opening loss allowance (based on FRS
109)
XXX
XXX
XXX
XYZ Holdings (Singapore) Limited | 225
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating changes in accounting policies
on adoption of FRS 109
Commentary
Ê
The illustrative disclosure of early adoption of FRS 109 for hedge accounting is illustrated in
Appendix B-2 Hedge accounting under FRS 109.
Ë
In this illustration, the Group has elected to apply the limited exemption under paragraph
7.2.15 of FRS 109 which provides limited exemption relating to transition for classification
and measurement and impairment. The exemption allows entity not to restate comparative
periods in the year of initial application. As a consequence:
Ž
-
Any adjustments to carrying amount of financial assets or liabilities are recognised at the
beginning of the current reporting period, with the difference recognised in opening
retained earnings, (or other component of equity, as appropriate).
-
Financial assets are not reclassified in the balance sheet for the comparative periods.
-
Provisions for impairment have not been restated in the comparative period.
-
The transition is a change in accounting policy, and disclosures required by FRS 8 are
illustrated.
-
A third balance sheet as at 1 January 2015 is not presented as there is no impact of
restatement on the balance sheet for the year ended 31 December 2014.
-
Disclosure requirements arising from the consequential amendments to FRS 107 upon
adoption of FRS 109 have not been presented in relation to the comparative period.
-
In the reporting period that includes the date of initial application of FRS 109, an entity is
not required to disclose the line item amounts that would have been reported in
accordance with the classification and measurement requirements of FRS 109 for prior
periods and FRS 39 for the current period.
FRS 109.7.2.15
In this illustration, the Group does not have any financial assets and financial liabilities that
were previously designated and measured at fair value through profit or loss but are no
longer so designated at the date of initial application of FRS 109.
If an entity has any financial assets and financial liabilities at fair value through profit or loss
but are no longer so designated at the date of initial application of FRS 109, the entity is
required to disclose
(i) the amount of these financial assets and financial liabilities, distinguishing between those
that FRS 109 requires an entity to reclassify and those that an entity elects to reclassify
at the date of initial application.
•
FRS 107R.42I.c
(ii) the effective interest rate determined on the date of initial application
FRS 107R.42N.a
(iii) the interest revenue or expense recognised
FRS 107R.42N.b
The disclosures in item (ii) and (iii) shall be made for each reporting period until derecognition
if the fair value of a financial asset or a financial liability is treated as the new gross carrying
amount at the date of initial application. Otherwise, the disclosures need not be made after
the annual reporting period in which the entity initially applies FRS 109.
FRS 107R.42N
In this illustration, the Group does not have any financial assets and financial liabilities that
have been reclassified so that they are measured at amortised cost and, in the case of
financial assets, that have been reclassified out of fair value through profit or loss so that
they are measured at fair value through other comprehensive income, as a result of
transition to FRS 109.
FRS 107R.42M
If an entity has such reclassifications, FRS 107 requires the disclosures of
(i)
The fair value of the financial assets or financial liabilities at the end of the reporting
period; and
FRS 107R.42M.a
(ii) The fair value gain or loss that would have been recognised in profit or loss or other
comprehensive income during the reporting period if the financial assets or financial
liabilities had not been reclassified.
FRS 107R.42M.b
XYZ Holdings (Singapore) Limited | 226
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating accounting policies relating to
financial instruments
X. Summary of significant accounting policies (continued)
X.X
Financial instruments
a) Financial assets
Measurement
Initial recognition and measurement
Financial assets are recognised when, only when the entity becomes party to the
contractual provisions of the instruments.
FRS 109.3.1.1
At initial recognition, the Group measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss.
FRS 109.5.1.1
Trade receivables are measured at the amount of consideration to which the Group
expects to be entitled in exchange for transferring promised goods or services to a
customer, excluding amounts collected on behalf of third party if the trade receivables do
not contain a significant financing component at initial recognition.
FRS 109.5.1.3
Subsequent measurement Œ
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the contractual cash flow characteristics of the asset. The three
measurement categories for classification of debt instruments are:
-
Amortised cost
Financial assets that are held for the collection of contractual cash flows where those
cash flows represent solely payments of principal and interest are measured at
amortised cost. Financial assets are measured at amortised cost using the effective
interest method, less impairment. Gains and losses are recognised in profit or loss
when the assets are derecognised or impaired, and through amortisation process.
-
FRS 109.4.1.2
Fair value through other comprehensive income (FVOCI)
Financial assets that are held for collection of contractual of cash flows and for selling
the financial assets, where the assets’ cash flows represent solely payments of
principal and interest, are measured at FVOCI. Financial assets measured at FVOCI
are subsequently measured at fair value. Any gains or losses from changes in fair
value of the financial assets are recognised in other comprehensive income, except
for impairment losses, foreign exchange gains and losses and interest calculated using
the effective interest method are recognised in profit or loss. The cumulative gain or
loss previously recognised in other comprehensive income is reclassified from equity
to profit or loss as a reclassification adjustment when the financial asset is derecognised.
-
FRS 109.5.2.1
FRS 109.4.1.2A
Fair value through profit or loss
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair
value through profit or loss. A gain or loss on a debt instruments that is subsequently
measured at fair value through profit or loss and is not part of a hedging relationship
is recognised in profit or loss statement in the period in which it arises. Interest
income from these financial assets is included in the finance income.
XYZ Holdings (Singapore) Limited | 227
FRS 109.4.1.4
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating accounting policies relating to
financial instruments
X. Summary of significant accounting policies (continued)
X.X
Financial instruments (continued)
a) Financial assets (continued)
Equity instruments
The Group subsequently measures all equity instruments at fair value. On initial
recognition of an equity instruments that is not held for trading, the Group may
irrevocably elect to present subsequent changes in fair value in OCI. Dividends from such
investments are to be recognised in profit or loss when the Group’s right to receive
payments is established.
FRS 109.4.1.4
Changes in fair value of financial assets at fair value through profit or loss are recognised
in profit or loss.
FRS 109.5.7.1
FRS 109.5.7.5
FRS 109.5.7.6
Changes in fair value of financial assets at FVOCI are recognised in OCI.
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is
entered into and are subsequently remeasured to their fair value at the end of each
reporting period. Changes in fair value of derivatives are recognised in profit or loss.
Impairment Ê
The Group assesses on a forward looking basis the expected credit losses (ECL) associated
with its debt instrument assets carried at amortised cost and FVOCI.
FRS 109.5.5.1
FRS 109.5.5.3
FRS 109.5.5.5
For trade receivables only, the Group measures the loss allowance at an amount equal to
the lifetime expected credit losses.
FRS 109.5.5.15
Derecognition
A financial asset is derecognised where the contractual right to receive cash flows from
the asset has expired. On derecognition of a financial asset in its entirety, the difference
between the carrying amount and the sum of the consideration received and any
cumulative gain or loss that had been recognised in other comprehensive income for debt
instruments is recognised in profit or loss.
FRS 109.3.2.3
b) Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the
contractual provisions of the financial instrument. The Group determines the classification
of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus in the case of financial
liabilities not at fair value through profit or loss, directly attributable transaction costs.
Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value through profit
or loss are subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised, and
through the amortisation process.
XYZ Holdings (Singapore) Limited | 228
FRS 109.3.1.1
FRS 109.5.1.1
FRS 109.5.7.2
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating accounting policies relating to
financial instruments
X.
X.X
Summary of significant accounting policies (continued)
Financial instruments (continued)
b) Financial liabilities
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition of
the original liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognised in profit or loss.
X.X
Convertible redeemable preference shares
Convertible redeemable preference shares are separated into liability and equity
components based on the terms of the contract.
FRS 107.21
On issuance of the convertible redeemable preference shares, the fair value of the liability
component is determined using a market rate for an equivalent non-convertible bond. This
amount is classified as a financial liability measured at amortised cost (net of transaction
costs) until it is extinguished on conversion or redemption in accordance with the
accounting policy set out in Note X.
FRS 32.28
The remainder of the proceeds is allocated to the conversion option that is recognised and
included in shareholders’ equity. Transaction costs are deducted from equity, net of
associated income tax. The carrying amount of the conversion option is not remeasured in
subsequent years.
FRS 32.31
Transaction costs are apportioned between the liability and equity components of the
convertible redeemable preference shares based on the allocation of proceeds to the
liability and equity components when the instruments are initially recognised.
X
X
FRS 32.32
FRS 32.38
Financial guarantee
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due in accordance with the terms of a debt instrument.
FRS 109.App A
Financial guarantees are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the guarantee.
Subsequent to initial recognition, financial guarantees are measured at the higher of the
amount of the loss allowance determined in accordance with the impairment model under
FRS 109 and the amount initially recognised less, when appropriate, the cumulative
amount of income recognised.
FRS 109.5.1.1
FRS 109.4.2.1.C
Share capital and share issuance expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity.
Incremental costs directly attributable to the issuance of ordinary shares are deducted
against share capital.
X
FRS 109.3.3.1
FRS 109.3.3.2
FRS 32.37
Treasury shares
The Group’s own equity instruments, which are reacquired (treasury shares) are
recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss
on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any
difference between the carrying amount of treasury shares and the consideration
received, if reissued, is recognised directly in equity. Voting rights related to treasury
shares are nullified for the Group and no dividends are allocated to them respectively.
XYZ Holdings (Singapore) Limited | 229
FRS 32.33
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extract of summary of significant accounting policies illustrating accounting policies relating to
financial instruments
Commentary:
Option to designate a financial asset at fair value through profit or loss
Ê
In this illustration, no financial instrument has been designated as financial assets or financial
liabilities at fair value through profit or loss. The following disclosures of accounting policies
apply if there is any financial liability designated at fair value through profit or loss:
Financial assets
-
The nature of the financial assets the entity has designated as measured at fair value through
profit or loss; and
-
How the entity has satisfied the criteria for such designations
FRS 107R.B5.aa
Financial liabilities
-
The nature of the financial liabilities the entity has designated as measured at fair value
through profit or loss; and
-
The criteria for so designating such financial liabilities on initial recognition
-
How the entity has satisfied the conditions for such designations
FRS 107R.B5.a
Additional illustrative disclosures
Impairment for purchased or originated credit impaired financial assets
Ê
In this illustration, the Group does not have purchased or originated credit-impaired
financial assets.
Illustrative accounting policy on impairment for purchased or originated credit-impaired
financial assets.
For purchased or originated credit-impaired financial assets, the Group recognises the
cumulative changes in lifetime expected credit losses since initial recognition, discounted at the
credit-impaired effective interest rate (EIR) as a loss allowance. The EIR for purchased or
originated credit-impaired financial assets is calculated taking into account the initial lifetime
ECLs in the estimated cash flows. At each reporting date, the Group recognises the amount of
the changes in lifetime expected credit losses as an impairment gain or loss. Favourable
changes in lifetime expected credit losses are recognised as an impairment gain, even if the
lifetime expected credit losses are less than the amount of expected credit losses that were
included in the estimated cash flows on initial recognition.
Extract of summary of significant accounting estimates and judgements relating to financial
instruments
X.
Significant accounting judgements and estimates
X.
Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default
and expected loss rates. The Group uses judgement in making these assumptions and
selecting the inputs to the impairment calculation, based on the Group’s past history, existing
market conditions as well as forward looking estimates at the end of each reporting period.
For details of the key assumptions and inputs used, see Note X.
XYZ Holdings (Singapore) Limited | 230
FRS 109.5.5.13
FRS 109.5.5.14
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Interest income
Group
2016
$’000
Interest income from
- Debt instruments at amortised cost
XXX
FRS 107R.20.b
- Debt instruments at fair value through other
comprehensive income
XXX
FRS 107R.20.b
XXX
X.
Other income Ê
Group
2016
$’000
Net fair value gains on financial instruments:
- Financial assets at fair value through profit or loss
XXX
FRS 107R.20.a.i
- Derivatives
XXX
FRS 107R.20.a.i
- Financial assets at fair value through other
comprehensive income relating to equity investments
held at the end of reporting period
XXX
FRS 107R.11A.d
- Financial assets at fair value through other
comprehensive income relating to equity investments
derecognised during the reporting period
XXX
FRS 107R.11A.d
Dividend income
XXX
X.
Interest expense Ê
Group
2016
$’000
Interest expense on
- Bank loans, bonds and bank overdrafts carried at
amortised cost
XXX
FRS 107R.20.b
- Convertible redeemable preference shares carried at
amortised cost
XXX
FRS 107R.20.b
XXX
XYZ Holdings (Singapore) Limited | 231
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Other expense
Impairment loss on financial assets (Note X)
Group
Company
2016
2016
$’000
$’00
XXX
XXX
Commentary:
Separate disclosure of income and expenses •
Œ
An entity shall disclose the fee income and expense (other than amounts included in
determining the effective interest rate) arising from financial assets or financial liabilities that
are not at fair value through profit or loss and trust and other fiduciary activities that result in
the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and
other institutions, either on the face of the financial statements or in the notes.
