THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES Report for the year ended 31 December 2013

Transcription

1 Annex A THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES Report for the year ended 31 December 2013 The Board of Management of the Chinese Permanent Cemeteries (the Board) is a statutory body established under the Chinese Permanent Cemeteries Ordinance (Cap. 1112). 2. The Board comprises both ex-officio members and appointed members. The Secretary for Home Affairs is the ex-officio Chairman of the Board. A membership list of the Board during the period under report is at Appendix I of Annex A. 3. The Board has appointed five Select Committees namely, Executive Committee, Finance Committee, Internal Affairs Committee, External Affairs Committee, Works and Development Committee. These Select Committees focus on the day to day business of the Board. The membership of these Select Committees is listed at Appendix II of Annex A. 4. The Board manages four Chinese Permanent Cemeteries, namely Aberdeen Cemetery, Tsuen Wan Cemetery, Cape Collinson Cemetery and Junk Bay Cemetery. The four cemeteries together provided around 80,000 burial lots and urn plots and some 240,000 niches of various types. 5. The Board perceives that in the coming years, the supply of new niches is limited. Hence, the Board has a pressing need to identify new sites to develop new cemeteries and columbaria to meet the demand of the public. If the Board is unable to acquire suitable sites in the coming years, the Board perceives that there will be limited supply of new niches in the future after exhaustion of all available stock. The Board will endeavor to explore suitable sites within its existing cemeteries and other potential sites for building columbaria and associated facilities to meet public demand. It is anticipated that substantial financial commitment would be required for development of new sites. 6. During the period under report, the Board has donated a total amount of $25 million to charitable organizations for supporting 117 projects under various donation exercises. 7. The audited Statement of Accounts of the Board for the year ended 31 December 2013 is at Appendix III of Annex A. Tsang Tak-sing Chairman The Board of Management of the Chinese Permanent Cemeteries November 2014

2 Appendix I of Annex A Membership List of the Board of Management of the Chinese Permanent Cemeteries (BMCPC) (for the year ended 31 December 2013) Chairman Secretary for Home Affairs (Ex-officio) Members Director of Lands (Ex-officio) Director of Food and Environmental Hygiene (Ex-officio) Dr CHAN Tung, GBS, JP (up to ) Mr CHING Kwok-ho, Samuel (up to ) Mr HO Tak-sum, MH (up to ) Dr TAM Kam-kau, JP (up to ) Mr TSANG Ching-lun, Edwin (up to ) Ms CHAN Ka-mun, Carmen, JP Dr WONG King-keung, Peter, BBS, JP Mr NG Leung-sing, SBS, JP Mr CHAN Pun-chung, BBS (up to ) Mr CHAU Kam-man (up to ) Ms NG Ka-yin, Agnes (up to ) Mr NG Kwok-tung, Tony Mr CHEUNG Wing-hong, Shannon Mr LI Hon-hung, MH, JP Mr CHAN Kwok-kai, BBS Ms LEUNG Wing-yu, Nisa Ir Dr CHAN Siu-kun, Alex (from ) Ms HO Siu-fong, Betty (from ) Ms HO Yee-lin, Elaine (from ) Dr LEE Sam-yuen, John, BBS (from )

3 Members Dr POON Chong-ching, Margaret (from ) Dr SO Chun-hin, Albert (from ) Mr TSANG Heung-kwan, MH (from ) Miss YU Yuk-ying, Vivian (from ) Co-opt Members Dr SO Chun-hin, Albert (up to ) Mr KWONG Kwok-keung, Kenneth (up to ) Ir Dr CHAN Siu-kun, Alex (up to ) Ms HO Siu-fong, Betty (up to ) Mr WONG Kam-choi

