Tune Protect Group Berhad

Transcription

1 ( K) Directors Report and Audited Financial Statements 31 December 2017

2 Contents Page Directors' report 1-7 Statement by directors 8 Statutory declaration 8 Independent auditors' report 9-15 Statements of financial position 16 Statements of comprehensive income Statements of changes in equity Statements of cash flows Notes to the financial statements

3 Directors report The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December Principal activities The principal activities of the Company are investment holding and the provision of management services to its subsidiaries. The principal activities and other information of the subsidiaries are set out in Note 6 to the financial statements. Results Group Company RM'000 RM'000 Net profit for the year 50,023 34,904 Profit attributable to: Equity holders of the Company 46,303 34,904 Non-controlling interests 3,720-50,023 34,904 There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Dividends The amount of dividend paid by the Company since 31 December 2016 was as follows: In respect of the financial year ended 31 December 2016: RM'000 Final single tier dividend of 5.2 sen per ordinary share on 751,759,980 ordinary shares, declared on 22 May 2017 and paid on 15 June ,092 1

4 Directors The names of the directors of the Company and its subsidiaries in office since the beginning of the financial year to the date of this report are: Name of Director Ng Soon Ng Siek Chuan (Chairman of TPG) Datuk Kamarudin Bin Meranun Tan Ming-Li Tan Sri Dr. Anthony Francis Fernandes Razman Hafidz Bin Abu Zarim Mohd Yusof Bin Hussian Chee Siew Eng Lim Chong Beng Koot Chiew Ling Su Tieng Teck Hong Kean Yong Siegtraund Teh Siew Foong Mohamed Rashdi Bin Mohamed Ghazalli Cheong Lai Lai Khoo Ai Lin Chen Ooi Wai Directors of the entities Holding Company TPG* TIMB* TPR* Subsidiaries TDL* TDM * TIPCCL * Resigned on 30 June Resigned on 1 August Appointed on 1 July Appointed on 1 June Resigned on Resigned on 21 November January Appointed on 15 November Appointed on 21 November 2017 Appointed on 12 January * TPG - TIMB - Tune Insurance Malaysia Berhad TPR - Tune Protect Re Ltd TDL - Tune Direct Ltd TDM - Tune Direct (M) Sdn Bhd TIPCCL - Tune Insurance PCC Ltd 2

5 Directors benefits Neither at the end of the financial year, nor at any time during that financial year, did there subsist any arrangement to which the Company or its subsidiaries were a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors from the Company and related corporations, or the fixed salary of a full-time employee of the Company as shown in Notes 27 and 34(b) to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. During the financial year, the total amount of indemnity coverage and insurance premium paid for the Directors and the officers of the Group was RM30,000,000 and RM90,640 respectively. Directors interests According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares in the Company or its related corporations during the financial year were as follows: Direct interests: Directors of the Company: Number of ordinary shares As at As at Acquired Disposed '000 '000 '000 '000 Datuk Kamarudin Bin Meranun Ng Soon Ng Siek Chuan Directors of the subsidiaries: Mohd Yusof Bin Hussian Chee Siew Eng

6 Directors interests (cont'd.) Number of ordinary shares of RM0.10 each As at As at Acquired Disposed '000 '000 '000 '000 Indirect interests: Datuk Kamarudin Bin Meranun #1 102, ,609 Datuk Kamarudin Bin Meranun #2 125,083 - (6,520) 118,563 Notes: #1 Deemed interested by virtue of his interest in AirAsia Berhad #2 Deemed interested by virtue of his interest in Tune Group Sdn. Bhd. Other than as disclosed above, none of the directors in office at the end of the financial year had any interest in shares of the Company or its related corporations during the financial year. Employees' share option scheme ("ESOS") On 18 March 2014, the Company offered 15,715,000 ESOS shares to eligible employees of the Group. The offer period was from 18 March 2014 to 17 April The ESOS is exercisable over a period of 10 years from the grant date of 17 April 2014 at an exercise price of RM1.71 per ESOS share. The members of the committee administering the ESOS are as follows: Datuk Kamarudin Bin Meranun Razman Hafidz Bin Abu Zarim Chen Ooi Wai The salient features and other terms of the ESOS are disclosed in Note 28 to the financial statements. 4