FRS 107R.20.c
Classes of financial instruments
•
FRS 107 specifies a number of disclosure requirements on the following topics to
be provided by ‘class of financial instruments’:
-
Credit risk;
FRS 107R.36
-
Fair value of financial instruments;
FRS 107R.25
-
Accounting policy for recognising any difference between fair value at initial
recognition and the amount that would be determined at that date using
valuation technique and the aggregate difference yet to be recognised in profit
or loss; and
FRS 107R.28
-
Transfers of financial assets that are not derecognised in their entirety.
FRS 107R.42D
FRS 107 requires an entity to group financial instruments into classes that are
appropriate to the nature of information disclosed and that take into account the
characteristics of those financial instruments. These classes are determined by
the reporting entity and are distinct (usually lower in level) from the categories of
financial instruments (e.g., amortised cost, fair value through other
comprehensive income) specified in FRS 109.
In determining classes of financial instruments, an entity shall, at a minimum:
-
Distinguish instruments measured at amortised cost from those measured at
fair value
-
Treat as a separate class or classes those financial instruments outside the
scope of FRS 107
The entity is also required to provide sufficient information to permit
reconciliation of the classes of financial instruments to the line items presented in
the balance sheet.
XYZ Holdings (Singapore) Limited | 232
FRS 107R.6
FRS 107R.B1
FRS 107R.B2
FRS 107R.6
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Trade and other receivables ÊËÌ
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Trade receivables
XXX
XXX
–
–
Bills of exchange and promissory notes
XXX
XXX
–
–
Amounts due from related companies
XXX
–
XXX
XXX
Staff loans
XXX
XXX
XXX
XXX
Refundable deposits
XXX
XXX
–
–
XXX
XXX
XXX
XXX
Amounts due from subsidiaries
–
–
XXX
XXX
SGD loans to subsidiaries
–
–
XXX
XXX
SGD loans to associates
XXX
XXX
XXX
XXX
SGD loan to a fellow subsidiary
XXX
XXX
XXX
XXX
Staff loans
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Total trade and other receivables (current
and non-current)
XXX
XXX
XXX
XXX
Add: Cash and short-term deposits (Note
X)
XXX
XXX
XXX
XXX
Add: 3% p.a. SGD government bonds due
31 March 2018 (Note X)
XXX
XXX
XXX
XXX
(XXX)
(XXX)
(XXX)
(XXX)
XXX
XXX
XXX
XXX
Trade and other receivables (current):
Other receivables (non-current):
Less: Sales tax receivables
Total financial assets carried at amortised
cost
XYZ Holdings (Singapore) Limited | 233
FRS 107R.7
FRS 107R.31
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Trade and other receivables ÊËÌ (continued)
Trade receivables
FRS 107R.7 and 31
Trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms.
At the end of the reporting period, trade receivables arising from export sales amounting to
$XXX (2015: $XXX) are arranged to be settled via letters of credit issued by reputable banks in
countries where the customers are based. Trade receivables from first-time customers that are
insured by trade credit insurance underwritten by a reputable insurer in Singapore amount to
$XXX (2015: XXX) at the end of the reporting period.
FRS 107R.36.b
Trade receivables denominated in foreign currencies at 31 December are as follows:
FRS 107R.34.a
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
United States Dollar
XXX
XXX
–
–
Renminbi
XXX
XXX
–
–
Bills of exchange and promissory notes
These receivables bear interest at market rates and have an average maturity of 30 days
(2015: 20 days) from the end of the reporting period.
FRS 107R.7 and 31
Related party balances and staff loans
-
Amounts due from related companies are non-trade related, unsecured, non-interest
bearing, repayable upon demand and are to be settled in cash.
-
Amounts due from subsidiaries and loans to subsidiaries are unsecured, non-interest
bearing and are to be settled in cash. The former are not expected to be repaid within the
next 12 months while the latter are due on 30 June 2019.
-
Loans to associates bear interest at SIBOR + 2% p.a. (2015: SIBOR + 2% p.a.), have an
average maturity of 1.5 years (2015: 2.5 years), secured by corporate guarantees issued
by their respective holding companies and are to be settled in cash.
-
Loan to a fellow subsidiary is unsecured, bears interest at SIBOR + 2% p.a. (2015: SIBOR +
2% p.a.), repayable on 30 September 2018 and is to be settled in cash.
-
Staff loans are unsecured and non-interest bearing. Non-current amounts have an average
maturity of 1.5 years (2015: 1.5 years). The loans are recognised initially at fair value. The
difference between the fair value and the absolute loan amount represents payment for
services to be rendered during the period of the loan and is recorded as part of prepaid
operating expenses
XYZ Holdings (Singapore) Limited | 234
FRS 107R.7, 31 and
36.b
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Trade and other receivables ÊËÌ (continued)
Receivables subject to offsetting arrangements Í
The Group regularly purchases electronic raw materials from and sell electronic products to
MNO Pte. Ltd. Both parties have an arrangement to settle the net amount due to or from each
other on a 30-days term basis.
The Group’s trade receivables and trade payables that are off-set are as follows:
31 December 2016
$‘000
Gross carrying
amounts
Description
Trade receivables
Trade payables
Trade payables
Net amounts in
the balance
sheet
XXX
(XXX)
XXX
-
(XXX)
-
FRS 107R.13C
31 December 2015
$‘000
Description
Trade receivables
Gross amounts
offset in the
balance sheet
XXX
(XXX)
XXX
-
(XXX)
-
Receivables subject to an enforceable master netting arrangement that are not otherwise
set-off Í
The Group regularly purchases electronic raw materials from and sell electronic products to PQR
Pte. Ltd. Both parties do not have an arrangement to settle the amount due to or from each
other on a net basis but have the right to set off in the case of default and insolvency or
bankruptcy.
FRS 107.13E
The Group’s trade receivables and trade payables subject to an enforceable master netting
arrangement that are not otherwise set-off are as follows:
31 December 2016
$‘000
Gross carrying
amounts
Description
Related amounts
not set off in the
balance sheet
FRS 107R.13C.d.i
FRS 107R.13C.e
Net amount
Trade receivables
XXX
(XXX)
XXX
Trade payables
XXX
(XXX)
-
31 December 2015
Description
$‘000
Trade receivables
XXX
(XXX)
XXX
Trade payables
XXX
(XXX)
-
XYZ Holdings (Singapore) Limited | 235
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
Commentary:
Collateral and other credit enhancements
Ê
When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or
repledge the collateral in the absence of default by the owner of the collateral, it shall disclose:
(a) the fair value of the collateral held; (b) the fair value of any such collateral sold or
repledged, and whether the entity has an obligation to return it; and (c) the terms and
conditions associated with its use of the collateral.
FRS 107R.15
•
When an entity obtains financial or non-financial assets during the period by taking possession
of collateral it holds as security or calling on other credit enhancements (e.g., guarantees),
and such assets meet the recognition criteria under FRS, an entity shall disclose for such
assets held at the reporting date:
FRS 107R.38
(a) the nature and carrying amount of the assets; and
(b) when the assets are not readily convertible into cash, its policies for disposing of such
assets or for using them in its operations.
The above disclosure required for financial assets obtained by taking possession of collateral or
other credit enhancements are only applicable to assets still held at the reporting date.
Ì
An entity shall disclose a description of collateral held as security and of other credit
enhancements, and their financial effect (e.g. a quantification of the extent to which collateral
or other credit enhancements mitigate credit risk) in respect of the amount that best
represents the maximum exposure to credit risk.
FRS 107R.36.b
FRS 107 Disclosures – Offsetting financial assets and financial liabilities
Í
FRS 107 requires an entity to disclose information to enable users of its financial statements
to evaluate the effect or potential effect of netting arrangements on the entity’s financial
position which includes the effect or potential effect of rights of set-off associated with the
entity’s recognised financial assets and recognised financial liabilities that are within the scope
of paragraph 13A of FRS 107.
FRS 107R.13B
These disclosures are required for all recognised financial instruments that are set off in
accordance with paragraph 42 of FRS 32 and also apply to recognised financial instruments
that are subject to an enforceable master netting arrangement or similar agreement
irrespective of whether they are set off in accordance with paragraph 42 of FRS 32.
FRS 107R.13A
To meet the objective above, an entity shall disclose, at the end of the reporting period, the
following quantitative information separately for recognised financial assets and recognised
financial liabilities that are within the scope of paragraph 13A of FRS 107:
FRS 107R.13C
(a) the gross amounts of those recognised financial assets and recognised financial liabilities;
(b) the amounts that are set off in accordance with the criteria in FRS 32.42 when
determining the net amounts presented in the balance sheet;
(c) the net amounts presented in the balance sheet;
(d) the amounts subject to an enforceable master netting arrangement or similar
arrangement that are not otherwise included in (b), including Î
iii. amounts related to recognised financial instruments that do not meet some or all of
the offsetting criteria of FRS 32.42; and
iv. amounts related to financial collateral (including cash collateral); and
(e) the net amounts after deducting the amounts in (d) from the amounts in (c) above.
The information above shall be presented in a tabular format, separately for financial assets
and financial liabilities, unless another format is more appropriate.
Î
The total amount disclosed for an instrument in accordance with (d) above shall be limited to
the net amounts presented in the balance sheet for that instrument.
XYZ Holdings (Singapore) Limited | 236
FRS 107R.13D
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Investment securities •
Group
2016
$’000
At fair value through profit or loss Ê
- Equity securities (quoted)
XXX
FRS 107R.8.h.i
At fair value through other comprehensive income Ê
- Other debt securities (unquoted)
XXX
- Equity securities (unquoted)
XXX
At amortised cost Ê
- 3% p.a. SGD government bonds due 31 March 2018 (quoted)
XXX
XXX
FRS 107R.8.h.i
FRS 107R.8.h.ii
FRS 107R.8.f
Investments pledged as security
The Group’s investment in government bonds amounting to $XXX (2015:$XXX) has been
pledged as security for a bank loan (Note X). Under the terms and conditions of the loan, the
Group is prohibited from disposing of this investment or subjecting it to further charges without
furnishing a replacement security of similar value.
FRS 107R.14
Investments in equity instruments designated at fair value through other comprehensive income
The fair value of each of the investments in equity instruments designated at fair value through
other comprehensive income at the end of the reporting period is as follows:
FRS 107R.11A
Group
2016
$’000
At fair value through other comprehensive income
- Equity securities (unquoted)
Company BIG
XXX
Company JKL
XXX
FRS 107R.11A.a
FRS 107R.11A.c
XXX
The Group has elected to measure these equity securities at FVOCI due to the Group’s intention
to hold these equity instruments for long-term appreciation.
During the year, the Group disposed of its investments in equity instruments of YYY due to
favourable market condition. The fair value at the date of derecognition amounted to $XXX. The
cumulative gain arising from the disposal amounted to $XXX and were transferred from fair
value adjustment reserve to retained earnings.
XYZ Holdings (Singapore) Limited | 237
FRS 107R.11A.b
FRS 107R.11B.a
FRS 107R.11B.b
FRS 107R.11B.c
FRS 107R.11A.e
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
Commentary:
Categories of financial assets and financial liabilities
Ê
FRS 107 required disclosure of the carrying amounts of financial instruments under each of
the categories, as specified in FRS 109, either on the face of the balance sheet or in the notes.
The categories of financial instruments include financial assets and financial liabilities that are
classified as held-for-trading, those that are designated upon initial recognition as financial
assets or financial liabilities at fair value through profit or loss, financial assets at amortised
cost, financial liabilities measured at amortised cost and financial assets measured at fair
value through other comprehensive income, showing separately those that are measured at
fair value through other comprehensive income due to its business model classification and
investments in equity instruments designated as such upon initial recognition.
FRS 107R.8
Nature and extent of risks arising from financial instruments
•
Information such as the interest rates and maturity dates of the debt securities, and countries
where the equity securities are listed should be disclosed if material and enables the users of
the financial statements to evaluate the nature and extent of the risks arising from financial
instruments to which the entity is exposed to at the reporting date. In this illustration, the
countries where the equity securities are listed are disclosed in Note X Market price risk.
XYZ Holdings (Singapore) Limited | 238
FRS 107R.31
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Derivatives
Group
Contract/
Notional
Amount
2016
2015
$’000
$’000
Assets
Liabilities
Contract/
Notional
Amount
FRS 107R.7 and 31
Assets
Liabilities
Forward currency
contracts
XXX
XXX
(XXX)
XXX
XXX
–
Interest rate swap
XXX
XXX
–
XXX
XXX
–
XXX
(XXX)
XXX
–
XXX
(XXX)
XXX
–
XXX
–
XXX
–
–
(XXX)
–
–
XXX
(XXX)
XXX
–
Total derivatives
Add: Equity securities
at fair value through
profit or loss (Note X)
Add: Contingent
consideration for
business combination
(Note X)
Total financial
assets/(liabilities) at
fair value through
profit or loss
At the Company level, the carrying amount of financial liability at fair value through profit or loss
is the contingent consideration for business combination amounting to $XXX as at 31 December
2016 (2015: Nil).
Forward currency contracts are used to hedge foreign currency risk arising from the Group’s
sales and purchases denominated in USD for which firm commitments existed at the end of the
reporting period, extending to March 2016 (2015: March 2015) (Note X)).
The interest rate swap receives floating interest equal to SIBOR + 3% p.a. (2015: SIBOR + 3%
p.a.), pays a fixed rate of interest of X.X% p.a. (2015: X.X% p.a.) and matures on 30 November
2016 (2015: 30 November 2015).