4 Appendix II of Annex A Membership list of the Select Committees of the Board of Management of the Chinese Permanent Cemeteries (for the year ended 31 December 2013) Executive Committee Chairperson : Mr TSANG Tak-sing, GBS, JP Members : Dr CHAN Tung, GBS, JP (up to ) Mr CHING Kwok-ho, Samuel (up to ) Mr HO Tak-sum, MH (up to ) Dr WONG King-keung, Peter, BBS, JP Mr CHAN Pun-chung, BBS (up to ) Ms CHAN Ka-mun, Carmen, JP (from ) Mr CHEUNG Wing-hong, Shannon (from ) Mr CHAN Kwok-kai, BBS (from ) Internal Affairs Committee Chairperson : Mr CHING Kwok-ho, Samuel (up to ) Mr CHAN Kwok-kai, BBS (from ) Vice-chairperson : Mr CHEUNG Wing-hong, Shannon (from ) Members : Dr CHAN Tung, GBS, JP (up to ) Mr CHAN Pun-chung, BBS (up to ) Mr TSANG Ching-lun, Edwin (up to ) Mr CHEUNG Wing-hong, Shannon (up to ) Mr CHAN Kwok-kai, BBS (up to ) Ir Dr CHAN Siu-kun, Alex (from ) Ms HO Yee-lin, Elaine (from ) Finance Committee Chairperson : Mr HO Tak-sum, MH (up to ) Mr CHEUNG Wing-hong, Shannon (from ) Vice-chairperson : Mr NG Leung-sing, SBS, JP Members : Dr TAM Kam-kau, JP (up to ) Dr WONG King-keung, Peter, BBS, JP Mr NG Kwok-tung, Tony Mr CHEUNG Wing-hong, Shannon (up to ) Ms LEUNG Wing-yu, Nisa Dr POON Chong-ching, Margaret (from ) Dr SO Chun-hin, Albert (from )

5 Works Committee (up to *) Chairperson : Dr WONG King-keung, Peter, BBS, JP Vice-chairperson : Mr CHAU Kam-man (up to ) Members : Mr TSANG Ching-lun, Edwin (up to ) Ms NG Ka-yin, Agnes (up to ) Mr LI Hon-hung, MH, JP Mr CHAN Kwok-kai, BBS Co-opt member : Ir Dr CHAN Siu-kun, Alex (up to ) Development Committee (up to *) Chairperson : Mr CHAN Pun-chung, BBS (up to ) Vice-chairperson : Mr LI Hon-hung, MH, JP Members : Dr CHAN Tung, GBS, JP (up to ) Mr TSANG Ching-lun, Edwin (up to ) Ms CHAN Ka-mun, Carmen, JP Dr WONG King-keung, Peter, BBS, JP Mr CHAU Kam-man (up to ) Ms NG Ka-yin, Agnes (up to ) Co-opt members : Dr SO Chun-hin, Albert (up to ) Ms HO Siu-fong, Betty (up to ) * With effect from , Works Committee and Development Committee have merged to form one committee as Works and Development Committee. Works and Development Committee (from ) Chairperson : Dr WONG King-keung, Peter, BBS, JP (from ) Vice-chairperson : Mr LI Hon-hung, MH, JP (from ) Members : Ms CHAN Ka-mun, Carmen, JP (from ) Mr CHAN Kwok-kai, BBS (from ) Ir Dr CHAN Siu-kun, Alex (from ) Ms HO Siu-fong, Betty (from ) Dr SO Chun-hin, Albert (from ) Mr TSANG Heung-kwan, MH (from )

6 External Affairs Committee Chairperson : Dr CHAN Tung, GBS, JP (up to ) Ms CHAN Ka-mun, Carmen, JP (from ) Vice-chairperson : Ms CHAN Ka-mun, Carmen, JP (up to ) Mr NG Kwok-tung, Tony (from ) Members : Mr HO Tak-sum, MH (up to ) Dr TAM Kam-kau, JP (up to ) Mr NG Leung-sing, SBS, JP Mr NG Kwok-tung, Tony (up to ) Mr LI Hon-hung, MH, JP Ms HO Yee-lin, Elaine (from to ) Dr LEE Sam-yuen, John, BBS (from ) Dr POON Chong-ching, Margaret (from ) Dr SO Chun-hin, Albert (from ) Mr TSANG Heung-kwan, MH (from ) Ms LEUNG Wing-yu, Nisa (from ) Miss YU Yuk-ying, Vivian (from ) Co-opt members : Mr KWONG Kwok-keung, Kenneth (up to ) Mr WONG Kam-choi