7 Employees' share option scheme ("ESOS") (cont'd.) Details of the ESOS as at 31 December 2017 are as follows: Vesting Term to period Exercise expiry from from grant price Number of Tranche Vesting date grant date date RM options 1 17 April years 1 year ,928, April years 2 years ,928, April years 3 years ,928, April years 4 years ,928,750 15,715,000 Other statutory information (a) Before the statements of financial position and statements of comprehensive income of the Group and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowances had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) (ii) the amount written off for bad debts or the amount of the allowances for doubtful debts of the Group and of the Company inadequate to any substantial extent; and the values attributed to current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. 5

8 Other statutory information (cont'd.) (d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (e) As at the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability in respect of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the directors: (i) (ii) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. For the purpose of paragraphs (e)(ii) and (f)(i) above, contingent or other liabilities do not include liabilities arising from insurance and reinsurance contracts underwritten in the ordinary course of business of the Group. (g) Before the statements of financial position and the statements of comprehensive income were made out, the directors took reasonable steps to ascertain that there was adequate provision for its insurance contract liabilities in accordance with the valuation methods prescribed under Part D of the Risk-Based Capital ("RBC") Framework for Insurers issued by BNM and the valuation requirements stipulated in the Labuan Financial Services Authority's ("Labuan FSA") Guidelines on Valuation Basis for Liabilities of Labuan General Insurance Business. Significant and subsequent events The significant events during and subsequent events after the financial year-end are disclosed in Note 43 to the financial statements. 6

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18 Statements of financial position As at 31 December 2017 Group Company Note RM'000 RM'000 RM'000 RM'000 Assets Property and equipment 3 8,409 8, ,077 Investment property 4 2,899 2, Intangible assets 5 2,866 3, Investments in subsidiaries , ,475 Investment in an associate 7 55,471 52,328 40,955 40,955 Investment in a joint venture company 8 2,842 2, Goodwill 9 24,165 24, Investments , ,593 63,768 67,145 Deferred tax assets 17 1,245 2, Reinsurance assets , , Insurance receivables , , Other receivables , ,478 6,742 7,943 Cash and bank balances 7,453 9, Total assets 1,317,245 1,266, , ,604 Equity Share capital ,519 75, ,519 75,176 Share premium , ,343 Merger deficit 15 - (13,838) - - Available-for-sale ("AFS") reserves (3,982) (4,809) - - Employee share option reserves 4,998 5,897 4,998 5,897 Foreign currency translation reserve 6,716 7, Retained earnings 246, ,390 32,063 36,251 Equity attributable to owners of the parent 503, , , ,667 Non-controlling interests 6 46,063 44, Total equity 549, , , ,667 Liabilities Insurance contract liabilities , , Deferred tax liabilities 17 1,509 1, Insurance payables 18 99, , Retirement benefits Other payables 20 49,374 52,050 2,602 3,937 Total liabilities 768, ,445 2,602 3,937 Total equity and liabilities 1,317,245 1,266, , ,604 The accompanying notes form an integral part of the financial statements. 16

19 Statements of comprehensive income For the financial year ended 31 December 2017 Group Company Note RM'000 RM'000 RM'000 RM'000 Operating revenue , ,621 55,305 45,982 Gross earned premiums 22(a) 515, , Premiums ceded to reinsurers 22(b) (193,954) (153,327) - - Net earned premiums , , Investment income 23 27,314 30,276 55,305 45,982 Realised gains and losses 24 1, ,948 Fair value gains and losses 920 (242) (557) (1,791) Fees and commission income 40,677 28, Other operating income 25 2,124 4,989 5,260 5,373 Other revenue 72,553 64,037 60,340 51,512 Gross claims paid 26 (186,163) (177,196) - - Claims ceded to reinsurers 26 61,330 73, Gross change to contract liabilities 26 (51,938) 29, Change in contract liabilities ceded to reinsurers 26 36,054 (38,181) - - Net claims 26 (140,717) (113,210) - - Fee and commission expense (80,502) (85,729) - - Management expenses 27 (121,429) (107,090) (25,331) (24,924) Other operating expenses 25 (2,831) (370) (47) (1,307) Other expenses (204,762) (193,189) (25,378) (26,231) Share of results of an associate 7 3,504 2, Share of results of a joint venture company , Profit before taxation 52,904 94,683 34,962 25,281 Taxation 29 (2,881) (8,098) (58) (64) Net profit for the year 50,023 86,585 34,904 25,217 17

