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Notes to the Consolidated Financial Statements

31st March 2016

3 FINANCIAL RISK MANAGEMENT (CONTINUED)

3.2 Capital risk management (Continued)

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total
borrowings net of cash and cash equivalents divided by total equity as shown in the consolidated
balance sheet.

The gearing ratios at 31st March 2016 and 2015 were as follows:

2016 2015
HK$’000 HK$’000

Cash and cash equivalents (Note 22) 1,591,643 888,335
Borrowings (Note 24) (232,800) (50,000)
Trust receipt loan – (1,654)

Net surplus cash 1,358,843 836,681
Total equity 1,984,998 1,926,335

Gearing ratio Not applicable Not applicable

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.

(a) Estimate of fair value of investment properties

The fair value of investment properties is determined by using valuation technique. Details of the
judgement and assumptions have been disclosed in Note 15.

(b) Estimate of useful lives of property, plant and equipment and intangible assets

The Group has significant property, plant and equipment and intangible assets. The Group is
required to estimate the useful lives of property, plant and equipment and intangible assets in order
to ascertain the amount of depreciation and amortisation charges for each reporting period.

54 ALCO HOLDINGS LIMITED ANNUAL REPORT 2016