THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES Report for the year ended 31 December 2016

Transcription

1 Annex THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES Report for the year ended 31 December 2016 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 members of 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 the Annex. 3. The Board has appointed five Select Committees, namely Executive Committee, Internal Affairs Committee, Finance Committee, Works and Development Committee and External Affairs Committee. These Select Committees monitor the operations of the Board. The membership of these Select Committees is listed at Appendix II of the Annex. 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 approximately 80,000 burial lots and urn plots and some 275,000 niches of various types. 5. To serve the needs of the public, the Board will continue to explore suitable sites within its existing cemeteries and other potential sites for building columbaria and associated facilities. It is anticipated that significant financial commitment would be required for development of new sites and facilities. 6. During the period under report, the Board donated a total amount of about $46 million to charitable organizations for supporting 86 projects under various donation exercises. 7. The audited Statement of Accounts of the Board for the year ended 31 December 2016 is at Appendix III of the Annex. LAU Kong-wah Chairman The Board of Management of the Chinese Permanent Cemeteries November 2017

2 Appendix I of the Annex Membership List of the Board of Management of the Chinese Permanent Cemeteries (BMCPC) (for the year ended 31 December 2016) Chairman Secretary for Home Affairs (Ex-officio) Members Director of Lands (Ex-officio) Director of Food and Environmental Hygiene (Ex-officio) Mr NG Kwok-tung, Tony (up to ) Mr CHEUNG Wing-hong, Shannon, MH (up to ) Mr LI Hon-hung, MH, JP (up to ) Mr CHAN Kwok-kai, BBS (up to ) Ms LEUNG Wing-yu, Nisa, JP Ir Dr CHAN Siu-kun, Alex, BBS Ms HO Siu-fong, Betty, MH Ms HO Yee-lin, Elaine Dr LEE Sam-yuen, John, BBS Dr SO Chun-hin, Albert Mr TSANG Heung-kwan, MH Miss YU Yuk-ying, Vivian Mr KWONG Cho-shing, Antonio, MH Mr YU Hon-kwan, Randy, MH, JP Dr LAI Wing-chueng, Raymond Mr KAN Siu-lun, Philip (from ) Dr MA Hok-ka, Carol (from ) Mr YUNG Wing-ki, Samuel, SBS, MH, JP (from ) Ms CHAN Wing-man (from ) Mr WONG Kam-choi, MH (from ) Co-opted Members Mr WONG Kam-choi, MH (up to ) Mr Lanny TAM, Stanley, MH (from ) Dr Yanki LEE (from )

3 Appendix II of the Annex Membership list of the Select Committees of the Board of Management of the Chinese Permanent Cemeteries (for the year ended 31 December 2016) Executive Committee Chairperson : Mr LAU Kong-wah, JP Members : Mr CHEUNG Wing-hong, Shannon, MH (up to ) Mr CHAN Kwok-kai, BBS (up to ) Mr NG Kwok-tung, Tony (up to ) Ir Dr CHAN Siu-kun, Alex, BBS Dr SO Chun-hin, Albert (from ) Mr YUNG Wing-ki, Samuel, SBS, MH, JP (from ) Ms HO Yee-lin, Elaine (from ) Internal Affairs Committee Chairperson : Mr CHAN Kwok-kai, BBS (up to ) Ms HO Yee-lin, Elaine (from ) Vice-chairperson : Mr CHEUNG Wing-hong, Shannon, MH (up to ) Ms HO Yee-lin, Elaine (from up to ) Mr KWONG Cho-shing, Antonio, MH (from ) Members : Ir Dr CHAN Siu-kun, Alex, BBS Ms HO Yee-lin, Elaine (up to ) Mr KWONG Cho-shing, Antonio, MH (up to ) Ms CHAN Wing-man (from ) Mr WONG Kam-choi, MH (from ) Finance Committee Chairperson : Mr CHEUNG Wing-hong, Shannon, MH (up to ) Mr YUNG Wing-ki, Samuel, SBS, MH, JP (from ) Vice-chairperson : Dr LAI Wing-chueng, Raymond Members : Mr NG Kwok-tung, Tony (up to ) Ms LEUNG Wing-yu, Nisa, JP Dr SO Chun-hin, Albert Mr KAN Siu-lun, Philip (from )