20 Statements of comprehensive income For the financial year ended 31 December 2017 (cont'd.) Group Company Note RM'000 RM'000 RM'000 RM'000 Net profit for the year 50,023 86,585 34,904 25,217 Other comprehensive (loss)/income: Items that will not be subsequently reclassified to profit or loss: Share of actuarial gain of an associate Items that may be subsequently reclassified to profit or loss: Changes in AFS financial assets, net: Gain on fair value changes of AFS financial assets 10(d) Share of gain on fair value changes of AFS investments of an associate Realised gains transferred to profit or loss 10(d) (229) (29) Deferred tax relating to AFS financial assets 17 (56) (55) - - Effect of post-acquisition foreign exchange translation reserve on investment in associates (770) 1, Other comprehensive (loss)/income for the year (539) 1, Total comprehensive income for the year 49,484 88,470 34,904 25,217 Profit attributable to: Owners of the parent 46,303 79,976 34,904 25,217 Non-controlling interests 3,720 6, ,023 86,585 34,904 25,217 Other comprehensive (loss)/income attributable to: Owners of the parent 57 1, Non-controlling interests (596) (539) 1,

21 Statements of comprehensive income For the financial year ended 31 December 2017 (cont'd.) Group Company Note RM'000 RM'000 RM'000 RM'000 Total comprehensive income attributable to: Owners of the parent 46,360 81,845 34,904 25,217 Non-controlling interests 3,124 6, ,484 88,470 34,904 25,217 Earnings per share attributable to owners of the parent (sen per share) Basic and diluted The accompanying notes form an integral part of the financial statements. 19

22 Statements of changes in equity For the financial year ended 31 December 2017 < Attributable to the owners of the parent > Non distributable Distributable Employee Foreign Available- share currency Non- Share Share Merger for-sale option translation Retained controlling Total capital premium deficit reserves reserves reserves earnings Total interests equity Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 (Note 14) (Note 14) (Note 15) (Note 6) At 1 January , ,343 (13,838) (4,969) 4,705 5, , ,196 40, ,620 Net profit for the year ,976 79,976 6,609 86,585 Other comprehensive income for the year ,709-1, ,885 Total comprehensive income for the year ,709 79,976 81,845 6,625 88,470 Grant of equity-settled share options to employees , ,192-1,192 Dividends on ordinary shares (Note 31) (37,588) (37,588) - (37,588) Dividends paid to non-controlling interests (Note 6) (2,337) (2,337) At 31 December , ,343 (13,838) (4,809) 5,897 7, , ,645 44, ,357 At 1 January , ,343 (13,838) (4,809) 5,897 7, , ,645 44, ,357 Net profit for the year ,303 46,303 3,720 50,023 Other comprehensive income/(loss) for the year (770) - 57 (596) (539) Total comprehensive income/(loss) for the year (770) 46,303 46,360 3,124 49,484 Grant of equity-settled share options to employees (899) - - (899) - (899) Dissolution of a subsidiary (Note 43(a)) , (13,838) - (100) (100) Dividends on ordinary shares (Note 31) (39,092) (39,092) - (39,092) Dividends paid to non-controlling interests (Note 6) (1,673) (1,673) Transition in accordance with Section 618(2) of the Companies Act, 2016 to non-par value regime on 31 January 2017* (Note 14) 173,343 (173,343) At 31 December , (3,982) 4,998 6, , ,014 46, ,077 The accompanying notes form an integral part of the financial statements. 20