XYZ Holdings (Singapore) Limited | 239
FRS 107R.8.a
FRs 107R,8.e
FRS 107R.8.e
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Cash and short-term deposits
FRS 107R.7 and 31
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Cash at banks and on hand
XXX
XXX
XXX
XXX
Short-term deposits
XXX
XXX
XXX
XXX
Cash and short-term deposits
XXX
XXX
XXX
XXX
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term
deposits are made for varying periods of between one day and three months, depending on the
immediate cash requirements of the Group and the Company, and earn interests at the
respective short-term deposit rates. The weighted average effective interest rates as at 31
December 2016 for the Group and the Company were X.X% (2015: X.X%) and X.X% (2015: X.X%)
respectively.
Cash and short-term deposits denominated in foreign currencies at 31 December are as follows:
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
United States Dollar
XXX
XXX
XXX
XXX
Renminbi
XXX
XXX
XXX
XXX
XYZ Holdings (Singapore) Limited | 240
FRS 107R.31 and
34
FRS 107R.34.a
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Loans and borrowings
Maturity
Maturity
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Current:
Obligations under finance leases
(Note X)
Bank overdrafts
X.X% p.a. fixed rate SGD bank loan
2016
XXX
XXX
–
–
On demand
XXX
XXX
–
–
2016
XXX
XXX
–
–
XXX
XXX
–
–
Non-current:
Obligations under finance leases
(Note X)
2018-2025
XXX
XXX
–
–
X.X% p.a. fixed rate SGD bonds
2018-2022
XXX
XXX
XXX
XXX
31 July 2022
XXX
–
–
–
- SGD loan at LIBOR + X.X% p.a.
2018-2022
XXX
XXX
XXX
XXX
- SGD loan at SIBOR + X.X% p.a.
30 November 2020
XXX
XXX
–
–
–
XXX
–
–
XXX
XXX
XXX
XXX
Bank loans:
- X.X% p.a. fixed rate USD loan
- X.X% p.a. fixed rate SGD loan
Convertible redeemable
preference shares
Total loans and borrowings
–
2019-2022
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Obligations under finance leases
These obligations are secured by a charge over the leased assets (Note X). The average discount
rate implicit in the leases is X.X% p.a. (2015: X.X% p.a.). These obligations are denominated in
the respective functional currencies of the relevant entities in the Group.
Bank overdrafts
Bank overdrafts are denominated in SGD, bear interest at SIBOR + X.X% p.a. (2015: SIBOR +
X.X% p.a.) and are secured by a floating charge over certain inventories (Note X).
X% p.a. fixed rate SGD bank loan
This loan is fully repayable on 30 June 2017 (2015: 30 June 2016) and is secured by a charge
over freehold land under development (Note X).
X.X% p.a. fixed rate SGD bonds
These bonds with a face value of $XXX are unsecured and are repayable in 5 equal annual
instalments commencing on 1 January 2018.
X.X% p.a. fixed rate USD bank loan
This loan has been drawn down under a six-year multi-option facility (MOF). The loan is
repayable within 12 months after the reporting date, but has been classified as long-term
because the Group expects and has the discretion to exercise its rights under the MOF to
refinance this funding.
XYZ Holdings (Singapore) Limited | 241
FRS 107R.7 and 31
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
FRS 107R.7 and 31
Loans and borrowings (continued)
X% p.a. fixed rate USD bank loan (continued)
Such immediate replacement funding is available until 31 January 2021. The total amount
repayable on maturity is $XXX. The facility is secured by a first mortgage over certain freehold
land and buildings of the Group (Note X).
SGD bank loan at LIBOR + X.X% p.a.
This loan is secured by a first mortgage over certain investment properties (Note X) of the Group
and is repayable in two equal instalments due on 31 December 2018 and 31 January 2022. The
loan includes a financial covenant which requires the Group to maintain a gearing ratio not
exceeding 50%.
SGD bank loan at SIBOR + X.X% p.a.
This loan is secured by a first mortgage over certain of the Group’s freehold land and buildings
(Note X), a charge over certain investment securities (Note X) of the Group and corporate
guarantee provided by the Company (Note X). Repayment of this loan is due on 30 November
2020. The loan includes a financial covenant which requires the Group to maintain a net current
asset and net asset positions throughout the tenure of the loan.
X.X% p.a. fixed rate SGD loan
As at 31 December 2016, this loan has been presented as part of the liabilities of the disposal
group classified as held for sale (Note X).
Convertible Redeemable Preference Shares
As at 31 December 2016 and 2015, there were 505,000 Convertible Redeemable Preference
Shares (CRPS) issued and fully paid. The shares were issued at $1 each and are convertible at
the option of the shareholders into ordinary shares of the Company on 1 January 2019 on the
basis of one ordinary share for every preference share held. Any preference shares not
converted will be redeemed on 31 December 2021 at a price of $X.XX per share. The preference
shares carry a dividend of X% p.a., payable half-yearly in arrears on 30 June and 31 December.
The dividend rights are non-cumulative and the shareholders have no voting rights.
The carrying amount of the liability component of CRPS at the end of the reporting period is
arrived at as follows:
Group and Company
Face value of CRPS
Equity component
Liability component of CRPS at initial recognition
2016
2015
$’000
$’000
XXX
(XXX)
XXX
(XXX)
XXX
XXX
Add: Accumulated amortisation of discount
- Opening balance at 1 January
XXX
–
- Amortisation of discount during the financial year
XXX
XXX
- Closing balance at 31 December
XXX
XXX
XXX
XXX
Liability component of CRPS at the end of the reporting period
XYZ Holdings (Singapore) Limited | 242
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Trade and other payables
FRS 107R.7 and 31
Group
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
Trade payables
XXX
XXX
XXX
XXX
Other payables
XXX
XXX
XXX
XXX
Amounts due to related companies
XXX
XXX
–
–
XXX
XXX
XXX
XXX
Deferred cash settlement (Note X)
XXX
–
–
–
Total trade and other payables
XXX
XXX
XXX
XXX
- Other liabilities (Note X)
XXX
XXX
XXX
XXX
- Loans and borrowings (Note X)
XXX
XXX
XXX
XXX
Total financial liabilities carried at amortised
cost
XXX
XXX
XXX
XXX
Trade and other payables (current):
Other payables (non-current):
Add:
FRS107R.8.f
Trade payables/other payables
These amounts are non-interest bearing. Trade payables are normally settled on 60-day
terms while other payables have an average term of six months.
FRS107R.7 and 31
Trade payables denominated in foreign currencies as at 31 December are as follows:
Group
United States Dollar
Company
2016
2015
2016
2015
$’000
$’000
$’000
$’000
XXX
XXX
XXX
XXX
Amounts due to related companies
These amounts are trade related, unsecured, non-interest bearing, repayable on demand
and are to be settled in cash.
XYZ Holdings (Singapore) Limited | 243
FRS 107R.7
FRS 107R.31
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Other liabilities
FRS 107R.7 and 31
Group
2016
$’000
2015
$’000
Financial guarantees
Provision for expected credit loss
Company
2016
$’000
2015
$’000
XXX
XXX
XXX
XXX
(XXX)
-
(XXX)
-
XXX
XXX
XXX
XXX
XXX
–
XXX
–
XXX
XXX
XXX
XXX
Contingent consideration for business
combination (Note X)
Contingent consideration for business combination
As part of the purchase agreement with the previous owner of MSAX, a contingent consideration
has been agreed. This consideration is dependent on the profit before tax of MSAX during a 12month period. The fair value at the acquisition date was $XXX, which has been adjusted as of 31
December 2016 due to a significantly enhanced performance compared to budget to a fair value
of $XXX. The consideration is due for final measurement and payment to the former
shareholders on 18 October 2016. No further significant change to the consideration is
expected.
XYZ Holdings (Singapore) Limited | 244
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
X.
Fair value of assets and liabilities
FRS 107R.25
FRS 107R.26
Assets and liabilities not measured at fair value, for which fair value is disclosed
The following table shows an analysis of the Group’s assets and liabilities not measured at fair
value, for which fair value is disclosed:
Group
2016
$’000
Fair value measurements at the end of the reporting period using
Quoted
prices in
active
markets for
identical
assets
Significant
observable
inputs other
than quoted
prices
Significant
unobservable
inputs
(Level 1)
(Level 2)
(Level 3)
Fair
value
Total
Carrying
amount
Assets
Government bonds
XXX
-
Investment in associates
XXX
Staff loans (non-current)
-
Deferred cash settlement
Financial guarantees
-
XXX
XXX
-
-
XXX
XXX
-
XXX
XXX
XXX
-
-
(XXX)
(XXX)
(XXX)
-
-
(XXX)
(XXX)
(XXX)
- Obligations under finance
leases
-
-
(XXX)
(XXX)
(XXX)
- Fixed rate bank loans and
bonds
-
-
(XXX)
(XXX)
(XXX)
- Convertible redeemable
preference shares
-
-
(XXX)
(XXX)
(XXX)
Liabilities:
Loans and borrowings (noncurrent)
Company
Assets
Amounts and loans due from
subsidiaries
-
XXX
-
XXX
XXX
Staff loans (non-current)
-
-
XXX
XXX
XXX
-
-
(XXX)
(XXX)
(XXX)
- Fixed rate bank loans and
bonds
-
-
(XXX)
(XXX)
(XXX)
- Convertible redeemable
preference shares
-
-
(XXX)
(XXX)
(XXX)
Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)
XYZ Holdings (Singapore) Limited | 245
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
X.
Fair value of assets and liabilities (continued)
Assets and liabilities not measured at fair value, for which fair value is disclosed
FRS 107R.25
FRS 107R.26
Group
2015
$’000
Fair value measurements at the end of the reporting period using
Quoted
prices in
active
markets for
identical
assets
(Level 1)
Significant
observable
inputs other
than quoted
prices
(Level 2)
Significant
unobservable
inputs
(Level 3)
Fair
value
Total
Carrying
amount
Assets
Government bonds
XXX
-
-
XXX
XXX
Investment in associates
XXX
-
-
XXX
XXX
Staff loans (non-current)
-
-
XXX
XXX
XXX
-
-
(XXX)
(XXX)
(XXX)
- Obligations under finance
lease
-
-
(XXX)
(XXX)
(XXX)
- Fixed rate bank loans and
bonds
-
-
(XXX)
(XXX)
(XXX)
- Convertible redeemable
preference shares
-
-
(XXX)
(XXX)
(XXX)
Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)
Company
Assets
Amounts and loans due from
subsidiaries
-
XXX
-
XXX
XXX
Staff loans (non-current)
-
-
XXX
XXX
XXX
-
-
(XXX)
(XXX)
(XXX)
- Fixed rate bank loans and
bonds
-
-
(XXX)
(XXX)
(XXX)
- Convertible redeemable
preference shares
-
-
(XXX)
(XXX)
(XXX)
Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)
XYZ Holdings (Singapore) Limited | 246
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Financial risk management objectives and policies
X.X
Financial risk management strategy
The Group and the Company are exposed to financial risks arising from its operations and the
use of financial instruments. The key financial risks include credit risk, liquidity risk, interest
rate risk, foreign currency risk and market price risk. The board of directors reviews and
agrees on policies and procedures for the management of these risks, which are executed by
the Chief Financial Officer, Head of Treasury and Head of Credit Control. The Audit
Committee provides independent oversight to the effectiveness of the risk management
process. It is, and has been throughout the current and previous financial year, the Group’s
policy that no trading in derivatives for speculative purposes shall be undertaken.
FRS 107R.7 and 31
FRS 107R.31-33
and IG 15
The following sections provide details regarding the Group’s and Company’s exposure to the
above-mentioned financial risks and the objectives, policies and processes for the management
of these risks.
a) Credit risk ÊËÌÍÎÏ
Credit risk is the risk of loss that may arise on outstanding financial instruments should a
counterparty default on its obligations. The Group’s and the Company’s exposure to credit
risk arises primarily from trade and other receivables. For other financial assets (including
investment securities, cash and short-term deposits and derivatives), the Group and the
Company minimise credit risk by dealing exclusively with high credit rating counterparties.
FRS 107R.33.a-b
FRS 107R.IG15.c
The Group’s objective is to seek continual revenue growth while minimising losses incurred
due to increased credit risk exposure. The Group trades only with recognised and
creditworthy third parties. It is the Group’s policy that all customers who wish to trade on
credit terms are subject to credit verification procedures. In addition, receivable balances
are monitored on an ongoing basis with the result that the Group’s exposure to bad debts
is not significant. For transactions that do not occur in the country of the relevant
operating unit, the Group does not offer credit terms without the approval of the Head of
Credit Control.
The Group considers the probability of default upon initial recognition of asset and
whether there has been a significant increase in credit risk on an ongoing basis throughout
each reporting period.
The Group has determined the default event on a financial asset to be when the
counterparty fails to make contractual payments, within 60 days when they fall due, which
are derived based on the Group’s historical information.
FRS 107R.35F.b
The Group considers “low risk” to be an investment grade credit rating with at least one
major rating agency for those investments with credit rating. To assess whether there is a
significant increase in credit risk, the company compares the risk of a default occurring on
the asset as at reporting date with the risk of default as at the date of initial recognition.