4 Works and Development Committee Chairperson : Ir Dr CHAN Siu-kun, Alex, BBS Vice-chairperson : Mr LI Hon-hung, MH, JP (up to ) Mr YU Hon-kwan, Randy, MH, JP (from ) Members : Mr CHAN Kwok-kai, BBS (up to ) Ms HO Siu-fong, Betty, MH Dr SO Chun-hin, Albert Mr TSANG Heung-kwan, MH Mr YU Hon-kwan, Randy, MH, JP (up to ) Dr LAI Wing-chueng, Raymond Co-opted Member : Dr Yanki LEE (from ) External Affairs Committee Chairperson : Mr NG Kwok-tung, Tony (up to ) Dr SO Chun-hin, Albert (from ) Vice-chairperson : Dr SO Chun-hin, Albert (up to ) Miss YU Yuk-ying, Vivian (from ) Members : Mr LI Hon-hung, MH, JP (up to ) Dr LEE Sam-yuen, John, BBS Mr TSANG Heung-kwan, MH Ms LEUNG Wing-yu, Nisa, JP (up to ) Miss YU Yuk-ying, Vivian (up to ) Mr YU Hon-kwan, Randy, MH, JP Ms CHAN Wing-man (from ) Dr MA Hok-ka, Carol (from ) Mr WONG Kam-choi, MH (from ) Co-opted members : Mr WONG Kam-choi, MH (up to ) Mr TAM Lanny, Stanley, MH (from )

5 Appendix III of the Annex THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES Report and Financial Statements For the year ended 31 December 2016

6 REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 CONTENTS PAGE(S) INDEPENDENT AUDITOR'S REPORT 1-3 DETAILED STATEMENT OF SURPLUS AND OTHER COMPREHENSIVE INCOME 4-6 STATEMENT OF FINANCIAL POSITION 7 STATEMENT OF CHANGES IN FUNDS 8 STATEMENT OF CASH FLOWS 9 NOTES TO THE FINANCIAL STATEMENTS 10-44

7 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE BOARD OF MANAGEMENT OF THE CHINESE PERMANENT CEMETERIES (Registered under the Chinese Permanent Cemeteries Ordinance) Opinion We have audited the financial statements of The Board of Management of the Chinese Permanent Cemeteries (the "Board") set out on pages 4 to 44, which comprise the statement of financial position as at 31 December 2016, and the detailed statement of surplus and other comprehensive income, statement of changes in funds and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements give a true and fair view of the financial position of the Board as at 31 December 2016, and of its financial performance and its cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Board in accordance with the HKICPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Matter The financial statements of the Board for the year ended 31 December 2015 were audited by another auditor who expressed an unmodified opinion on those statement on 17 November Responsibilities of the members of the Board and Those Charged with Governance for the Financial Statements The members of the Board are responsible for the preparation of the financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA, 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. In preparing the financial statements, the members of the Board are responsible for assessing the Board's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the members of the Board either intend to liquidate the Board or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Board's financial reporting process

8 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) Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Board's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the members of the Board. Conclude on the appropriateness of the members of the Board's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Board's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Board to cease to continue as a going concern

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) Auditor's Responsibilities for the Audit of the Financial Statements - continued Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 14 December

