Consolidated Profit And Loss Account (Page 40 of 48) in pdf

NOTES TO THE ACCOUNTS

30. FUTURE CHANGES IN ACCOUNTING POLICIES

For full convergence with International Financial Reporting Standards, the HKICPA has issued a number of

new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards

(collectively, “new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005.

The Group has not early adopted these new HKFRSs in the accounts for the year ended 31 March 2005.

The Group has made a preliminary assessment of the impact of these new HKFRSs and has so far concluded

that the adoption of Hong Kong Accounting Standards (“HKAS”) 40 “Investment Property”, HK

Interpretation (“HK-INT”) 2 “The appropriate policies for hotel properties”, Hong Kong Financial Reporting

Standards (“HKFRS”) 3 “Business Combinations” and HK(SIC) Interpretation (“HK(SIC)-INT”) 21 “Income

taxes – recovery of revalued non-depreciable assets” will have a significant impact on its consolidated

accounts as set out below:

At present, the Group’s associate records its hotel properties at valuation in accordance with SSAP 17

“Property, plant and equipment”. No depreciation is provided by the associate on its hotel properties as

they are maintained in a continuous state of sound repair such that, given the estimated life of the hotel

properties and their residual values, any depreciation would be immaterial. For the financial year

beginning 1 January 2005, the associate will adopt the requirements of HK-INT 2 and apply them

retrospectively. The hotel properties will be stated at cost less accumulated depreciation and

impairment, if any. The adoption of this new accounting interpretation by the associate would have had

the effect of reducing the Group’s net assets by approximately HK$1.4 billion at 31 March 2005, mainly

as a result of the reversal of revaluations of hotel properties dealt with in other capital reserves and the

annual depreciation on the hotel properties attributable to the Group for 2005/06 will be less than

HK$15 million.

At present, surpluses or deficits arising on the annual revaluation of the Group’s and its associates’

investment properties to open market value at the balance sheet date are dealt with in the investment

property revaluation reserves or in the profit and loss account if the total of those reserves is insufficient

to cover a deficit on a portfolio basis. Following the adoption of the new HKAS 40, the investment

properties of the Group and its associates will continue to be stated at open market value and all

surpluses/deficits arising from the revaluation of the investment properties will be reported in the profit

and loss account. The new HKAS 40 and HK(SIC)-INT 21 require the provision of deferred tax on all these

revaluation surpluses/deficits to be calculated at applicable profits tax rates. If these revised accounting

standards had been adopted as at 31 March 2005, the Group’s profit attributable to shareholders would

have increased by approximately HK$4.2 billion, being the Group’s share of associates’ investment

property revaluation surpluses of approximately HK$5.2 billion which have been dealt with in investment

property revaluation reserves less deferred tax of approximately HK$1.0 billion. Furthermore, recognition

of deferred tax on the associates’ cumulative property revaluation surpluses is required and hence the

Group’s net assets as at 31 March 2005 would have reduced by approximately HK$3.6 billion.

Wheelock and Company Limited Annual Report 2004/05

Consolidated Profit And Loss Account Page 40