The Group considers available reasonable and supportive forwarding-looking information
which includes the following indicators:
FRS 107R.35F.a.i
- Internal credit rating
- External credit rating
- Actual or expected significant adverse changes in business, financial or economic
conditions that are expected to cause a significant change to the borrower’s ability to
meet its obligations
XYZ Holdings (Singapore) Limited | 247
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
X.X
Financial risk management objectives and policies (continued)
Financial risk management strategy (continued)
a) Credit risk (continued) ÊËÌÍÎÏ
- Actual or expected significant changes in the operating results of the borrower
FRS 107R.35F.a.i
- Significant increases in credit risk on other financial instruments of the same borrower
- Significant changes in the value of the collateral supporting the obligation or in the
quality of third-party guarantees or credit enhancements
- Significant changes in the expected performance and behaviour of the borrower,
including changes in the payment status of borrowers in the group and changes in the
operating results of the borrower.
Regardless of the analysis above, a significant increase in credit risk is presumed if a
debtor is more than 30 days past due in making contractual payment.
FRS 107R.35F.a.ii
The Group determined that its financial assets are credit-impaired when:
FRS 107R.35F.d
- There is significant difficulty of the issuer or the borrower
- A breach of contract, such as a default or past due event
- It is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation
- There is a disappearance of an active market for that financial asset because of
financial difficulty
The Group categorises a loan or receivable for potential write-off when a debtor fails to
make contractual payments more than 120 days past due. Financial assets are written off
when there is no reasonable expectation of recovery, such as a debtor failing to engage in
a repayment plan with the Group. Where loans and receivables have been written off, the
company continues to engage enforcement activity to attempt to recover the receivable
due. Where recoveries are made, these are recognised in profit or loss.
FRS 107R.35F.e
The following are credit risk management practices and quantitative and qualitative
information about amounts arising from expected credit losses for each class of financial
assets.
(i) Debt securities at amortised cost, debt securities at fair value through other
comprehensive income and loans
The Group uses three categories of internal credit risk ratings for debt instruments and
loans which reflect their credit risk and how the loss provision is determined for each of
those categories. These internal credit risk ratings are aligned to external credit rating
companies, such as Standard and Poor, Moody’s and Fitch.
A summary of the inputs and assumptions the Group’s expected credit loss model for
the debt instruments and loans is as follows:
XYZ Holdings (Singapore) Limited | 248
FRS 107R.35F.a
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
Financial risk management objectives and policies (continued)
X.X Financial risk management strategy (continued)
a) Credit risk (continued) ÊËÌÍÎÏ
(i) Debt securities at amortised cost, debt securities at fair value through other
comprehensive income and loans
Category
Group definition of category
Grade I
Customers have a low risk of
default and a strong capacity to meet
contractual cash flows
Loans for which there is a
significant increase in credit risk; as
significant increase in credit risk is presumed
if interest and/or principal repayments are 30
days past due
Interest and/or principal
repayments are 60 days past due
Interest and/or principal repayments are 120
days past due and there is no reasonable
expectation of recovery.
Grade II
Grade III
Write-off
Basis for recognition
of expected credit
loss provision
12-month expected
credit losses
Lifetime expected
credit losses
Lifetime expected
credit losses
Asset is written off
Over the term of the loans, the Group accounts for its credit risk by appropriately
providing for expected credit losses on a timely basis. In calculating the expected credit
loss rates, the company considers historical loss rates for each category of
counterparty, and adjusts for forward looking macroeconomic data. The Group
provides for credit losses against debt securities at amortised cost, debt securities at
fair value through other comprehensive income and loans as follows:
Group’s
internal
rating
External
credit
rating
Grade I
Expected
credit
loss rate
Basis for
recognition
of expected
credit loss
provision
Estimated
gross
carrying
amount at
default
Carrying
amount
(net of
impairment
provision)
Basis for
calculating
interest
revenue
AAA
AA
A
BBB
BB
B
X%
X%
X%
X%
X%
X%
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Gross
carrying
amount
Gross
carrying
amount
Grade III
CCC
CC
C
X%
X%
X%
12-month
expected
credit loss
Lifetime
expected
credit
losses
Lifetime
expected
credit
losses
XXX
XXX
XXX
XXX
XXX
XXX
Writeoff
D
X%
Asset is
written off
XXX
XXX
Amortised
cost of
carrying
amount
(net of
credit
allowance)
None
Grade II
FRS 107R.35F.b
FRS 107R.35F.c
FRS 107R.35F.e
FRS 107R.35G.a
There are no significant changes to estimation techniques or assumptions made during
the reporting period.
XYZ Holdings (Singapore) Limited | 249
FRS 107R.35G.b
FRS 107R.35F.b
FRS 107R.35F.c
FRS 107R.35F.e
FRS 107R.35G.a
FRS 107R.35M
FRS 107R.35G.c
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X Financial risk management strategy (continued)
a) Credit risk (continued) ÊËÌÍÎÏ
(i) Debt securities at amortised cost, debt securities at fair value through other
comprehensive income and loans
The loss allowance provision for debt securities at amortised cost, debt securities at
fair value through other comprehensive income and loans as at 31 December 2016
reconciles to the opening loss allowance for that provision as follows:
Group
Company
Trade
Debt
Debt
receivables securities securities
at
at FVOCI
amortised
cost
$’000
$’000
FRS 107R.35H.a
FRS 107R.35H.b
$’000
Other
Financial
guarantee receivables
Loans
$’000
$’000
$’000
Loans
Financial
guarantee
$’000
$’000
Closing
allowance as
at 31
December
2015 (based
on FRS
39/FRS 37)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Restatement
s to opening
retained
earnings
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
As at 1
January
2016
(Restated)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
12- month
ECL
-
XXX
-
XXX
XXX
XXX
XXX
XXX
Lifetime ECL
-
-
-
-
-
-
-
-
since initial
recognition
-
-
XXX
-
-
-
-
-
- Trade
receivables
XXX
-
-
-
-
-
-
-
New
financial
assets
originated or
purchased
XXX
-
-
XXX
-
XXX
XXX
-
Recoveries
XXX
-
-
-
-
-
-
-
Written-off
-
-
-
-
-
-
-
-
Loss
allowance
measured
at:
- Credit risk
has
increased
significantly
As at 31
December
2016
FRS 107R.35I.a
FRS 107R.35I.c
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XYZ Holdings (Singapore) Limited | 250
XXX
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X Financial risk management strategy (continued)
a) Credit risk (continued) ÊËÌÍÎÏ
(i)
Debt securities at amortised cost, debt securities at fair value through other
comprehensive income and loans
FRS 107R.35K.a
The gross carrying amount of debt securities at amortised cost, debt securities at fair
value through other comprehensive income and loans, without taking into account of
any collaterals held or other credit enhancements which represents the maximum
exposure to loss, is as follows:
Group
31 December
2016
$’000
12-month
ECL
12-month
ECL
Lifetime
ECL
Debt securities at amortised cost
XXX
Loans
XXX
Debt instruments at fair value through other
comprehensive income
Total
XXX
XXX
The gross carrying amount of loans of the Company as at 31 December 2016, without
taking into account of any collaterals held or other credit enhancements which
represents the maximum exposure to loss, is $XXX.
(ii) Trade receivables, promissory notes and bills of exchange
The Group provides for lifetime expected credit losses for all trade receivables and
promissory notes. The loss allowance provision as at 31 December 2016 is
determined as follows, the expected credit losses below also incorporate forward
looking information such as forecast of economic conditions where the gross domestic
product will deteriorate over the next year, leading to an increased number of
defaults.
2016
Current
More than
30 days
past due
More than
60 days
past due
More than
90 days
past due
More than
120 days
past due
Total
Expected loss
rate
X%
X%
X%
X%
X%
X%
Gross carrying
amount
XXX
XXX
XXX
XXX
XXX
XXX
Loss allowance
provision
XXX
XXX
XXX
XXX
XXX
XXX
The gross carrying amount of the Group’s trade receivables is $XXX (2015: $XXX),
the gross carrying amount of the Group’s promissory notes is $XXX (2015: $XXX) and
the gross carrying amount of the Group’s bill of exchange is $XXX (2015: $XXX).
During the financial year, the group did not make any write-offs of trade receivables, it
does not expect to receive future cash flows from and no recoveries from collection of
cash flows previously written off.
XYZ Holdings (Singapore) Limited | 251
FRS 107R.35M
FRS 107R.35N
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
X.X
Financial risk management objectives and policies (continued)
Financial risk management strategy (continued)
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographical region, or have economic features that would
cause their ability to meet contractual obligations to be similarly affected by changes in
economic, political or other conditions. Concentrations indicate the relative sensitivity of the
Group’s performance to developments affecting a particular industry.
FRS 107R.33.a-b
FRS 107.IG15.c
In order to avoid excessive concentrations of risk, the Group’s policies and procedures include
specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of
credit risks are controlled and managed accordingly. Selective hedging is used within the
Group to manage risk concentrations at both the relationship and industry levels. The Group
does not apply hedge accounting.
Exposure to credit risk ÐÑ
At the end of the reporting period, the Group’s and the Company’s maximum exposure to
credit risk is represented by:
-
A nominal amount of $XXX (2015: $XXX) relating to a corporate guarantee provided by
the Group to the banks on associates’ and joint venture’s loans
-
A nominal amount of $XXX (2015: $XXX) relating to a corporate guarantee provided by
the Company to a bank on a subsidiary’s bank loan
FRS 107R.AGB9B10
Information regarding credit enhancements for trade and other receivables is disclosed in
Note X.
Credit risk concentration profile Ò
The Group determines concentrations of credit risk by monitoring the country and industry
sector profile Ò of its trade receivables on an ongoing basis. The credit risk concentration
profile of the Group’s trade receivables at the end of the reporting period is as follows:
Group
2016
$’000
% of total
By country:
Singapore
People’s Republic of China
Malaysia
Vietnam
Other countries
By industry sectors:
Multi-industry conglomerates
Electronics
Property
Others
$’000
2015
% of total
XXX
XXX
XXX
XXX
XXX
XX%
XX%
XX%
XX%
XX%
XXX
XXX
XXX
XXX
XXX
XX%
XX%
XX%
XX%
XX%
XXX
XXX%
XXX
XXX%
XXX
XXX
XXX
XXX
XX%
XX%
XX%
XX%
XXX
XXX
XXX
XXX
XX%
XX%
XX%
XX%
XXX
XXX%
XXX
XXX%
XYZ Holdings (Singapore) Limited | 252
FRS 107R.34.a and
AGB8
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
X.
X.X
Financial risk management objectives and policies (continued)
Financial risk management strategy (continued)
At the end of the reporting period, approximately:
-
XX% (2015: XX%) of the Group’s trade receivables were due from five major customers
who are multi-industry conglomerates located in Singapore.
-
XX% (2015: XX%) of the Group’s trade and other receivables were due from related
parties while almost all of the Company’s receivables were balances with related parties.
FRS 107R.34.a, 34c
and AGB8
Commentary
Ê
The credit risk disclosures shall enable users of financial statements to understand the effect
of credit risk on the amount, timing and uncertainty of future cash flows. To achieve this
objective, credit risk disclosures shall provide:
FRS 107R.35B
(a) Information about an entity’s credit risk management practices and how they relate to
the recognition and measurement of expected credit losses, including the methods,
assumptions and information used to measure expected credit losses
(b) The quantitative and qualitative information that allows users of financial statements to
evaluate the amounts in the financial statements arising from expected credit losses,
including changes in the amount of expected credit losses and the reasons for those
changes; and
(c) Information about an entity’s credit risk exposure (i.e. the credit risk inherent in an
entity’s financial assets and commitments to extend credit) including significant credit
risk concentrations.
An entity need not duplicate information that is already presented elsewhere, provided that
the information is incorporated by cross-reference from the financial statements to other
statements, such as a management commentary or risk report that is available to users of the
financial statements on the same terms as the financial statements and at the same time.
Without the information incorporated by cross-reference, the financial statements are
incomplete.
For disclosures requirement above, an entity shall consider how much detail to disclose, how
much emphasis to place on different aspects of the disclosure requirements, the appropriate
level of aggregation or disaggregation, and whether users of the financial statements need
additional explanations to evaluate the quantitative information disclosed.
Ë
In this illustration, the Group does not measure expected credit losses on a collective basis. If
the Group measures expected credit losses on a collective basis, it shall disclose how the
instruments were grouped.
Ž
In this illustration, the Group does not have modification of contractual cash flows for its
financial assets. If an entity has modification of contractual cash flows for its financial assets,
an entity shall disclose how it has applied the requirements in para 5.5.12 of FRS 109,
including how an entity:
(i) Determines whether the credit risk on a financial asset that has been modified while the
loss allowance was measured at an amount equal to lifetime expected credit losses, has
improved to the extent that the loss allowance reverts to being measured at an amount
equal to 12-month expected credit losses in accordance with para 5.5.5 of FRS 109; and
(ii) Monitors the extent to which the loss allowance on financial assets meeting the criteria in
(i) is subsequently remeasured at an amount equal to lifetime expected credit losses in
accordance with para 5.5.3 of FRS 109.