7 Appendix III of Annex A THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2013

8 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES (Registered under the Chinese Permanent Cemeteries Ordinance) We have audited the financial statements of The Board of Management of The Chinese Permanent Cemeteries (the Board ) set out on pages 3 to 35, which comprise the balance sheet as at 31st December 2013, and the statement of comprehensive income, statement of changes in funds and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Responsibility of the members of the Board for the financial statements The members of the Board are responsible for the preparation of financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, and for such internal control as the members of the Board determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the members of the Board, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion

9 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES (CONTINUED) (Registered under the Chinese Permanent Cemeteries Ordinance) Opinion In our opinion, the financial statements give a true and fair view of the state of the Board s affairs as at 31st December 2013, and of its surplus and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 4th December

10 BALANCE SHEET As at 31st December Note ASSETS Non-current assets Intangible assets 5 5,676,862 - Property, plant and equipment 6 409,860, ,135,504 Investment properties 7 582,881, ,791,250 Available-for-sale financial assets 9 3,884,468,423 3,815,333,646 Held-to-maturity financial assets 10 38,732,696 42,680,102 Deposits, non-current 11-6,791,742 4,921,619,992 4,843,732, Current assets Development and formation costs of columbarium, grave and niche spaces ,510,157 61,733,720 Inventories 340,683 28,513,445 Receivables, deposits and prepayments 11 7,881,884 15,956,144 Held-to-maturity financial assets 10 11,518,465 61,263,402 Financial assets at fair value through profit or loss ,781, ,435,812 Cash and cash equivalents ,438, ,592,305 1,849,471,143 1,800,494, Total assets 6,771,091,135 6,644,227,072 FUNDS Accumulated funds 3,763,211,229 3,602,466,655 Reserves 14 2,855,007,307 2,905,354,241 Total funds 6,618,218,536 6,507,820, LIABILITIES Non-current liabilities Provision for donations 15 2,367,158 2,975, Current liabilities Other payables and accrued charges ,252, ,015,453 Provision for donations 15 32,253,129 21,415, ,505, ,431, Total liabilities 152,872, ,406, Total funds and liabilities 6,771,091,135 6,644,227,072 The notes on pages 8 to 35 are an integral part of these financial statements. The financial statements on pages 3 to 35 were approved by the members of the Board on 4th December 2014 and were signed on its behalf TREASURER CHEUNG WING-HONG, SHANNON EXECUTIVE DIRECTOR LO MEI WAH, BRENDA

11 STATEMENT OF COMPREHENSIVE INCOME Operating activities Year ended 31st December Note Revenue Sales of grave, niche and urn spaces 52,571,800 73,974,000 Sales of reverted subscriber lots 9,940,500 8,120,000 Income from reallocation of family niche spaces, ossuary and ordinary niche spaces 1,548,600 1,222,200 Income from reallocation of Type B renewable lots 13,104,000 13,384,000 Income from reallocation of Type C non-renewable lots 15,060,000 15,040,000 Conversion of Type B grave spaces to ordinary lots 560,000 1,400,000 Cleaning, removal and backfilling service fees for exhumation 2,688,950 2,520,100 Digging and paving fees for grave spaces 1,831,200 1,933,600 Exhumation lots renewal fees 27,760,000 18,660,000 Other service fees 1,773,440 1,787,408 Total revenue 126,838, ,041, Less: Direct costs Cost of grave, niche and urn spaces sold 28,172,762 40,713,751 Direct costs arising from cleaning, removal and backfilling service for exhumation 1,188, ,920 Direct costs of digging and paving of grave spaces 2,692,988 1,735,698 32,054,150 43,281, ,784,340 94,759,939 Other operating income and other gains 17 11,325,528 2,595, ,109,868 97,355, Less: General and administrative expenses Advertising and newspapers 357, ,695 Air-conditioning and management fees 856, ,084 Auditor s remuneration 376, ,079 Cleaning 7,771,610 8,116,863 Crown rent and permit fees 608, ,255 Amortisation of intangible assets 5 1,419,216 - Depreciation 6 13,861,384 11,733,882 Employee benefit expense 18 43,527,011 41,807,128 Electricity, telephone and water 2,424,415 2,060,992 Geotechnical consultancy service fees 62,485,183 38,845,114 Insurance 1,284,920 1,084,753 Lift maintenance fees 208, ,065 Motor vehicle running expenses 280, ,622 Postage 80, ,177 Printing and stationery 197, ,561 Repairs and improvement works 17,655,175 54,445,330 Security guard fees 8,423,880 9,194,892 Sundry 5,341,825 3,829,634 Travelling 872, , ,032, ,730, Deficit for the year from operating activities (carried forward to page 5) (61,922,620) (77,374,526)