23 Statements of changes in equity For the financial year ended 31 December 2017 Non distributable Employee Disshare tributable Share Share option Retained Total capital premium reserves earnings equity Company RM'000 RM'000 RM'000 RM'000 RM'000 (Note 14) (Note 14) At 1 January , ,343 4,705 48, ,846 Total comprehensive income for the year ,217 25,217 Dividends on ordinary shares (Note 31) (37,588) (37,588) Grant of equity-settled share options to employees - - 1,192-1,192 At 31 December , ,343 5,897 36, ,667 At 1 January , ,343 5,897 36, ,667 Total comprehensive income for the year ,904 34,904 Dividends on ordinary shares (Note 31) (39,092) (39,092) Grant of equity-settled share options to employees - - (899) - (899) Transition in accordance with Section 618(2) of the Companies Act, 2016 to non-par value regime on 31 January 2017 * (Note 14) 173,343 (173,343) At 31 December ,519-4,998 32, ,580 * Pursuant to Section 74 of the Companies Act, 2016 ("the Act"), the Company's shares no longer have a par or nominal value with effect from 31 January In accordance with the transitional provision set out in Section 618 of the Act, any amount standing to the credit of the share premium account becomes part of the Company's share capital. Companies have 24 months upon the commencement of the Act to utilise the said credit. There is no impact on the number of shares in issue or the relative entitlement of any of the members as a result of the transition. During the financial year, the Company has not utilised any credit in the share premium account which is now part of share capital. The accompanying notes form an integral part of the financial statements. 21

24 Statements of cash flows For the financial year ended 31 December 2017 Group Company Note RM'000 RM'000 RM'000 RM'000 Cash flows from operating activities Profit before taxation 52,904 94,683 34,962 25,281 Adjustments for: Investment income 23 (27,314) (30,276) (55,305) (45,982) Net unrealised losses/(gains) on foreign exchange 25 2,277 (2,715) 12 (309) Realised gain on disposal of AFS and fair value through profit or loss ("FVTPL") investments 24 (1,512) (35) (725) (1,956) Realised (gain)/loss on disposal of investment in a subsidiary 24 (6) Fair value (gains)/losses of investments (920) ,791 Gain on disposal of property and equipment 24 - (13) - - Depreciation of property and equipment 3 2,348 2, Depreciation of investment property Amortisation of intangible assets 5 2,004 2, Write-off of property and equipment Write-off of intangible assets Allowance for impairment losses of reinsurance assets Allowance for impairment losses of insurance receivables 12 5, Grant of equity-settled share options to employees 27(a) (899) 1,192 (395) 416 Impairment loss on investment in subsidiaries ,307 Share of results of an associate (3,504) (2,808) - - Share of results of a joint venture company (996) (1,219) - - Operating profit/(loss) before working capital changes 30,740 64,532 (19,658) (18,721) Reinsurance assets (36,661) 51, Insurance receivables 34,677 36, Other receivables 12,114 8,880 1,

25 Statements of cash flows For the financial year ended 31 December 2017 (cont'd.) Group Company Note RM'000 RM'000 RM'000 RM'000 Cash flows from operating activities (cont'd.) Insurance contract liabilities 33,821 (32,372) - - Insurance payables (42,817) (22,118) - - Retirement benefits 327 (9) - - Other payables 3,857 (1,320) (1,335) 1,441 Cash generated from/(used in) operating activities 36, ,816 (19,814) (16,717) Net interest received 12,803 29, Net dividend received - 1,320 52,817 43,507 Rental received Retirement benefits paid 19 (7) (103) - - Income tax paid (9,765) (10,576) (36) (106) Net cash generated from operating activities 39, ,230 32,999 26,717 Investing activities Purchases of FVTPL financial assets 10(d) (625,239) (222,180) (115,715) (47,000) Proceeds from maturities/disposal of AFS financial assets 10(d) 16,986 12, Proceeds from disposal of FVTPL financial assets 10(d) 177, , ,716 51,500 Decrease/(increase) in loans and receivables ("LAR") 428,977 (58,233) - - Proceeds from disposal of property and equipment Purchase of property and equipment 3 (1,967) (2,517) (143) (573) Purchase of intangible assets 5 (1,363) (1,493) (112) (141) Net cash (used in)/generated from investing activities (4,997) (116,574) 5,760 3,786 23