XYZ Holdings (Singapore) Limited | 253
FRS 107R.35C
FRS 107R.35D
FRS 107R.35F.c
FRS 107R.35F.f
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
Commentary
Ž
In addition, to enable users of financial statements to understand the nature and effect of
modifications of contractual cash flows on financial assets that have not resulted in
derecognition and the effect of such modifications on the measurement of expected credit
losses; an entity shall disclose
FRS 107R.35J
(a) The amortised cost before the modification and the net modification gain or loss
recognised for financial assets for which the contractual cash flows have been modified
during the reporting period while they had a loss allowance measured at an amount equal
to lifetime expected credit losses; and
(b) The gross carrying amount at the end of the reporting period of financial assets that
have been modified since initial recognition at a time when the loss allowance was
measured at an amount equal to lifetime expected credit losses and for which the loss
allowance has changed during the reporting period to an amount equal to 12-month
expected credit losses
The entity shall also provide an explanation of how significant changes in the gross carrying
amount of financial instruments during the period contributed to changes in the loss
allowance for modification of contractual cash flows on financial assets that do not result in a
derecognition of those financial assets in accordance with FRS 109.
Í
FRS 107R.35I.b
In this illustration, the Group does not have financial assets that are credit-impaired at the
reporting date (but that are not purchased or originated credit impaired and financial assets
that are purchased on originated credit-impaired.
If an entity has such financial assets, the entity shall disclose:
•
(a) The changes in the loss allowance and the reasons for those changes, provide by class of
financial instrument, a reconciliation from the opening balance to the closing balance of
the loss allowance, in a table, showing separately the changes during the period;
FRS 107R.35H
(b) the total amount of undiscounted expected credit losses at initial recognition on financial
assets initially recognised during the reporting period; and
FRS 107R.35H.c
(c) The gross carrying amount by credit risk rating grades.
FRS 107R.35M.c
In this illustration, the Group does not have any collateral and other credit enhancement
which affects the amounts arising from expected credit losses.
If an entity has any collateral and other credit enhancement which affects the amounts
arising from expected credit losses, the entity shall disclose by class of financial instrument:
‘
(a) A narrative description of collateral held as security and other credit enhancements,
including:
(i) A description of the nature and quality of the collateral held
(ii) An explanation of any significant changes in the quality of that collateral or credit
enhancements as a result of deterioration or changes in the collateral policies of the
entity during the reporting period; and
(iii) Information about financial instruments for which an entity has not recognised a loss
allowance because of the collateral
(b) Quantitative information about the collateral held as security and other credit
enhancements (for example, quantification of extent to which collateral and other credit
enhancements mitigate credit risk) for financial assets that are credit-impaired at the
reporting date.
FRS 107R.35K.b
An entity shall disclose the contractual amount outstanding on financial assets that were
written off during the reporting period and are still subject to enforcement activity.
FRS 107R.35L
XYZ Holdings (Singapore) Limited | 254
FRS 107R.35K.c
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to
financial instruments
Commentary:
Credit risk relating to financial assets or financial liabilities at fair value through profit or loss
Ð
In this illustration, no financial instrument has been designated as financial assets or financial
liabilities at fair value through profit or loss. If an entity has designated a loan or receivable
or financial liability as at fair value through profit or loss, FRS 107 requires further
disclosures regarding the maximum credit risk exposures of such receivables and the amount
by which any related credit derivatives or similar instruments mitigate that credit risk
exposure; changes in fair value during the period and cumulatively, of such loan or receivable
or financial liabilities that is attributable to changes in credit risk (including the methods of
determining such fair value changes) and of any related credit derivatives or similar
instruments; and the difference between the financial liability’s carrying amount and the
contractual repayment amount.
FRS 107R.9-11
Disclosure of maximum exposure to credit risk
Ñ
For financial instruments where the carrying amount best represents the maximum exposure
to credit risk, the disclosure of the maximum exposure to credit risk is not required.
FRS 107R.36.a
Quantitative disclosures
Ò
FRS 107 requires the disclosure of summary quantitative data about an entity’s exposure to
financial risk (e.g., credit risk, liquidity risk and market risk) that is based on the information
provided internally to key management personnel of the entity (as defined in FRS 24, Related
Party Disclosures), e.g., the board of directors or CEO. As such, the disclosures would be
defined by the actual information used by management in managing financial risks, which
may be different from those disclosed in this illustration.
FRS 107R.34.a
In addition, if the above-mentioned quantitative data disclosed as at the end of the reporting
period are unrepresentative of the entity’s exposure to risk during the period, the entity shall
provide further information that is representative e.g., an entity might disclosed the highest,
lowest and average amount of risk to which it was exposed during the period to meet the
disclosure requirement.
FRS 107R.35 and
IG20
The identification of concentrations of credit risk requires judgement taking into account the
circumstances of the entity. Apart from country and industry sectors, other measures of
credit risk concentrations may include credit rating or other measures of credit quality,
limited number of individual counterparties, or groups of closely related counterparties.
XYZ Holdings (Singapore) Limited | 255
FRS 107R.AGB8 and
IG18
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting
financial obligations due to shortage of funds. The Group’s and the Company’s exposure to
liquidity risk arises primarily from mismatches of the maturities of financial assets and
liabilities. The Group’s and the Company’s objective is to maintain a balance between
continuity of funding and flexibility through the use of stand-by credit facilities.
FRS 107R.33a-b, 39.c
and IG5
The Group’s and the Company’s liquidity risk management policy is that not more than
XX% (2015: XX%) of loans and borrowings (including overdrafts and convertible
redeemable preference shares) should mature in the next one year period, and that to
maintain sufficient liquid financial assets and stand-by credit facilities with three different
banks. At the end of the reporting period, approximately X% (2015: XX%) of the Group’s
loans and borrowings will mature in less than one year based on the carrying amount
reflected in the financial statements, excluding discontinued operation. None (2015:
none) of the Company’s loans and borrowings will mature in less than one year at the end
of the reporting period.
FRS 107.33.b, 39.c
and AGB11F.e
The Group assessed the concentration of risk with respect to refinancing its debt and
concluded it to be low. Access to sources of funding is sufficiently available and debt
maturing within 12 months can be rolled over with existing lenders.
Analysis of financial instruments by remaining contractual maturities
Group
2015
$’000
One year or One to Over five
less
five years years
One year One to Over five
or less five years years
Total
Total
Financial assets:
Trade and other
receivables
Cash and short-term
deposits
Derivatives
XXX
XXX
–
XXX
XXX
XXX
–
XXX
XXX
XXX
–
–
–
–
XXX
XXX
XXX
XXX
–
–
–
–
XXX
XXX
XXX
XXX
–
XXX
XXX
XXX
–
XXX
XXX
XXX
XXX
XXX
–
XXX
–
–
XXX
XXX
XXX
XXX
XXX
XXX
XXX
–
–
XXX
–
–
XXX
XXX
XXX
XXX
XXX
XXX
–
–
–
–
XXX
XXX
–
–
–
–
–
–
–
–
Total undiscounted
financial liabilities
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Total net
undiscounted
financial assets/
XXX
(XXX)
(XXX)
XXX
(XXX)
(XXX)
(XXX)
Total undiscounted
financial assets
Financial liabilities:
Trade and other
payables
Other liabilities
Loans and
borrowings
Contingent
consideration for
business
combination
Derivatives
(XXX)
XYZ Holdings (Singapore) Limited | 256
FRS 107R.34.a, 34.c
and AGB8
FRS 107R.39.a, b and
AGB11D
The table below summarises the maturity profile of the Group’s and the Company’s
financial assets used for managing liquidity risk and financial liabilities at the end of the
reporting period based on contractual undiscounted repayment obligations.
2016
$’000
FRS 107R.AGB11F.a
and c
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X b) Liquidity risk (continued)
Company
2016
2015
$’000
$’000
One year or One to Over five
less
five years years
Total
One year One to Over five
or less five years years
Total
Financial assets:
Trade and other
receivables
XXX
XXX
Cash and short-term
deposits
XXX
–
Total undiscounted
financial assets
XXX
XXX
Trade and other
payables
XXX
Other liabilities
–
XXX
XXX
XXX
–
XXX
XXX
XXX
–
–
XXX
–
XXX
XXX
XXX
–
XXX
–
–
XXX
XXX
–
–
XXX
XXX
–
–
XXX
XXX
–
–
XXX
–
XXX
XXX
XXX
–
XXX
XXX
XXX
Total undiscounted
financial liabilities
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Total net
undiscounted
financial assets/
(liabilities)
XXX
XXX
(XXX)
XXX
XXX
XXX
(XXX)
XXX
Financial liabilities:
Loans and borrowings
The table below shows the contractual expiry by maturity of the Group’s and Company’s
contingent liabilities and commitments. The maximum amount of the financial guarantee
contracts are allocated to the earliest period in which the guarantee could be called.
2016
2015
$’000
$’000
One year One to Over five
or less five years years
Total
One year One to Over five
or less five years years
Total
Group
Financial guarantees
XXX
XXX
–
XXX
XXX
XXX
–
XXX
–
XXX
–
XXX
–
XXX
–
XXX
Company
Financial guarantees
XYZ Holdings (Singapore) Limited | 257
FRS 107R.AGB11C.c
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the
Company’s financial instruments will fluctuate because of changes in market interest
rates. The Group’s and the Company’s exposure to interest rate risk arises primarily from
their loans and borrowings, interest-bearing loans given to related parties and
investments in debt securities. The Group does not hedge its investment in fixed rate debt
securities as they have active secondary or resale markets to ensure liquidity. The
Company’s loans at floating rate given to related parties form a natural hedge for its noncurrent floating rate bank loan. All of the Group’s and the Company’s financial assets and
liabilities at floating rates are contractually re-priced at intervals of less than 6 months
(2015: less than 6 months) from the end of the reporting period.
FRS 107R.33.a-b and
IG16
The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts.
The Group’s policy is to keep XX% to XX% (2015: XX% to XX%) of its loans and borrowings
at fixed rates of interest. To manage this mix in a cost-efficient manner, the Group enters
into interest rate swaps. At the end of the reporting period, after taking into account the
effect of an interest rate swap, approximately XX% (2015: XX%) of the Group’s borrowings
are at fixed rates of interest.
FRS 107.33.b and
34.a
Sensitivity analysis for interest rate risk
At the end of the reporting period, if SGD interest rates had been XX (2015: XX) basis
points lower/higher with all other variables held constant, the Group’s profit before tax
would have been $XXX (2015: $XXX) higher/lower, arising mainly as a result of
lower/higher interest expense on floating rate loans and borrowings, lower/higher interest
income from floating rate loans to related parties and lower/higher positive fair value of
an interest rate swap, and the Group’s other reserve in other comprehensive income
would have been $XXX (2015: $XXX) higher/lower, arising mainly as a result of an
increase/decrease in the fair value of fixed rate debt securities classified as FVOCI. The
assumed movement in basis points for interest rate sensitivity analysis is based on the
currently observable market environment, showing a significantly higher volatility as in
prior years.
XYZ Holdings (Singapore) Limited | 258
FRS 107R.40, IG36
and AGB18
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X d) Foreign currency risk
The Group has transactional currency exposures arising from sales or purchases that are
denominated in a currency other than the respective functional currencies of Group
entities, primarily SGD, Malaysian Ringgit (Ringgit) and Renminbi (RMB). The foreign
currencies in which these transactions are denominated are mainly United States Dollars
(USD). Approximately XX% (2015: XX%) of the Group’s sales are denominated in foreign
currencies whilst almost XX% (2015: XX%) of costs are denominated in the respective
functional currencies of the Group entities. The Group’s trade receivable and trade
payable balances at the end of the reporting period have similar exposures.
FRS 107R.33.a and
34.a
The Group and the Company also hold cash and short-term deposits denominated in
foreign currencies for working capital purposes. At the end of the reporting period, such
foreign currency balances are mainly in USD.
FRS 107R.33.a and
34.a
The Group requires all of its operating entities to use forward currency contracts to
eliminate the currency exposures on any individual transactions in excess of $XXX for
which payment is anticipated more than one month after the Group has entered into a firm
commitment for a sale or purchase. The forward currency contracts must be in the same
currency as the hedged item. It is the Group’s policy not to enter into forward contracts
until a firm commitment is in place. It is the Group’s policy to negotiate the terms of the
forward currency contracts to match the terms of the firm commitment to maximise
hedge effectiveness.
At 31 December 2016, the Group had hedged XX% (2015: XX%) and XX% (2015: XX%) of
its foreign currency denominated sales and purchases respectively, for which firm
commitments existed at the end of the reporting period, extending to March 2016 (2015:
March 2016). The Group does not apply hedge accounting for such foreign currency
denominated sales and purchases.
FRS 107R.33.b
FRS 107R.34.a
The Group is also exposed to currency translation risk arising from its net investments in
foreign operations, including Malaysia, People’s Republic of China (PRC) and Vietnam. The
Group’s investment in its Vietnam subsidiary is hedged by a USD denominated bank loan,
which mitigates structural currency exposure arising from the subsidiary’s net assets. The
Group’s net investments in Malaysia and PRC are not hedged as currency positions in
Ringgit and RMB are considered to be long-term in nature.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s profit before tax to a
reasonably possible change in the USD, RMB and Ringgit exchange rates against the
respective functional currencies of the Group entities, with all other variables held
constant.