12 STATEMENT OF COMPREHENSIVE INCOME (CONTINUED) Year ended 31st December Note Deficit for the year from operating activities (brought forward from page 4) (61,922,620) (77,374,526) Investing activities Income Investment income ,845, ,099,881 Rental income from investment properties 12,025,776 11,193,696 Fair value gains on investment properties 7 17,090, ,594, ,962, ,887, Less: Direct expenses Impairment losses on available-for-sale financial assets 14-5,400,000 Investment expenses 19 5,108,200 4,421,934 Direct operating expenses arising from investment properties that generate rental income 85,329 78,081 5,193,529 9,900, Surplus for the year from investing activities 247,768, ,987, Total surplus for the year before donations 185,845, ,613,411 Donations 15 (25,101,345) (17,551,493) Surplus for the year 160,744, ,061,918 Other comprehensive (loss)/income for the year Item that may be reclassified to profit or loss Available-for-sale financial assets 14 (50,346,934) 721,613,692 Total comprehensive income for the year 110,397, ,675,610 The notes on pages 8 to 35 are an integral part of these financial statements

13 STATEMENT OF CHANGES IN FUNDS Accumulated funds Reserves Total (note 14) Balance at 1st January ,346,404,737 2,183,740,549 5,530,145, Comprehensive income Surplus for the year 256,061, ,061, Other comprehensive income/(loss) Available-for-sales financial assets - net fair value gains - 724,310, ,310,006 - gains transferred to the statement of comprehensive income upon disposals - (8,096,314) (8,096,314) - impairment losses recognised in comprehensive income - 5,400,000 5,400,000 Total other comprehensive income - 721,613, ,613, Total comprehensive income 256,061, ,613, ,675, Balances at 31st December 2012 and 1st January ,602,466,655 2,905,354,241 6,507,820, Comprehensive income Surplus for the year 160,744, ,744, Other comprehensive income/(loss) Available-for-sales financial assets - net fair value losses - (49,665,797) (49,665,797) - gains transferred to the statement of comprehensive income upon disposals - (681,137) (681,137) Total other comprehensive loss - (50,346,934) (50,346,934) Total comprehensive income/(loss) 160,744,574 (50,346,934) 110,397, Balance at 31st December ,763,211,229 2,855,007,307 6,618,218,536 The notes on pages 8 to 35 are an integral part of these financial statements

14 STATEMENT OF CASH FLOWS Year ended 31st December Note Cash flows from operating activities Net cash used in operating activities 21 (118,146,237) (88,080,426) Cash flows from investing activities Purchases of intangible assets (304,336) (6,791,742) Purchases of property, plant and equipment 6 (10,586,016) (2,538,500) Purchases of available-for-sale financial assets 9 (142,823,277) (55,115,490) Purchases of held-to-maturity financial assets 10 (8,000,105) (40,858,439) Proceeds from disposals of available-for-sale financial assets 9 24,022,703 17,087,614 Proceeds from redemptions of held-to-maturity financial assets 10 61,251, ,580,250 Net decrease/(increase) in financial assets at fair value through profit or loss 148,135,153 (129,417,684) Net decrease in financial liabilities at fair value through profit or loss - (320,233) Dividends received 150,775, ,513,948 Interest received 23,521,587 28,543,829 Net cash generated from investing activities 245,992, ,683, Net increase in cash and cash equivalents 127,846, ,603,127 Cash and cash equivalents at beginning of the year 761,592, ,989,178 Cash and cash equivalents at end of the year ,438, ,592,305 The notes on pages 8 to 35 are an integral part of these financial statements