10 DETAILED STATEMENT OF SURPLUS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 OPERATING ACTIVITIES NOTE Revenue Sales of grave, niche and urn spaces 9,114, ,766,600 Sales of reverted subscriber and ordinary lots 10,080,000 10,640,000 Income from reallocation of family niche spaces, ossuary and ordinary niche spaces 1,790,800 1,108,800 Income from reallocation of Type B renewable lots 21,224,000 19,096,000 Income from reallocation of Type C non-renewable lots 6,220,000 8,940,000 Conversion of Type B grave spaces to ordinary lots 281, ,100 Cleaning, removal and backfilling services fees for exhumation 2,351,100 2,602,800 Digging and paving fee for grave spaces 1,388,000 1,536,800 Exhumation lots of renewal fees 36,660,000 36,540,000 Other service fees 1,962,360 2,056,920 Total revenue 91,072, ,570,020 Less: Direct costs Costs of grave, niche and urn spaces sold 3,800,511 87,858,949 Direct costs arising from cleaning, removal and backfilling services for exhumation 1,238,200 1,372,900 Direct costs of digging and paving of grave spaces 9,734,847 11,636,738 14,773, ,868,587 Gross profit 76,298, ,701,433 Other operating income and gains 5 5,619, ,652 81,918, ,464,

11 DETAILED STATEMENT OF SURPLUS AND OTHER COMPREHENSIVE INCOME - continued FOR THE YEAR ENDED 31 DECEMBER 2016 NOTE Less: General and administrative expenses Advertising and newspapers 459, ,523 Air-conditioning and management fees 890, ,440 Auditor's remuneration 368, ,950 Cleaning 12,253,158 11,161,456 Crown rent and permit fees 676, ,658 Amortisation of intangible assets 1,579,635 1,579,635 Depreciation 14,138,439 14,793,067 Employee benefit expenses 43,609,865 43,138,767 Electricity, telephone and water 2,359,036 2,360,418 Geotechnical consultancy services fees 53,484,188 46,100,915 Insurance 1,183,749 1,351,596 Lift maintenance fees 430, ,900 Motor vehicle running expenses 148, ,239 Postage 112, ,806 Printing and stationery 211, ,154 Repairs and improvement works 22,343,674 42,844,369 Retirement benefit scheme contributions 1,631,512 1,675,605 Security guard fees 10,684,477 9,813,291 Sundry 5,793,495 5,375,385 Travelling 1,146, , ,505, ,720,484 Deficit for the year from operating activities (91,587,633) (72,256,399) INVESTING ACTIVITIES Income Investment income and gains/losses other than impairment 6 212,727, ,684,567 Rental income from investment properties 15,065,032 14,393,592 Fair value gain on investment properties 16,913,125 49,994, ,705, ,072,534 Less: Direct expenses Impairment losses on available-for-sale investments 2,166,488 15,827,000 Investment expenses 9,692,847 11,525,772 Direct operating expenses arising from investment properties that generate rental income 104, ,757 11,964,005 27,455,529 Surplus for the year from investing activities 232,741, ,617,005 Total surplus for the year before donation 141,154, ,360,606 Donations (46,195,416) (19,584,244) Surplus for the year 94,958, ,776,

12 DETAILED STATEMENT OF SURPLUS AND OTHER COMPREHENSIVE INCOME - continued FOR THE YEAR ENDED 31 DECEMBER Other comprehensive (expense) income for the year Items that may be reclassified subsequently to profit or loss: Change in fair value of available-for-sale investments (4,110,811) (298,966,236) Release upon disposal of available-for-sale investments (14,599,851) (1,826,231) Reclassification adjustment upon impairment loss on available-for-sale investments 2,166,488 15,827,000 (16,544,174) (284,965,467) Total comprehensive income (expense) for the year 78,414,540 (175,189,105) - 6 -