XYZ Holdings (Singapore) Limited | 259
FRS 107R.40 and
AGB18
XYZ Holdings (Singapore) Limited
Appendix B-1
Financial Instruments
Extracts of notes to the financial statements illustrating the disclosures relating to financial
instruments
X.
Financial risk management objectives and policies (continued)
X.X
d) Foreign currency risk (continued)
FRS 107R.40 and
AGB18
Group
2016
2015
$’000
$’000
Profit before tax
Profit before tax
USD/SGD
- strengthened X% (2015: X%)
–XX
–XX
- weakened X% (2015: X%)
+XX
+XX
USD/RMB
- strengthened X% (2015: X%)
–XX
–XX
+XX
+XX
RMB/SGD
- strengthened X% (2015: X%)
+XX
+XX
- weakened X% (2015: X%)
- weakened X% (2015: X%)
Ringgit/SGD - strengthened X% (2015: X%)
- weakened X% (2015: X%)
–XX
–XX
+XX
+XX
-XX
–XX
X.X e) Market price risk
Market price risk is the risk that the fair value or future cash flows of the Group’s financial
instruments will fluctuate because of changes in market prices (other than interest or
exchange rates). The Group is exposed to equity price risk arising from its investment in
quoted equity securities. These securities are quoted on the Singapore Exchange
Securities Trading Limited (SGX-ST) in Singapore and are classified as FVTPL or FVOCI
financial assets. The Group does not have exposure to commodity price risk.
The Group’s objective is to manage investment returns and equity price risk using a mix of
investment grade shares with steady dividend yield and non-investment grade shares with
higher volatility. The Group’s policy is to limit its interest in the latter type of investments
to XX% (2015: XX%) of its entire equity portfolio. Any deviation from this policy is required
to be approved by the CEO and audit committee. At the end of the reporting period, XX%
(2015: XX%) of the Group’s equity portfolio consist of non-investment grade shares of
companies operating in PRC and Singapore, while the remaining portion of the equity
portfolio comprises investment grade shares included in the Straits Times Index (STI).
FRS 107R.33.a
FRS 107R.33.b and
34.a
Sensitivity analysis for equity price risk
At the end of the reporting period, if the price of the shares had been X% (2015: X%)
higher/lower with all other variables held constant, the Group’s profit before tax would
have been $XXX (2015: $XXX) higher/lower, arising as a result of higher/lower fair value
gains on held for trading investments in equity instruments, and the Group’s other
comprehensive income would have been $XXX (2015: $XXX) higher/lower, arising as a
result of an increase/decrease in the fair value of equity securities classified as FVOCI.
XYZ Holdings (Singapore) Limited | 260
FRS 107R.40, AGB
17-18 and AGB
25-27
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of summary of significant accounting policies illustrating accounting policies relating to
hedge accounting:
X.
X.X
Summary of significant accounting policies
Hedge accounting
The Group applies hedge accounting for certain hedging relationships which qualify for
hedge accounting.
FRS 107R.21
For the purpose of hedge accounting, hedges are classified as:
§
§
§
fair value hedges when hedging the exposure to changes in fair value of a recognised
asset or liability or an unrecognised firm commitment
FRS 109.6.5.2.a
cash flow hedges when hedging exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a
highly probable forecast transaction or the foreign currency risk in an unrecognised
firm commitment; or
FRS 109.6.5.2.b
hedges of a net investment in a foreign operation.
FRS 109.6.5.2.c
Fair value hedges
The change in the fair value of a hedging derivative is recognised in profit or loss or other
comprehensive income if the hedging instrument hedges an equity instrument for which
the Group has elected to present changes in fair value in other comprehensive income.
The change in the fair value of the hedged item attributable to the risk hedged is
recorded as a part of the carrying value of the hedged item and is also recognised in
profit or loss. The change in fair value of the hedged item which is an equity instrument
for which an entity has elected to present changes in fair value in other comprehensive
income, shall remain in other comprehensive income.
FRS 109.6.5.8
For fair value hedges relating to items carried at amortised cost, the adjustment to
carrying value is amortised through profit or loss over the remaining term of the hedge
using the effective interest rate method. Effective interest rate amortisation may begin
as soon as an adjustment exists and no later than when the hedged item ceases to be
adjusted for changes in its fair value attributable to the risk being hedged.
FRS 109.6.5.10
For hedged item that is a debt instrument measured at fair value through other
comprehensive, the adjustment to be amortised through profit or loss is the amount that
represents the cumulative gain or loss recognised in other comprehensive income. If the
hedged item is derecognised, the unamortised fair value is recognised immediately in
profit or loss.
FRS 109.6.5.10
When an unrecognised firm commitment is designated as a hedged item, the subsequent
cumulative change in the fair value of the firm commitment attributable to the hedged
risk is recognised as an asset or liability to include the cumulative change in fair value of
the hedged item that was recognised in the balance sheet.
FRS 109.6.5.9
XYZ Holdings (Singapore) Limited | 261
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of summary of significant accounting policies illustrating accounting policies relating to
hedge accounting:
X.
X.X
Summary of significant accounting policies (continued)
Hedge accounting (continued)
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in other
comprehensive income, while any ineffective portion is recognised immediately in profit
or loss.
FRS 109.6.5.11b
and c
The Group uses forward currency contracts as hedges of its exposure to foreign currency
risk in forecasted transactions and firm commitments, as well as forward commodity
contracts for its exposure to volatility in the commodity prices.
Amounts recognised as other comprehensive income are transferred to profit or loss
when the hedged transaction affects profit or loss. Where the hedged item is the cost of a
non-financial asset or non-financial liability, the amounts recognised as other
comprehensive income are transferred to the initial carrying amount of the non-financial
asset or liability.
FRS 109.5.11.d
When a cash flow hedge is discontinued, the cumulative gain or loss previously
recognised in other comprehensive income will remain in the cash flow hedge reserve
until the future cash flows occur if the hedged future cash flows are still expected to
occur or reclassified to profit or loss immediately if the hedged furture cash flows are no
longer expected to occur.
FRS 109.6.5.12
Hedges of a net investment
Hedges of a net investment in a foreign operation, including a hedge of a monetary item
that is accounted for as part of the net investment, are accounted for in a way similar to
cash flow hedges. Gains or losses on the hedging instrument relating to the effective
portion of the hedge are recognised as other comprehensive income while any gains or
losses relating to the ineffective portion are recognised in profit or loss. On disposal of
the foreign operation, the cumulative value of any such gains or losses recorded in equity
is transferred to profit or loss.
FRS 109.6.5.13
and 14
Time value of options
When option contracts are used to hedge forecast transactions, the Group designates
only the intrinsic value of the option contract as the hedging instrument.
FRS 109.6.5.15
The change in the fair value of the time value of the option contracts that relate to the
hedge item are recognised in other comprehensive income. The cumulative change in fair
value arising from the time value of option accumulated in equity are subsequently
recognised:
FRS 109.6.5.15
-
as initial cost or carrying amount of the asset or liability if the hedged item
subsequently results in the recognition of a non-financial asset or a non-financial
liability, or a firm commitment for a non-financial asset or a non-financial liability for
which fair value hedge accounting is applied; or
-
as a reclassification adjustment to the profit or loss when the hedged expected
future cash flows affect the profit or loss.
XYZ Holdings (Singapore) Limited | 262
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of summary of significant accounting policies illustrating accounting policies relating to
hedge accounting (continued):
X.
X.X
Summary of significant accounting policies (continued)
Hedge accounting (continued)
Forward elements of forward contracts
When forward contracts are used to hedge forecast transactions, the Group designates
only the spot element of the forward contracts as the hedging instrument.
FRS 109.6.5.16
The Group elects for each hedge designation, whether the change in the fair value of the
forward elements of forward contracts that relate to the hedge item are recognised
directly in profit or loss, or in other comprehensive income with the cumulative change in
fair value accumulated in equity being subsequently recognised:
FRS 109R.B6.5.34
-
as initial cost or carrying amount of the asset or liability if the hedged item
subsequently results in the recognition of a non-financial asset or a non-financial
liability, or a firm commitment for a non-financial asset or a non-financial liability for
which fair value hedge accounting is applied; or
-
as a reclassification adjustment to the profit or loss when the hedged expected
future cash flows affect the profit or loss.
XYZ Holdings (Singapore) Limited | 263
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of risk management
strategy:
X.
X.X
Hedging activities
Financial risk management objectives and policies ÊË
The Group and the Company are exposed to financial risks from its operations and the
use of financial instruments. The board of directors reviews and agrees on policies and
procedures for the management of these risks, which are executed by the Chief Financial
Officer, Head of Treasury and Head of Credit Control. The Audit Committee provides
independent oversight to the effectiveness of the risk management process.
FRS 107.21A
The Group’s activities expose it to foreign currency risk and commodity risk. In order to
minimise any adverse effects on the financial performance of the Group, derivative
financial instruments, such as foreign exchange forward contracts, foreign currency
option contracts and commodity forward contracts are used to hedge certain foreign
currency risk exposures and commodity price exposures. In addition, the Group is also
exposed to changes in market interest rates as most of the Group’s borrowings are fixed
interest rates borrowings. It is the Group’s policy that no trading in derivatives for
speculative purposes may be undertaken.
The following are details regarding the Group’s and Company’s exposure to the above
mentioned financial risks and the objectives, policies and processes for the management
of these risks.
Commentary:
Hedge accounting
Ê
Hedge accounting disclosures shall provide information about:
FRS 107R.21A
(a) an entity’s risk management strategy and how it is applied to manage risk;
(b) how the entity’s hedging activities may affect the amount, timing and uncertainty of its
future cash flows; and
(c) the effect that hedge accounting has had on the entity’s statement of financial position,
statement of comprehensive income and statement of changes in equity
The required disclosures for hedge accounting are required to be presented in a single note
or separate section on its financial statements. However, an entity need not duplicate
information that is already presented elsewhere, provided that the information is
incorporated by cross-reference from the financial statements to some other statements
such as management commentary or risk report that is available to users of the financial
statements on the same terms as the financial statements and at the same time. Without the
information incorporated by cross-reference, the financial statements are incomplete.
•
FRS 107 requires each entity to determine each risk category on the basis of risk exposures
an entity decides to hedge and for which hedge accounting is applied and determine risk
categories consistently for all hedge accounting disclosures.
To meet the objectives in Ê, an entity shall determine how much detail to disclose, how
much emphasis is place on different aspects of the disclosure requirements, the appropriate
level of aggregation or disaggregation, and whether users of financial statements need
additional explanation to evaluate the quantitative information disclosed. However, an
entity shall use the same level of aggregation or disaggregation it uses for disclosure
requirements of related information in FRS 107 and FRS 113.
XYZ Holdings (Singapore) Limited | 264
FRS 107R.21B
FRS 107R.21C
FRS 107R.21D
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of fair value hedge
accounting:
X.
Hedging activities ÊËÌÒ
X.X Fair value hedges ÍÎ
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the
Company’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arise primarily from their loans
and borrowings, interest-bearing loans given to related parties and investments in debt
securities.
FRS 107R.22A
The Group has a $XXX X.XX% fixed rate secured borrowings. Changes in market interest rate
expose the Group to fair value risk. The Board’s risk management strategy is to hedge all its
exposure to market interest rate movement for the entire term of the borrowings. The
objective of the hedge is to designate an interest rate swap as a fair value hedge of a $XXX
fixed rate borrowings.
To manage the fair value exposure arising from the fixed rate loan, the Group entered into an
interest rate swap agreement with a notional amount of $XXX whereby the Group receives a
fixed rate of interest of X.XX% and pays a variable rate equal to SIBOR+X% on the notional
amount.
FRS 107R.22B.a
The Group determines the economic relationship between the fixed rate borrowings and the
interest rate swap by matching the critical terms of the hedging instrument with the terms of
the hedged item. The hedge ratio is determined to be 1:1. There were no expected sources of
ineffectiveness on the Group’s fair value hedge the critical terms of the interest rate swap
match exactly with the terms of the hedged item,
FRS 107R.22B.b
FRS 107.22B.c
The effects of applying hedge accounting on the Group’s balance sheet and profit or loss are
as follows:
Fair value hedge
31 December 2016
Hedged item
X.XX% fixed rate borrowings
Carrying amount of hedged item
XXX
Maturity date
FRS 107R.24B.a.i
December 20X7
Accumulated fair value adjustments on the hedged item
XXX
FRS 107R.24B.a.ii
Line item in the balance sheet that includes the hedged
item
Non-current bank borrowings
FRS 107R.24B.a.iii
Hedging instrument
Receive fixed/pay variable
interest rate swap
Maturity date
December 20X7
Carrying amount
Line item in the balance sheet that includes the hedging
instruments
XXX
FRS 107R.24A.a
Derivative financial asset
FRS 107R.24A.b
XXX
FRS 107R.24A.d
X.XX
FRS 107R.23B.b
Nominal amount
Weighted average hedged rate for the year
FRS 107R.22B.a
XYZ Holdings (Singapore) Limited | 265
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
X.X
Hedging activities ÊËÌÒ (continued)
Cash flow hedges ÏÐÑ
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure
will fluctuate because of changes in foreign exchange rates. The Group is exposed to
foreign exchange risk arising from foreign currency transactions, primarily with respect
to the US dollar and the British pound. Foreign exchange risk arises from future
transactions and recognised assets and liabilities denominated in a currency that is not
the functional currency of the companies within the Group.
