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2. Changes in accounting policies (continued)
Details of the changes in accounting policies for HKFRS 16 is outlined below.

(i) Adjustments recognised on adoption of HKFRS 16

The Group has adopted HKFRS 16 retrospectively from 1 April 2019, but
has not restated comparatives for the 2019 reporting period, as permitted
under the specific transitional provisions in the standard. The reclassifications
and adjustments arising from the new leasing rules for lessees are therefore
recognised in the opening unaudited consolidated balance sheet on 1 April 2019.
On adoption of HKFRS 16, the Group recognised lease liabilities in relation
to leases which had previously been classified as “operating leases” under the
principles of HKAS 17 “Leases” (“HKAS 17”). These liabilities were measured at
the present value of the remaining lease payments, discounted using the lessee’s
incremental borrowing rate as of 1 April 2019. The weighted average lessee’s
incremental borrowing rate applied to the lease liabilities on 1 April 2019 was
3.68%. In applying HKFRS 16 for the first time, the Group has used the following
practical expedients permitted by the standard:

– reliance on previous assessments on whether leases are onerous;

– the accounting for operating leases with remaining lease term of less than
12 months as at 1 April 2019 as short-term lease;

– the exclusion of initial direct costs for the measurement of the right-of-use
assets at the date of initial application; and

– the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains a
lease at the date of initial application. Instead, for contracts entered into before
the transition date the Group relied on its assessment made applying HKAS 17
and HK(IFRIC)-Int 4 “Determining whether an Arrangement contains a Lease”.

8 ALCO HOLDINGS LIMITED Interim Report 2019