15 1 General information The Board of Management of the Chinese Permanent Cemeteries (the Board ) is established and operated under the Chinese Permanent Cemeteries Ordinance. The Board is engaged in the sale of niche, family niche, grave and urn spaces and the provision of related services. The Board may allocate an exhumable lot, either- Type A For an initial term of 10 years, which may be extended for one further and final term of 6 years for an additional premium which the Board, in its discretion, may determine at the time of expiry of the initial period (designated to Type C from August 1995 onwards). Type B For an initial term of 10 years, which may be extended for an indefinite number of terms up to 10 years each, for an additional premium which the Board, in its discretion, may determine at the time of expiry of each term. Type C For a finite term of 10 years which will not be extended at its expiry. These financial statements are presented in Hong Kong dollars unless otherwise stated. These financial statements have been approved for issue by the members of the Board on 4th December Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The financial statements of the Board have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRS ). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss and investment properties, which are carried at fair value. The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Board s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4. (a) New standards, amendments and interpretations to existing HKFRS (collectively, the Amendments ) effective for the accounting year commencing on 1st January 2013 Amendment to Hong Kong Accounting Standard ( HKAS ) 1, Financial statement presentation regarding other comprehensive income. The main change resulting from this amendment is a requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). There is no significant impact on these financial statements other than certain additional disclosures

16 2 Summary of significant accounting policies (Continued) 2.1 Basis of preparation (Continued) (a) New standards, amendments and interpretations to existing HKFRS (collectively, the Amendments ) effective for the accounting year commencing on 1st January 2013 (Continued) Amendment to HKFRS 7, Financial instruments: Disclosures, on asset and liability offsetting. The amendment requires new disclosure requirements which focus on quantitative information about recognised financial instruments that are offset in the balance sheet, as well as those recognised financial instruments that are subject to master netting or similar arrangements irrespective of whether they are offset. This new amendment does not have any impact on these financial statements as the Board has not offset financial instruments, nor has it entered into master netting or similar arrangements which are subject to disclosures of HKFRS 7. HKFRS 13, Fair value measurement, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across HKFRS. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within HKFRS. There is no significant impact on these financial statements other than certain additional disclosures. (b) Amendments that are not yet effective and have not been early adopted by the Board Certain Amendments have been published that are mandatory for the Board s accounting periods commencing on or after 1st January The following Amendments are relevant and applicable to the Board; however, they have not been early adopted in these financial statements: HKAS 32 (Amendment) Financial instruments: Presentation - offsetting financial assets and financial liabilities 1 HKFRS 9 Financial instruments 3 HKFRS 15 Revenue from contracts with customers 2 Note: (1) Effective for financial periods beginning on or after 1st January 2014 (2) Effective for financial periods beginning on or after 1st January 2017 (3) Effective for financial periods beginning on or after 1st January 2018 The Board will apply these Amendments in the period of initial application. The Board is currently assessing the impact of the adoption of the Amendments and is not yet in a position to state whether they would have a significant impact on the Board s results of operations and financial position. 2.2 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Board operates ( the functional currency ). The financial statements are presented in Hong Kong dollars, which is the Board s functional and presentation currency

17 2 Summary of significant accounting policies (Continued) 2.2 Foreign currency translation (Continued) (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in comprehensive income, and other changes in carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in the statement of comprehensive income as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income. 2.3 Investment properties Investment properties, comprising leasehold land and buildings, are held for long-term rental yields and are not occupied by the Board. Land held under operating leases is accounted for as investment properties when the rest of the definition of an investment property is met. In such cases, the operating leases concerned are accounted for as if they were finance leases. Investment properties are initially measured at cost, including related transaction costs. After initial recognition at cost, investment properties are carried at fair value, representing open market value determined at each reporting date by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If the information is not available, the Board uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recognised in comprehensive income in the statement of comprehensive income. 2.4 Intangible assets computer software Acquired computer software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Computer software is carried at cost less accumulated amortisation and impairment. Amortisation is calculated using the straight-line method to allocate the cost of computer software over its estimated useful life of 5 years. 2.5 Property, plant and equipment Land and buildings comprise mainly office premises. Leasehold land classified as finance lease and all other property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. 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 Board and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged in the statement of comprehensive income during the financial year in which they are incurred