FRS 107R.22A
The Group manages its foreign currency risk by entering into foreign currency forward
contracts for its highly probable sales and purchases. The Group’s strategy is to minimise
the volatility of SGD currency cost of highly probable sales and purchases of inventory.
These forecast transactions are highly probable, and the Group’s objective is to hedge
25% of the Group’s total expected sales and about 65% of its total expected purchases,
for which firm commitments existed at the end of the reporting period, extending to
March 2017.
The Group uses foreign currency forward contracts to hedge its exposure to foreign
currency risk. The Group designates the spot component of the foreign currency forward
contract to hedge forecast sales in the United States and forecast purchases in the
United Kingdom.
FRS 107R.22B.a
The terms of the foreign currency forward contracts have been negotiated for the
expected highly probable forecast transactions. If changes in circumstances affect the
terms of the hedged item such that the critical terms no longer match exactly with the
critical terms of the hedging instrument, the Group uses the hypothetical derivative
method to assess effectiveness. The hedge ratio is determined to be 1:1.
FRS 107R.22B.b
FRS 107R.22B.c
Ineffectiveness is recognised on a cash flow hedge when the cumulative change in the
designated component value of the hedging instrument exceeds on an absolute basis the
change in value of the hedged item attributable to the hedged risk.
In hedges of the above foreign currency sales and foreign currency purchases, the
expected sources of hedge ineffectiveness emerge when differences arise between the
credit risk inherent within the hedged item and the hedging instrument.
FRS 107R.23D
Other sources of hedge ineffectiveness may emerge if the timing of the transaction
changes from what was originally estimated.
FRS 107R.23E
XYZ Holdings (Singapore) Limited | 266
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
Hedging activities ÊËÌÒ (continued)
X.X
Cash flow hedges ÏÐÑ (continued)
Foreign currency risk
The effects of applying hedge accounting for expected future sales on the Group’s
balance sheet and profit or loss are as follows:
Cash flow hedge
31 December 2016
Hedged item
Hedge of 25% of 3
months future sales
XXX
Change in value of the hedge item used as the basis for
recognising hedge ineffectiveness for the period
Balances in the cash flow hedge reserve
Hedging instrument
Maturity date
Carrying amount
Line item in the balance sheet that includes the hedged item
Change in fair value used for measuring ineffectiveness for
the period
Notional amount
Hedging gains or losses for the period recognised in OCI
Hedge ineffectiveness recognised in profit or loss
Line item in the income statement which includes the hedge
ineffectiveness
Amount reclassified from OCI to profit or loss
Line item in the income statement which includes the
reclassification adjustment
Weighted average hedged rate for the year
XXX
Foreign currency
forward contract
March 20X7
XXX
Derivative financial
liabilities
XXX
XXX
XXX
XXX
Other expenses
XXX
Revenue
X.XX
XYZ Holdings (Singapore) Limited | 267
FRS 107R.24B.b.i
FRS 107R.24B.b.ii
FRS 107R.22B.a
FRS 107R.24A.a
FRS 107R.24A.b
FRS 107R.24A.c
FRS 107R.24A.d
FRS 107R.24C.b.i
FRS 107R.24C.b.ii
FRS 107R.24C.b.iii
FRS 107R.24C.b.iv
FRS 107R.24C.b.v
FRS 107R.23B.b
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
Hedging activities ÊËÌÒ (continued)
X.X
Cash flow hedges ÏÐÑ (continued)
Foreign currency risk
The effects of applying hedge accounting for expected future purchases on the Group’s
balance sheet and profit or loss are as follows:
Cash flow hedge
31 December 2016
Hedged item
Hedge of 65% of 3
months future
purchases
Change in value of the hedge item used as the basis for
recognising hedge ineffectiveness for the period
XXX
FRS 107R.24B.b.i
Balances in the cash flow hedge reserve
XXX
FRS 107R.24B.b.ii
Hedging instrument
Foreign currency
forward contract
Maturity date
FRS 107R.22B.a
March 20X7
Carrying amount
XXX
FRS 107R.24A.a
Derivative financial
liabilities
FRS 107R.24A.b
Change in fair value used for measuring ineffectiveness for
the period
XXX
FRS 107R.24A.c
Notional amount
XXX
FRS 107R.24A.d
Hedging gains or losses for the period recognised in OCI
XXX
FRS 107R.24C.b.i
Hedge ineffectiveness recognised in profit or loss
XXX
FRS 107R.24C.b.ii
Line item in the balance sheet that includes the hedged
item
Line item in the income statement which includes the hedge
ineffectiveness
Other expenses
FRS 107R.24C.b.iii
XXX
FRS 107R.24C.b.iv
Cost of sales
FRS 107R.24C.b.v
Amount reclassified from OCI to profit or loss
Line item in the income statement which includes the
reclassification adjustment
Weighted average hedged rate for the year
X.XX
XYZ Holdings (Singapore) Limited | 268
FRS 107R.23B.b
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
Hedging activities ÊËÌÒ (continued)
X.X
Cash flow hedges ÏÐÑ (continued)
Commodity price risk
The Group purchases copper on an ongoing basis as its operating activities in the
electronic division require a continuous supply of copper for the production of its
electronic devices. The increased volatility in copper price over the past 12 months has
led to the Board’s decision to enter into commodity forward contracts to hedge its
exposure to cooper’s price volatility. Hedging the price volatility of forecast copper
purchases is in accordance with the risk management strategy outlined by the Board of
Directors.
The Group’s objective is to hedge all its copper purchases for the next 12 months based
on existing purchase agreements. The Group purchases commodity forward contracts to
hedge the commodity risk. These forward contracts, which commenced on 1 July 2016,
are expected to reduce the volatility attributable to price fluctuations of copper. The
Group designated only the spot-to-spot movement of the entire commodity purchase
price as the hedged risk. The forward points of the commodity forward contracts are
therefore excluded from the hedge designation.
The terms of the commodity forward contracts have been negotiated for the expected
highly probable forecast transactions. If changes in circumstances affect the terms of the
hedged item such that the critical terms no longer match exactly with the critical terms of
the hedging instrument, the Group uses the hypothetical derivative method to assess
effectiveness. The hedge ratio is determined to be 1:1.
In hedges of the commodity purchases, the expected sources of hedge ineffectiveness
emerge when differences arise between the credit risk inherent within the hedged item
and the hedging instrument.
Other sources of hedge ineffectiveness may emerge if the timing of the transaction
changes from what was originally estimated.
XYZ Holdings (Singapore) Limited | 269
FRS 107R.22A
FRS 107R.22B.a
FRS 107R.22B.b
FRS 107R.22B.c
FRS 107R.23D
FRS 107R.23E
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:
X.
Hedging activities ÊËÌÒ (continued)
X.X
Cash flow hedges ÏÐÑ (continued)
Commodity price risk
The effects of applying hedge accounting on the Group’s balance sheet and profit or loss
are as follows:
Cash flow hedge
31 December 2016
Hedged item
Future quarterly copper
purchases
Change in value of the hedge item used as the basis for
recognising hedge ineffectiveness for the period
XXX
FRS 107R.24B.b.i
Balances in the cash flow hedge reserve
XXX
FRS 107R.24B.b.ii
Hedging instrument
Commodity forward
contract
FRS 107R.22B.a
30th June 2017
Maturity date
Carrying amount
XXX
FRS 107R.24A.a
Derivative financial
liabilities
FRS 107R.24A.b
Change in fair value used for measuring ineffectiveness for
the period
XXX
FRS 107R.24A.c
Notional amount
XXX
Hedging gains or losses for the period recognised in OCI
XXX
FRS 107R.24C.b.i
Hedge ineffectiveness recognised in profit or loss
XXX
FRS 107R.24C.b.ii
Other expenses
FRS 107R.24C.b.iii
Line item in the balance sheet that includes the hedged
item
Line item in the income statement which includes the
hedge ineffectiveness
Amount reclassified from OCI to profit or loss
XXX
Line item in the income statement which includes the
reclassification adjustment
Weighted average hedged rate for the year
Cost of sales
X.XX
XYZ Holdings (Singapore) Limited | 270
FRS 107R.24A.d
FRS 107R.24C.b.iv
FRS 107R.24C.b.v
FRS 107R.23B.b
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of hedge of net
investments in foreign operations:
X.
X.X
Hedging activities ÊËÌÒ (continued)
Hedge of net investments in foreign operations Ï
Included in loans at 31 December 2016 was a borrowing of USDXXX which has been
designated as a hedge of the net investment in the two subsidiaries in the United States,
XX Inc. and XXX Inc. This borrowing is being used to hedge the Group’s exposure to
foreign exchange risk on these investments.
The Group’s objective is to hedge the foreign currency exposure of both the investments
in foreign subsidiaries. Gains or losses on the retranslation of this borrowing are
transferred to other comprehensive income to offset any gains or losses on translation of
the net investments in the subsidiaries. The nominal amount of the USD borrowings
approximates the cost of investments in the subsidiaries. The hedge is determined to be
1:1 and the hedge is expected to be highly effective.
Hedge of net investments
FRS 107R.22A
FRS 107R.22B.b
FRS 107R.22B.c
31 December 2016
Hedged item
Net investment in two
subsidiaries XX Inc. and
XXX Inc.
Change in value of the hedge item used as the basis for
recognising hedge ineffectiveness for the period
XXX
FRS 107R.24B.b.i
Balances in the foreign currency translation reserve
XXX
FRS 107R.24B.b.ii
Hedging instrument
USD borrowings
Maturity date
December 20X9
Carrying amount
FRS 107R.22B.a
XXX
FRS 107R.24A.a
Loans and borrowings
FRS 107R.24A.b
Notional amount
XXX
FRS 107R.24A.d
Hedging gains or losses for the period recognised in OCI
XXX
FRS 107R.24C.b.i
Line item in the balance sheet that includes the hedging
instruments
Weighted average hedged rate for the year
X.XX
XYZ Holdings (Singapore) Limited | 271
FRS 107R.23B
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the notes to the financial statements:
X.
Hedging activities ÊËÌÒ (continued)
X.X Hedging reserve
The cash flow hedge reserve contains the effective portion of the cash flow hedge
relationships incurred as at the reporting date. $XXX are made up of the net movements in
cash flow hedges and the effective portion of the forward commodity contract, net of tax.
FRS 1.79.b
X.X Cost of hedging reserve
The cost of hedging reserve contains cumulative change in fair value of time value of options
and forward element of forward contracts not designated as hedging instruments in hedge
relationships, net of tax.
X.X Foreign currency translation reserve
The foreign currency translation reserve represents exchange differences arising from the
translation of the financial statements of foreign operations whose functional currencies are
different from that of the Group’s presentation currency and the gains or losses arising from
foreign exchange revaluation of borrowing used as hedging instrument in a net investment
hedge.
X.X Components of other comprehensive income
Group
Opening balance
Foreign
currency
translation
reserve
$’000
Hedging
reserve
$’000
Cost of
hedging
reserve
$’000
XXX
XXX
XXX
XXX
-
-
XXX
(XXX)
-
-
XXX
(XXX)
-
-
Cash flow hedges
(a) Foreign currency risk
Effective portion of changes in fair value of hedging instruments
-
USD/SGD forecast sales
- GBP/SGD forecast purchases
Net amount reclassified to profit or loss
(b) Commodity risk
Effective portion of changes in fair value of hedging instruments
- Forward commodity contract
Net amount reclassified to profit or loss
Cost of hedging reserves
Fair value changes
-
Time value of options
-
XXX
-
-
Forward elements of forward contracts
-
XXX
-
Net amount reclassified to profit or loss for
-
Time value of options
-
(XXX)
-
-
Forward elements of forward contracts
-
(XXX)
-
-
-
XXX
-
-
(XXX)
XXX
XXX
XXX
Hedge of net investment in foreign operations
USD foreign denominated borrowings
Foreign currency translation
Closing balance
XYZ Holdings (Singapore) Limited | 272
FRS 107R.24E.a
FRS 107R.24E.b
FRS 107R.24E.c
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of hedge of net
investments in foreign operations:
Commentary:
The risk management strategy
Ê
An entity shall explain its risk management strategy for each risk, category of risk exposures
that it decides to hedge and for which hedge accounting is applied. This explanation should
enable users of financial statements to evaluate:
FRS 107R.22A, 22B
(a) How each risk arises
(b) How the entity manages each risk; this includes whether the entity hedges an item in its
entirety for all risks or hedges a risk component (or components) of an item and why
(c) The extent of risk exposures that the entity manages
To meet the requirements above, the information should include a description of
(a) the hedging instruments that are used (and how they are used) to hedge risk
exposures;
(b) how the entity determines the economic relationship between the hedged item and the
hedging instrument for the purpose of assessing hedge effectiveness; and
(c) how the entity establishes the hedge ratio and what the sources of hedge
ineffectiveness are.