26 Statements of cash flows For the financial year ended 31 December 2017 (cont'd.) Group Company RM'000 RM'000 RM'000 RM'000 Financing activities Advances (to)/from subsidiaries - - (97) 481 Dividends paid to equity holder (39,092) (37,588) (39,092) (37,588) Dividends paid to non-controlling interests (1,673) (2,337) - - Net cash used in financing activities (40,765) (39,925) (39,189) (37,107) Net decrease in cash and cash equivalents (6,637) (31,269) (430) (6,604) Effect of exchange rate changes on cash and cash equivalents (163) 181 (12) 309 Cash and cash equivalents at beginning of year 48,501 79, ,190 Cash and cash equivalents at end of year 41,701 48, Cash and cash equivalents comprise: Fixed and call deposits (with original maturities of less than three months) with licensed financial institutions (Note 10(a)) 34,248 38, Cash and bank balances 7,453 9, ,701 48, The accompanying notes form an integral part of the financial statements. 24

27 Notes to the financial statements For the financial year ended 31 December Corporate information ("the Company") is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The principal activities of the Company are investment holding and provision of management services to its subsidiaries. The principal activities of the subsidiaries are set out in Note 6. There have been no significant changes in the nature of the principal activities of the Company and its subsidiaries during the financial year other than as disclosed in Note 6. The address of the principal place of business and registered office of the Company is as follows: Level 9, Wisma Tune No. 19, Lorong Dungun Damansara Heights Kuala Lumpur The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 20 March Significant accounting policies 2.1 Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards ("MFRS") as issued by the Malaysian Accounting Standards Board ("MASB"), International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the requirements of the Companies Act, 2016 in Malaysia. At the beginning of the current financial year, the Group and the Company had fully adopted the new and amended MFRSs as described fully in Note

28 2. Significant accounting policies (cont'd.) 2.1 Basis of preparation (cont'd.) The financial statements of the Group and the Company have been prepared under the historical cost convention, unless otherwise stated in the accounting policies. Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position, only when there is legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income and expense will not be offset in the statements of comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group and of the Company. The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM 000) except when otherwise indicated. 2.2 Basis of consolidation (a) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee; and The ability to use its power over the investee to affect its returns. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual arrangements; and The Group s voting rights and potential voting rights. 26

29 2. Significant accounting policies (cont'd.) 2.2 Basis of consolidation (cont'd.) (a) Basis of consolidation (cont'd.) The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income ("OCI") are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. (b) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at fair value at the acquisition date ("acquisition date fair value"), and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition-related costs are expensed as incurred and included in management expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. This includes the separation of embedded derivatives from host contracts by the acquiree. No reclassification of insurance contracts is required as part of the accounting for the business combination. 27

30 2. Significant accounting policies (cont'd.) 2.2 Basis of consolidation (cont'd.) (b) Business combinations and goodwill (cont'd.) If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument, and within the scope of MFRS 139 Financial Instruments: Recognition and Measurement ("MFRS 139"), is measured at fair value with changes in fair value recognised either in profit or loss or OCI. If the contingent consideration is not within the scope of MFRS 139, it is measured in accordance with the appropriate MFRS. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment testing, goodwill acquired in a business combination is allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cashgenerating unit retained. 28

31 2. Significant accounting policies (cont'd.) 2.2 Basis of consolidation (cont'd.) (c) Merger method of accounting Business combinations involving entities under common control are accounted for by applying the merger method of accounting. Accordingly, the assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the "acquired" entity is reflected within equity as a merger reserve or merger deficit. The statements of comprehensive income reflect the results of the combining entities for the full year, irrespective of when the combination takes place. Comparatives are presented as if the entities have always been combined since the date the entities had come under common control. 2.3 Summary of significant accounting policies (a) Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group s investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. 29

32 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (a) Investments in associates and joint ventures (cont'd.) The statement of comprehensive income reflects the Group s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the Company and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. The aggregate of the Group s share of profit or loss of an associate and a joint venture is shown on the face of the statement of comprehensive income outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss in profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 30