18 2 Summary of significant accounting policies (Continued) 2.5 Property, plant and equipment (Continued) Construction in progress are assets on which construction has not been completed, and are carried at cost, which includes development and construction expenditure incurred and other direct cost attributable to the construction, less accumulated impairment losses. On completion, the assets are transferred to the relevant category of property, plant and equipment at cost less accumulated impairment losses. No depreciation is provided for construction in progress until the construction is completed and available for its intended use. Leasehold land classified as finance lease commences amortisation from the time when the land interest becomes available for its intended use. Amortisation on leasehold land classified as finance lease and depreciation on other property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows: Leasehold land classified as finance lease Buildings Access roads Reservoir Furniture, fixtures and equipment Motor vehicles Footpath Remaining lease term 44 to 50 years 10 years 10 years 5 years 4 years 50 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of comprehensive income. 2.6 Impairment of non-financial assets Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 2.7 Financial assets (a) Classification The Board classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity and available for sale. The classification depends on the purposes for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition

19 2 Summary of significant accounting policies (Continued) 2.7 Financial assets (Continued) (a) Classification (Continued) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Board s loans and receivables comprise receivables and cash and cash equivalents in the balance sheet (notes 2.13 and 2.14). Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Board s management has the positive intention and ability to hold to maturity. If the Board were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available for sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the end of the reporting period. (b) Recognition and measurement Regular way purchases and sales of financial assets are recognised on the trade-date - the date on which the Board commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Board has transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective interest method

20 2 Summary of significant accounting policies (Continued) 2.7 Financial assets (Continued) (b) Recognition and measurement (Continued) Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of comprehensive income, in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income when the Board s right to receive payments is established. Changes in the fair value of securities classified as available for sale are recognised in other comprehensive income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income when the Board s right to receive payments is established. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in reserves are included in the statement of comprehensive income as part of investment income. 2.8 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 2.9 Impairment of financial assets (a) Assets carried at amortised cost The Board assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Board may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income

21 2 Summary of significant accounting policies (Continued) 2.9 Impairment of financial assets (Continued) (b) Assets classified as available for sale The Board assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Board uses the criteria refer to (a) above. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in comprehensive income - is removed from reserves and recognised in comprehensive income. Impairment losses recognised in comprehensive income on equity instruments are not reversed through comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in comprehensive income, the impairment loss is reversed through the statement of comprehensive income Derivative financial instruments The Board does not have any derivative financial instruments that are qualified for hedge accounting. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in the fair value of any derivative financial instruments are recognised immediately in comprehensive income, except where the derivative financial instruments are qualified for hedge accounting Development and formation costs of columbarium, grave and niche spaces The development and formation costs of columbarium, grave and niche spaces are stated at cost less any impairment losses, and are transferred to inventories when completed and ready for sale. Cost comprises architectural consultancy fees, construction costs and other direct costs attributable to the development and formation of columbarium, grave and niche spaces Inventories Inventories comprise grave, niche and urn spaces and are stated at the lower of cost and net realisable value. Cost, which comprises development, formation and construction costs of the grave, niche and urn spaces, is calculated using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses Receivables If collection of receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment

22 2 Summary of significant accounting policies (Continued) 2.14 Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts, if any Payables Payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method Employee benefits (a) Long service payments Certain of the Board s employees have completed a required number of years of service to the Board and are eligible for long service payments under the Hong Kong Employment Ordinance in the event of the termination of their employment. The Board is liable to make such payments in the event that such a termination of employment meets the circumstances specified in the Hong Kong Employment Ordinance. A provision is recognised in respect of the probable future long service payments expected to be made. The provision is based on the best estimate of the probable future payments which have been earned by the employees from their service to the Board to the balance sheet date. (b) Pension obligations The Board has established a mandatory provident fund scheme ( MPF scheme ) in Hong Kong. The assets of the MPF scheme are held in separate trustee-administered funds. Both the Board and the employees are required to contribute a certain percentage of the employees relevant income. The Board has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available Reserves Reserves, other than available-for-sale financial assets reserve and buildings revaluation reserve, are funds set aside by the Board which are earmarked for specific purposes Provisions Provisions are recognised when the Board has a present legal or constructive obligation where, as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small