13 STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2016 NOTES Non-current assets Intangible assets 8 1,768,397 3,348,032 Property, plant and equipment 9 408,320, ,184,664 Investment properties ,163, ,250,000 Available-for-sale investments 11 3,673,206,388 3,679,182,311 Held-to-maturity investments 12 23,593,462 45,040,457 4,794,051,600 4,805,005,464 Current assets Development and formation costs of columbarium, grave and niche spaces 26,560, ,929,579 Inventories 354,275,024 3,982,931 Other receivables, deposits and prepayments 13 9,829,291 9,331,997 Held-to-maturity investments 12 21,319,733 24,131,090 Financial assets designated as at fair value through profit or loss 14 1,353,478,868 1,243,877,233 Bank balances and cash ,506, ,766,741 2,040,969,502 1,934,019,571 Current liabilities Other payables and accrued charges 16 77,472,516 83,233,523 Financial liabilities designated as at fair value through profit or loss ,659 Provision for donations 17 43,911,416 19,812, ,383, ,336,885 Net current assets 1,919,585,570 1,830,682,686 Total assets less current liabilities 6,713,637,170 6,635,688,150 Non-current liabilities Provision for donations 17 5,188,542 5,654,062 6,708,448,628 6,630,034,088 Funds Accumulated funds 3,911,739,137 3,816,780,423 Emergency reserve 100,000, ,000,000 Maintenance reserve 1,000,000,000 1,000,000,000 Available-for-sale investment reserve 1,676,739,162 1,693,283,336 Buildings revaluation reserve 19,970,329 19,970,329 Total funds 6,708,448,628 6,630,034,088 The financial statements on pages 4 to 44 were approved and authorised for issue by the members of Board on 14 December YUNG WING KI, SAMUEL TREASURER MAK KUI YIN, LOUIS EXECUTIVE DIRECTOR - 7 -

14 STATEMENT OF CHANGES IN FUNDS FOR THE YEAR ENDED 31 DECEMBER 2016 Available-for-sale Building Accumulated Emergency Maintenance investment revaluation funds reserve reserve reserve reserve Total (Note a) (Note b) (Note c) At 1 January ,707,004, ,000,000 1,000,000,000 1,978,248,803 19,970,329 6,805,223,193 Change in fair value of available-for-sale investments (298,966,236) - (298,966,236) Release upon disposal of available-for-sale investments (1,826,231) - (1,826,231) Reclassification adjustment upon impairment loss on available-for-sale investments ,827,000-15,827,000 Surplus for the year 109,776, ,776,362 At 31 December ,816,780, ,000,000 1,000,000,000 1,693,283,336 19,970,329 6,630,034,088 Change in fair value of available-for-sale investments (4,110,811) - (4,110,811) Release upon disposal of available-for-sale investments (14,599,851) - (14,599,851) Reclassification adjustment upon impairment loss on available-for-sale investments ,166,488-2,166,488 Surplus for the year 94,958, ,958,714 At 31 December ,911,739, ,000,000 1,000,000,000 1,676,739,162 19,970,329 6,708,448,628 Notes: (a) Emergency reserve represents the fund set aside for use in emergency. (b) Maintenance reserve represents the amount set aside from accumulated funds for the purpose of upkeep and renovation of the facilities at the cemeteries up to (c) Building revaluation reserve represents the difference between the carrying amount and fair value of an owner-occupied property which was transferred from property, plant and equipment equipment to investment properties in Usage of the reserves as mentioned in notes (a) and (b) above will be reviewed by the Board every five years

