Notes to the Consolidated Financial Statements
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 GeNERAL INFORMATION Television Broadcasts Limited (the “Company”) and its subsidiaries are collectively referred to as the Group in the consolidated financial statements. The principal activities of the Company are terrestrial television broadcasting, together with programme production and other television-related activities. The principal activities of the principal subsidiaries are detailed in Note 43. The Company is a limited liability company incorporated and listed in Hong Kong. Its registered office is at TVB City, 77 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong. These consolidated financial statements are presented in Hong Kong dollars, unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 21 March 2018. 2 BASIS OF PREPARATION AND SUMMAry OF SIGNIFICANT ACCOUNTING POLICIES The basis and principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”) and requirements of the Hong Kong Companies Ordinance Cap. 622. They have been prepared under the historical cost convention, except that some financial assets are stated at their fair values as explained in Note 2.11. The preparation of financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4. (a) New and amended standards adopted by the Group The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2017: Amendments to Hong Kong Statement of cash flows Accounting Standard (“HKAS”) 7 Amendments to HKAS 12 Income taxes Amendments to HKFRS 12 Disclosure of interest in other entities The adoption of these amendments did not have any impact on the amounts in prior periods. Most of the amendments will also not affect the current or future periods. However, the amendments to HKAS 7 require disclosure of changes in liabilities arising from financing activities, see Note 32(b). Television Broadcasts Limited Annual Report 2017 117 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 BASIS OF PREPARATION AND SUMMAry OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) (b) Relevant new/revised standards that are not yet effective and have not been early adopted by the Group The following relevant new/revised standards have been published and are mandatory for the first time for the Group’s accounting period beginning on or after 1 January 2018 or later periods, but the Group has not early adopted them: HKFRS 9 Financial instruments HKFRS 15 Revenue from contracts with customers HKFRS 16 Leases Amendments to HKFRS 10 and HKAS 28 Sale or contribution of assets between an investor and its associate or joint venture None of the above is expected to have a significant effect on the consolidated financial statements of the Group, except the following: HKFRS 9 ‘Financial instruments’ Nature of change HKFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. Date of adoption by Group The new standard is mandatory for financial years commencing on or after 1 January 2018. The adoption of HKFRS 9 will generally be applied retrospectively, except for where the standard provides transition exemptions. The Group intends to apply the transition exemptions, which means that the cumulative impact of the adoption will be recognised in retained earnings as of 1 January 2018 and that comparatives will not be restated. Impact The Group does not expect the new guidance to affect the classification and measurement of its financial assets for the following reasons: • A fair value through other comprehensive income (“FVOCI”) election is available for the equity instruments which are currently classified as available-for-sale. • Debt instruments currently classified as loans and receivables and held-to-maturity financial assets, which are currently measured at amortised cost, would continue to meet the conditions for classification at amortised cost under HKFRS 9. It is expected that there will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from HKAS 39 ‘Financial instruments: recognition and measurement’ and have not been changed. 118 Television Broadcasts Limited Annual Report 2017 2 BASIS OF PREPARATION AND SUMMAry OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) (b) Relevant new/revised standards that are not yet effective and have not been early adopted by the Group (continued) HKFRS 9 ‘Financial instruments’ (continued) Impact (continued) The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses as is the case under HKAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under HKFRS 15 ‘Revenue from contracts with customers’, lease receivables and loan commitments. Based on the assessments undertaken to date, the Group expects a small increase in the loss allowance for trade debtors by approximately 7% and in relation to debt investments held at amortised cost. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard. HKFRS 15 ‘Revenue from contracts with customers’ Nature of change The Hong Kong Institute of Certified Public Accountants (“HKICPA”) has issued a new standard for the recognition of revenue. This will replace HKAS 18 which covers revenue arising from the sale of goods and the rendering of services and HKAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. Date of adoption by Group The new standard is mandatory for financial years commencing on or after 1 January 2018. The Group intends to use the modified retrospective approach for transition to the new revenue standard, which means that the cumulative impact of the adoption will be recognised in retained earnings as of 1 January 2018 and that comparatives will not be restated. Television Broadcasts Limited Annual Report 2017 119 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 BASIS OF PREPARATION AND SUMMAry OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) (b) Relevant new/revised standards that are not yet effective and have not been early adopted by the Group (continued) HKFRS 15 ‘Revenue from contracts with customers’ (continued) Impact Management has assessed the effects of applying the new standard on the Group’s financial statements and has identified the following areas that are likely to be affected to the Group: • revenue recognition of master contracts in the overseas licensing and distribution market – the application of HKFRS 15 may result in the identification of separate performance obligations which could affect the timing of the recognition of revenue going forward. The Group does not expect the new standard to affect the timing of the revenue recognition on current master contracts as at year end; and • accounting for costs incurred in fulfilling a contract – certain costs which are currently expensed may need to be recognised as an asset under HKFRS 15. Had the standard been adopted from 1 January 2017, the Group estimated that there would not be a significant effect on the consolidated financial statements of the Group. HKFRS 16 ‘Leases’ Nature of change HKFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the statement of financial position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change. Date of adoption by Group The new standard is mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to adopt the standard before its effective date. The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. Impact The standard will affect primarily the