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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)

HKFRS 15, “Revenue from Contracts with Customers” (Continued)

Date of adoption by 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.

HKFRS 16, “Leases”

Nature of change

HKFRS 16 will result in almost all leases being recognised on the consolidated 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.

Impact

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$412,411,000 (Note 30(b)). 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 results and classification of cash flows.

Management is in the process of quantifying the potential effects of this new standard in its
consolidated financial statements.

62 ALCO HOLDINGS LIMITED ANNUAL REPORT 2018