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Notes to the Consolidated Financial Statements

31st March 2018

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (Continued)

(b) (Continued)

The Group’s assessment of the impact of these new standards and interpretations is set out
below:

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.

Impact

The Group has reviewed its financial assets and liabilities and does not expect the new
guidance to affect the classification and measurement of its financial assets and financial
liabilities.

The new impairment model requires the recognition of impairment provisions based on
expected credit losses (“ECL”) 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 fair value through other comprehensive income, contract assets under HKFRS
15 “Revenue from Contracts with Customers”, lease receivables, loan commitments and
certain financial guarantee contracts. Based on the assessments undertaken up to date,
the Group does not expect the new model to have material impact on the recognition of the
Group’s credit losses.

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.

Date of adoption by the Group

Mandatory for financial years commencing on or after 1st January 2018. The Group intends
to adopt the standard using the modified retrospective approach which means that the
cumulative impact of the adoption will be recognised in retained earnings as of 1st April 2018
and that comparatives will not be restated.

60 ALCO HOLDINGS LIMITED ANNUAL REPORT 2018