Ë
In this illustration, the Group does not designate a specific risk component as hedged item. If
the group designates a specific risk component as a hedged item, the Group shall provide
the following qualitative and quantitative information about:
FRS 107R.22C
(a) how the entity determined the risk component that is designated as the hedged item
(including a description of the nature of the relationship between the risk component
and the item as a whole); and
(b) how the risk component relates to the item in its entirety.
Ì
If the Group has situations in which an entity frequently resets (i.e. discontinues and
restarts) hedging relationships because both the hedging instrument and the hedged item
frequently change (i.e. the entity uses a dynamic process in which both the exposure and
the hedging instruments used to manage that exposure do not remain the same for long, the
entity:
FRS 107R.23C
(a) is exempt from providing the disclosures required by paragraph 23A and 23B of FRS
107.
(b) shall disclose:
(i)
information about what the ultimate risk management strategy is in relation to
those hedging relationships
(ii)
a description of how its risk management strategy by using the hedge accounting
and designating those particular hedging relationships; and
(iii) an indication of how frequently the hedging relationships are discontinued and
restarted as part of the entity’s process in relation to those hedging relationships
Fair value hedges
Í
In this illustration, the Group does not have any hedged item that have ceased to be
adjusted for hedging gains and losses.
If the Group has any hedged item that has ceased to be adjusted for hedging gains and
losses, it shall disclose the accumulated amount of fair value hedge adjustments on the
hedged item remaining in the balance sheet.
XYZ Holdings (Singapore) Limited | 273
FRS 107R.24B.a.v
XYZ Holdings (Singapore) Limited
Appendix B-2
Hedge accounting
Extracts of notes to the financial statements illustrating the disclosures of hedge of net
investments in foreign operations:
Commentary:
Fair value hedges
Î
In this illustration, the Group does not expect hedge ineffectiveness arising from its fair value
hedge.
If the Group expects hedge ineffectiveness arising from its fair value hedge, it shall disclose:
(a) the change in fair value of the hedged item used as the basis for recognising hedge
ineffectiveness for the period
FRS 107R.24B.a.iv
(b) hedge ineffectiveness – i.e. The difference between the hedging gains or losses of the
hedging instrument and the hedge item
FRS 107R.24C.a.i
(c) the line item in the statement of comprehensive income that includes the hedge
ineffectiveness.
FRS 107R.24C.a.ii
Cash flow hedges and hedges of a net investment in a foreign operation
Ï
In this illustration, the Group does not have any hedging relationships for which hedge
accounting is no longer applied.
If the Group has any hedging relationships for which hedge accounting is no longer applied, it
shall disclose the balances remaining in the cash flow hedge and the foreign currency
translation reserve.
Ð
In this illustration, the Group does not have cash flow hedges for which hedge accounting had
been used in the previous period, but for which the hedged future cash flows are no longer
expected to occur.
If the Group has cash flow hedges for which hedge accounting had been used in the previous
period, but for which the hedged future cash flows are no longer expected to occur, it shall
disclose
Ñ
FRS 107R.24B.b.iii
-
a description of the forecast transaction
FRS 107R.23F
-
the amount reclassified from the cash flow hedge reserve into profit or loss as a
reclassification adjustment.
FRS 107R.24C.b.iv
In this illustration, the Group does not hedge net positions.
If the Group has hedges of net positions, it shall disclose the hedging gains and losses
recognised in a separate line item in the statement of comprehensive income.
FRS 107R.24C.b.vi
Option to designate a credit exposure as measured at fair value through profit or loss
Ò
If an entity designated a financial instrument, or a proportion of it, as measured at fair value
through profit or loss because it uses a credit derivative to manage the credit risk of that
financial instrument it shall disclose:
(a) for credit derivatives that have been used to manage the credit risk of financial
instruments designated as measured at fair value through profit or loss in accordance
with paragraph 6.7.1 of FRS 109, a reconciliation of each of the nominal amount and the
fair value at the beginning and at the end of the period;
(b) the gain or loss recognised in profit or loss on designation of a financial instrument, or a
proportion of it, as measured at fair value through profit or loss in accordance with
paragraph 6.7.1 of FRS 109; and
(c) on discontinuation of measuring a financial instrument, or a proportion of it, at fair value
through profit or loss, that financial instrument's fair value that has become the new
carrying amount in accordance with paragraph 6.7.4 of FRS 109 and the related nominal
or principal amount (except for providing comparative information in accordance with
FRS 1, an entity does not need to continue this disclosure in subsequent periods).
XYZ Holdings (Singapore) Limited | 274
FRS 107R.24G
XYZ Holdings (Singapore) Limited
Appendix C Comparison between FRS and IFRS
and
Aligned with IFRS?
Description
Reference
Yes
No
Notes
P
Œ
P
•
Ë•
Preface
Framework
FRS 1
Preface to the Financial Reporting Standards
Framework for the Preparation and Presentation of Financial
Statements of Financial Statements
Presentation
P
P
P
FRS 2
Inventories
P
FRS 7
FRS 8
Cash Flow Statements
Accounting Policies, Changes in Accounting Estimates and Errors
P
P
FRS 10
Events After the Reporting Period
P
FRS 11
FRS 12
Construction Contracts
Income Taxes
P
P
FRS 16
Property, Plant and Equipment
FRS 17
FRS 18
Leases
Revenue
P
P
FRS 19
Employee Benefits
P
FRS 20
FRS 21
Accounting for Government Grants and Disclosure of Government
Assistance
The Effects of Changes in Foreign Exchange Rates
P
P
FRS 23
Borrowing Costs
P
FRS 24
FRS 26
Related Party Disclosures
Accounting and Reporting by Retirement Benefit Plans
P
P
FRS 27
Separate Financial Statements
FRS 28
FRS 29
Investments in Associates and Joint Ventures
Financial Reporting in Hyperinflationary Economies
P
FRS 32
Financial Instruments: Presentation
P
FRS 33
FRS 34
Earnings Per Share
Interim Financial Reporting
P
P
FRS 36
Impairment of Assets
P
FRS 37
FRS 38
Provisions, Contingent Liabilities and Contingent Assets
Intangible Assets
P
P
FRS 39
Financial Instruments: Recognition and Measurement
P
FRS 40
FRS 41
Investment Property
Agriculture
P
P
FRS 101
First-Time Adoption of Financial Reporting Standards
P
FRS 102
FRS 103
Share-based Payment
Business Combinations
P
P
FRS 104
Insurance Contracts
P
FRS 105
FRS 106
Non-current Assets Held for Sale and Discontinued Operations
Exploration for and Evaluation of Mineral Resources
P
P
FRS 107
Financial Instruments: Disclosure
P
FRS 108
FRS 109
Operating Segments
Financial Instruments
P
FRS 110
Consolidated Financial Statements
P
FRS 111
FRS 112
Joint Arrangements
Disclosure of Interest in Other Entities
P
P
FRS 113
Fair Value Measurement
P
FRS 114
FRS 115
Regulatory Deferral Accounts
Revenue from Contracts with Customers
P
P
FRS 116
Leases
P
i
P
P
XYZ Holdings (Singapore) Limited | 275
•‘
Ž
‘
‘
ËÎ
Î
Î
XYZ Holdings (Singapore) Limited
Appendix C Comparison between FRS and IFRS
Notes on differences between FRS and IFRS
Œ
FRS 16 has a transitional provision which exempts an entity which had –
§
Revalued its property, plant and equipment before 1 January 1984; or
§
Performed any one-off revaluation on its property, plant and equipment between 1
January 1984 and 31 December 1996 (both dates inclusive), from complying with the
requirement to keep the valuation current by periodic valuation.
IAS 16 does not have such a transitional provision and therefore, all property, plant and
equipment that had been revalued prior to adoption of IAS 16 would have to be revalued on
a periodic basis.
•
One of the conditions for exemption from preparing consolidated financial statements or
equity accounting under IFRS 10 and IAS 28 is ‘the ultimate or any intermediate parent of
the parent produces consolidated financial statements available for public use that comply
with International Financial Reporting Standards.’ The requirement that the consolidated
financial statements comply with IFRS is not required under FRS 110 and FRS 28.
Ž
IFRS 3 applies to the accounting for business combinations for which the agreement date is
on or after 31 March 2004.
FRS 103 is effective for annual periods beginning on or after 1 July 2004.
•
FRS 102 is aligned with IFRS 2 except for the scope and the effective date for non-listed
companies. IFRS 2 applies to grants of shares, share options or other equity instruments
that were granted after 7 November 2002 and had not yet vested at the effective date of
IFRS 2. However, the reference date in FRS 102 is 22 November 2002 instead of 7
November 2002. For non-listed companies, FRS 102 is effective only for financial periods
beginning from 1 January 2006 whereas IFRS 2 applies to all companies for financial
periods beginning from 1 January 2005.
•
IFRS 10, IFRS 11, IFRS 12, Revised IAS 27 and Revised IAS 28 are effective for annual
periods beginning on or after 1 January 2013. FRS 110, FRS 111, FRS 112, Revised FRS 27
and Revised FRS 28 are effective only for annual periods beginning on or after 1 January
2014.
‘
The following amendments to IFRS has not been adopted as FRS:
·
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment
Transactions, effective for accounting periods beginning on or after 1 January 2018.
·
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts, effective for
accounting periods beginning on or after 1 January 2018.
XYZ Holdings (Singapore) Limited | 276
XYZ Holdings (Singapore) Limited
Appendix C Comparison between FRS and IFRS
Recommended Accounting Practice (RAP) in Singapore
The following RAP issued by the Institute of Singapore Chartered Accountants set out
recommendations on accounting treatment relating to foreign income not remitted to Singapore.
i
Foreign income not remitted to Singapore
The practice in Singapore is to recognise and account for a deferred tax liability in respect of
foreign-sourced income not remitted to Singapore in the same way as temporary differences
associated with investments in subsidiaries etc. as set out in accordance with FRS 12.39. Thus,
some companies do not provide deferred tax in respect of foreign income on the basis that they
do not intend to remit the funds to Singapore in the foreseeable future.
XYZ Holdings (Singapore) Limited | 277
XYZ Holdings (Singapore) Limited
Appendix C Comparison between FRS and IFRS
INT FRS vs. IFRIC Interpretations
Reference
Aligned with IFRIC
Interpretations
Description
Yes
INT FRS 7
Introduction of the Euro
P
INT FRS 10
Government Assistance – No Specific Relation to Operating Activities
P
INT FRS 15
Operating Leases – Incentives
P
INT FRS 25
Income Taxes – Changes in the Tax Status of an Enterprise or its
Shareholders
P
INT FRS 27
Evaluating the Substance of Transactions Involving the Legal Form
of a Lease
P
INT FRS 29
Disclosure – Service Concession Arrangements
P
INT FRS 31
Revenue – Barter Transactions Involving Advertising Services
P
INT FRS 32
Intangible Assets - Web Site Costs
P
INT FRS 101
Changes in Existing Decommissioning, Restoration and Similar
Liabilities
P
INT FRS 104
Determining Whether an Arrangement Contains a Lease
P
INT FRS 105
Rights to Interests Arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds
P
INT FRS 106
Liabilities Arising from Participating in a Specific Market – Waste
Electrical and Electronic Equipment
P
INT FRS 107
Applying the Restatement Approach under FRS 29 Financial
Reporting in Hyperinflationary Economies
P
INT FRS 109
Reassessment of Embedded Derivatives
P
INT FRS 110
Interim Financial Reporting and Impairment
P
INT FRS 112
Service Concession Arrangements
P
INT FRS 113
Customer Loyalty Programmes
P
INT FRS 114
FRS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their interaction
P
INT FRS 115
Agreements for the Construction of Real Estate
INT FRS 116
Hedges of a Net Investment in a Foreign Operation
P
INT FRS 117
Distributions of Non-cash Assets to Owners
P
INT FRS 118
Transfers of Assets from Customers
P
INT FRS 119
Extinguishing Financial Liabilities with Equity Instruments
P
INT FRS 120
Stripping Costs in the Production Phase of a Surface Mine
P
INT FRS 121
Levies
P
XYZ Holdings (Singapore) Limited | 278
No
Notes
P
Ê
XYZ Holdings (Singapore) Limited
Appendix C Comparison between FRS and IFRS
Ê
IFRIC 15 is effective for annual periods beginning on or after 1 January 2009. INT FRS 115
is effective only for annual periods beginning on or after 1 January 2011.
INT FRS 115 includes an accompanying note on application of INT FRS 115 in Singapore.
The accompanying note deals with the accounting treatment for revenue and associated
expenses by housing developers who develop more than four units of private residential
properties in Singapore for sale prior to completion of the properties. These developers are
regulated under the Singapore Housing Developers (Control and Licensing) Act (Chapter
130) and use the standard form of the sales and purchase agreement prescribed in the
schedule to the Housing Developers Rules.
•
The following IFRIC Interpretation has not been adopted as INT FRS:
§
IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments, effective for
annual periods beginning on or after 1 January 2005
XYZ Holdings (Singapore) Limited | 279
XYZ Holdings (Singapore) Limited | 280
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