15 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER OPERATING ACTIVITIES Surplus for the year 94,958, ,776,362 Adjustments for: Amortisation of intangible assets 1,579,635 1,579,635 Depreciation 14,138,439 14,793,067 Dividend income (174,806,367) (166,541,708) Interest income (26,539,377) (23,759,870) Gain on fair value change of investment properties (16,913,125) (49,994,375) Amortisation of premium on acquisition of held-to-maturity investments 74, ,472 Gain on disposals of property, plant and equipment (95,000) (14,200) Gain on disposals of available-for-sale investments (14,599,851) (1,826,231) Impairment losses on available-for-sale investments 2,166,488 15,827,000 Gain on fair value changes on derivative financial instruments (1,657,455) (7,207,070) Loss on fair value changes on financial assets designated as at fair value through profit or loss 4,802,358 34,368,770 Donations 46,195,416 19,584,244 Operating cash flows before movements in working capital (70,695,903) (53,121,904) Decrease (increase) in development and formation cost of columbarium, grave and niche spaces 306,368,997 (102,682,545) (Increase) decrease in inventories (350,292,093) 38,890,066 Decrease (increase) in other receivables, deposits and prepayments 330,911 (198,407) Decrease in other payables and accrued charges (3,737,420) (7,512,858) Decrease in provision for donations (22,562,223) (23,925,173) NET CASH USED IN OPERATING ACTIVITIES (140,587,731) (148,550,821) INVESTING ACTIVITIES Dividends received 174,806, ,541,708 Proceeds from disposals of available-for-sale investments 106,949,751 26,926,667 Interest received 25,711,172 23,981,065 Proceeds from redemptions of held-to-maturity investments 24,184,130 1,550,400 Proceeds from disposals of property, plant and equipment 95,000 14,200 Net (increase) decrease in financial assets/liabilities designated as at fair value through profit or loss (113,037,197) 26,280,381 Purchases of available-for-sale investments (105,084,639) (69,346,446) Purchases of property, plant and equipment (17,297,590) (13,273,223) Purchases of held-to-maturity investments - (32,665,712) Purchases of intangible assets - (141,700) NET CASH FROM INVESTING ACTIVITIES 96,326, ,867,340 NET DECREASE IN CASH AND CASH EQUIVALENTS (44,260,737) (18,683,481) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 319,766, ,450,222 CASH AND CASH EQUIVALENTS AT END OF THE YEAR, REPRESENTED BY BANK BALANCES AND CASH 275,506, ,766,

16 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER GENERAL The Board of Management of the Chinese Permanent Cemeteries (the "Board") is established and operated under the Chinese Permanent Cemeteries Ordinance and is to provide, maintain and administer cemeteries for persons of the Chinese race permanently resident in Hong Kong and their relatives. The address of the registered office and the principal place of business of the Board is 34/F, Wu Chung House, 213 Queen's Road East, Wan Chai, Hong Kong. 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. The financial statements are presented in Hong Kong dollars ("" or "HKD"), which is also the functional currency of the Board. 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") Amendments to HKFRSs that are mandatorily effective for the current year The Board has applied for the first time in current year the following amendments to HKFRSs and Hong Kong Accounting Standards ("HKAS") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). Amendments to HKAS 1 Amendments to HKAS 16 and HKAS 38 Amendments to HKAS 16 and HKAS 41 Amendments to HKFRSs Amendments to HKFRS 10, HKFRS 12 and HKAS 28 Amendments to HKFRS 11 Disclosure initiative Clarification of acceptable methods of depreciation and amortisation Agriculture: Bearer plants Annual improvements to HKFRSs cycle Investment entities: Applying the consolidation exception Accounting for acquisitions of interest in joint operations The application of the amendments to HKFRSs and HKASs in the current year has had no material impact on the Board's financial performance and positions for the current and prior years and/or on the disclosures set out in these financial statements

17 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") - continued New and amendments to HKFRSs in issue but not yet effective The Board has not early applied the following new and amendments to HKFRSs and HKASs and interpretations that have been issued but are not yet effective: HKFRS 9 Financial instrument 2 HKFRS 15 Revenue from contracts with customers and the related amendments 2 HKFRS 16 Leases 3 Amendments to HKFRSs Annual improvements to HKFRSs cycle 4 Amendments to HKFRS 2 Classification and measurement of share-based payment transactions 2 Amendments to HKFRS 4 Applying HKFRS 9 "Financial instruments" with HKFRS 4 "Insurance contracts" 2 Amendments to HKFRS 10 Sale or contribution of assets between an investor and and HKAS 28 its associate or joint venture 5 Amendments to HKAS 7 Disclosure initiative 1 Amendments to HKAS 12 Recognition of deferred tax assets for unrealised losses 1 Amendments to HKAS 40 Transfers of investment property 2 HK(IFRIC) - INT 22 Foreign currency transactions and advance consideration 2 HK(IFRIC) - INT 23 Uncertainty over income tax treatments 3 1 Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January 2017 or 1 January 2018, as appropriate. 5 Effective for annual periods beginning on or after a date to be determined