23 2 Summary of significant accounting policies (Continued) 2.19 Operating leases - as the lessor When the Board leases out properties under operating leases, the properties are included in the balance sheet as investment properties (note 2.3). Revenue arising from properties for leasing purposes under operating leases is recognised on a straight-line basis over the lease period (note 2.20(f)) Revenue and income recognition Revenue and income are recognised as follows: (a) Sales of grave, niche, urn spaces and reverted subscriber lots Sales of grave, niche, urn spaces and reverted subscriber lots (collectively, the Lots ) are recognised when the Board has transferred the right of use of the Lots to the customers in accordance with the terms of the relevant contract. (b) Reallocation and conversion income Income from reallocation and conversion of the Lots is recognised when the Board has transferred the right of use of the Lots to the customers in accordance with the terms of the relevant contract. (c) Cleaning, removal and backfilling service fees for exhumation, digging and paving fees for grave spaces, exhumation lots renewal fees and other service fees (collectively, Service Fees ) Service Fees are recognised when the relevant services are rendered. (d) Dividend income Dividend income is recognised when the right to receive payment is established. (e) Interest income Interest income is recognised on a time-proportion basis using the effective interest method. (f) Rental income Operating lease rental income is recognised over the term of the lease on a straight-line basis. (g) Other operating income Other operating income is recognised when the relevant services are rendered or on an accruals basis. 3 Financial risk and capital risk management 3.1 Financial risk factors The Board s activities expose it to a variety of financial risk factors: foreign exchange risk, price risk, credit risk, liquidity risk and cash flow and fair value interest rate risk. The Board s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Board s financial performance

24 3 Financial risk and capital risk management (Continued) 3.1 Financial risk factors (Continued) (a) Foreign exchange risk Foreign exchange risk arises where future commercial transactions, recognised assets and liabilities are denominated in a currency that is not the Board s functional currency. The Board is exposed to foreign exchange risks with respect to its investments and bank balances, arising primarily from United States dollars and Renminbi. In the opinion of the Board, as Hong Kong dollars are reasonably stable with the United States dollars under the Linked Exchange Rate System, the foreign exchange risk in relation to United States dollars is low. Accordingly, no sensitivity analysis is performed. At 31st December 2013, if Hong Kong dollar had weakened/strengthened by 5% against Renminbi with all other variables held constant, surplus for the year would have been increased/decreased by HK$3,854,000 (2012: HK$5,421,000), as a result of foreign exchange gains/losses on translation of Renminbi-denominated held-to-maturity financial assets, receivables and deposits, financial assets at fair value through profit or loss and cash and cash equivalents. In addition, forward foreign exchange contracts have been entered to further mitigate foreign exchange risk arising from various currency exposures, other than United States dollars and Renminbi, in respect of the Board s equity and debt securities included in financial assets at fair value through profit or loss. These forward exchange contracts are not qualified for hedge accounting and are classified as financial assets at fair value through profit or loss. (b) Price risk The Board s investments are exposed to price risk because the securities held by the Board are classified on the balance sheet either as available-for-sale financial assets or financial assets at fair value through profit or loss. The Board s investments are under the close monitoring of its Finance Committee, which meets on a regular basis to ensure that appropriate investment strategies are implemented in a timely and prudent manner. Most of the Board s investments are publicly traded and listed in major recognised stock exchanges. As majority of the investments classified as available-for-sale are listed on the Stock Exchange of Hong Kong, if the Hang Seng Index had been 5% (2012: 5%) higher/lower with all other variables held constant and all the Board s equity securities moved according to the historical correlation with the Index, the available-for-sale financial assets of the Board as at 31st December 2013 would have been increased/decreased by approximately 7% (2012: approximately 5%). Accordingly, the available-for-sale financial assets reserve would also increase/decrease as a result of gains/losses on equity securities classified as available for sale. For securities classified as financial assets at fair value through profit or loss, if their fair values had increased/decreased by 5% (2012: 5%), surplus for the year would have been approximately HK$39 million (2012: HK$44 million) higher/lower. The financial assets at fair value through profit or loss are managed by professional fund managers who report regularly to the Finance Committee of the Board. (c) Credit risk The Board s credit risk mainly arises from its liquid funds, held-to-maturity financial assets and financial assets at fair value through profit or loss. The Finance Committee of the Board is closely monitoring the credit ratings of respective counterparties. At this stage, the members of the Board are of the opinion that the credit risk is limited because the counterparties are reputable and creditworthy banks, corporations and governments. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet