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Notes to the Consolidated Financial Statements

31st March 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (Continued)

(b) (Continued)

HKFRS 15, “Revenue from contracts with customers” (Continued)

Management is currently assessing the effects of applying the new standard on the Group’s
consolidated financial statements and has identified the following areas that are likely to be
affected:

• revenue from service – the application of HKFRS 15 may result in the identification of
separate performance obligations which could affect the timing of the recognition of
revenue.

• accounting for certain costs incurred in fulfilling a contract – certain costs which are
currently expensed may need to be recognised as an asset under HKFRS 15, and

• rights of return – HKFRS 15 requires separate presentation on the balance sheet of the
right to recover the goods from the customer and the refund obligation.

At this stage, the Group is not able to estimate the impact of the new rules on the Group’s
consolidated financial statements. The Group will make more detailed assessments of the
impact over the next twelve months.

HKFRS 15 is mandatory for financial years commencing on or after 1st January 2018. At this
stage, the Group does not intend to adopt the standard before its effective date.

HKFRS 16, “Leases”

HKFRS 16 will result in almost all leases being recognised on the balance sheet, 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.

The standard will affect primarily the accounting for the Group’s operating leases. As
at the reporting date, the Group has non-cancellable operating lease commitments of
HK$395,563,000, see note 31. However, the Group has not yet determined to what extent
these commitments will result in the recognition of an asset and a liability for future payments
and how this will affect the Group’s profit and classification of cash flows.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2017 53