33 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (b) Property and equipment Property and equipment includes property occupied by the Group, renovation, furniture, fittings, office equipment, computers and motor vehicles. Freehold land is not depreciated and is carried at cost. Other property and equipment are stated at cost less accumulated depreciation and any impairment losses. Residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at each reporting date to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property and equipment. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(g). The cost of an item of property and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition for its intended use. Expenditure incurred after items of property and equipment have been put into operation, such as repairs and maintenance, is charged to profit or loss in the period in which it is incurred. Subsequent costs are included in the asset's carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. Depreciation of property and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over its estimated useful life at the following annual rates: Leasehold land over the lease term of 99 years Buildings 2% Renovation 10% Motor vehicles 20% Furniture, fittings and office equipment 12% - 17% Computers 25% An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Upon the disposal of an item of property and equipment, the difference between the net disposal proceeds and the net carrying amount is recognised in profit or loss. The residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. 31

34 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (c) Investment property Properties that are held for long-term rental yields or for capital appreciation or both, and that are not significantly occupied by the Group, for use by, or in the operations of the Group, are classified as investment property. If an investment property becomes owner-occupied, it is reclassified to property and equipment at its carrying value on the date of transfer. Investment properties are initially measured at cost, including related transaction costs. Subsequent to initial recognition, investment properties are carried at cost less accumulated depreciation and any accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(g). Depreciation is provided for on a straight-line basis over the estimated useful life of 50 years for the investment properties. The residual values and useful lives of the investment properties are reviewed, and adjusted if appropriate, at each reporting date. Any gains or losses on the retirement or disposal of an investment property are recognised when it has been disposed or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal. (d) Assets held for sale Non-current assets are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use. (e) Intangible assets Intangible assets of the Group and the Company consist of computer software, agency relationship, customer relationship and digital direct marketing platform. These intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is reflected in profit or loss in the period in which the expenditure is incurred. 32

35 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (e) Intangible assets (cont'd.) The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least once annually at each reporting date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category that is consistent with the function of the intangible assets. The acquired intangible assets are amortised using the straight line method over the following estimated useful lives: Computer software Agency relationship Customer relationship Digital direct marketing platform 4 years 8 years 5 years 4 years Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. (f) Investments in subsidiaries In the Company's separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of such investments, the difference between the net disposal proceeds and their carrying amounts is included in profit or loss. 33

36 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (g) Impairment of non-financial assets The carrying amounts of non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated to determine the amount of loss. For goodwill, the recoverable amount is estimated at each reporting date or more frequently when indicators of impairment are identified. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit ("CGU") to which the asset belongs. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's CGUs that is expected to benefit from the synergies of the combination. An asset s recoverable amount is the higher of an asset s or CGU's fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit on a pro-rata basis. An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset. Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. 34

37 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (h) Investments and financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss ("FVTPL"), loans and receivables ("LAR"), and available-forsale ("AFS") financial assets, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group or the Company commits to purchase or sell the asset. Subsequent measurement Financial assets at FVTPL Financial assets at FVTPL include financial assets held-for-trading and those designated upon initial recognition at FVTPL. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial assets at FVTPL are carried in the statements of financial position at fair value with net changes in fair value recognised in profit or loss. LAR LAR are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, LAR are measured at amortised cost, using the effective interest rate method, less impairment losses. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate method. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process. AFS financial assets AFS financial assets are non-derivative financial assets that are designated as AFS or are not classified in any of the two preceding categories. 35

38 2. Significant accounting policies (cont'd.) 2.3 Summary of significant accounting policies (cont'd.) (h) Investments and financial assets (cont'd.) AFS financial assets (cont'd.) After initial measurement, AFS financial assets are measured at fair value with unrealised gains or losses recognised in other comprehensive income ("OCI") and credited or debited in the AFS reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the AFS reserve to profit or loss. Fair value gains and losses of monetary securities denominated in a foreign currency are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Group s or the Company's statement of financial position) when: - - The rights to receive cash flows from the asset have expired; or The Group or the Company have transferred its rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Group or the Company have transferred substantially all the risks and rewards of the asset, or (b) the Group or the Company have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group or the Company have transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group or the Company continue to recognise the transferred asset to the extent of the Group s or the Company's continuing involvement. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group and the Company could be required to repay. 36