18 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") - continued HKFRS 9 "Financial instruments" HKFRS 9 introduces new requirements for the classification and measurement of financial assets, financial liabilities, general hedge accounting and impairments for financial assets. Key requirements of HKFRS 9 are described below: All recognised financial assets that are within the scope of HKFRS 9 are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at fair value through other comprehensive income ("FVTOCI"). All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities' credit risk are not subsequently reclassified to profit or loss. Under HKAS 39 "Financial instruments: Recognition and measurement", the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss. In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised

19 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") - continued HKFRS 9 "Financial instruments" - continued The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in HKAS 39. Under HKFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been removed. Enhanced disclosure requirements about an entity's risk management activities have also been introduced. Based on the Board's financial instruments and risk management policies as at 31 December 2016, application of HKFRS 9 in the future may have a material impact on the classification and measurement of the Board's financial assets. The Board's available-for-sale investments, including those currently stated at cost less impairment, will either be measured as fair value through profit or loss or be designated as FVTOCI (subject to fulfilment of the designation criteria). In addition, the expected credit loss model may result in early provision of credit losses which are not yet incurred in relation to the Board's financial assets measured at amortised cost. HKFRS 15 "Revenue from contracts with customers" HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 "Revenue", HKAS 11 "Construction contracts" and the related interpretations when it becomes effective. The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when "control" of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. In 2016, the HKICPA issued clarifications to HKFRS 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance. The members of the Board anticipate that the application of HKFRS 15 in the future may result in more disclosures, however, the members of the Board do not anticipate that the application of HKFRS 15 will have a material impact on the timing and amounts of revenue recognised in the respective reporting periods

20 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") - continued HKFRS 16 "Leases" HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. HKFRS 16 will supersede HKAS 17 "Leases" and the related interpretations when it becomes effective. HKFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees, except for short-term leases and leases of low value assets. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Under HKAS 17, the Board shall recognise an asset and a related finance lease liability for finance lease arrangement and prepaid lease payments for leasehold lands where the Board is a lessee. The application of HKFRS 16 may result in potential changes in classification of these assets depending on whether the Board presents right-of-use assets separately or within the same line item at which the corresponding underlying assets would be presented if they were owned. In contrast to lessee accounting, HKFRS 16 substantially carries forward the lessor accounting requirements in HKAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by HKFRS 16. As at 31 December 2016, the Board has no non-cancellable operating lease commitments as a lessee. The members of the Board do not anticipate that the application of the other new and amendments to HKFRSs and HKASs and interpretations will have a material impact on the Board's financial statements. 3. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. The financial statements have been prepared on the historical cost basis, except for investment properties and certain financial instruments, which are measured at fair values, at the end of the reporting period as explained in the accounting policies set out below

21 3. SIGNIFICANT ACCOUNTING POLICIES - continued Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Board takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 "Share-based payments", lease transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 "Inventories" or value in use in HKAS 36 "Impairment of assets". A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. The significant accounting policies are set out below. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future economic in benefits will flow to the Board and when specific criteria have been met for each of the Board's activities, as described below. Sales of grave, niche, urn spaces and reverted subscriber and ordinary 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

22 3. SIGNIFICANT ACCOUNTING POLICIES - continued Revenue recognition - continued 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. Cleaning, removal and backfilling services fees for exhumation, digging and paving fees for grave spaces, exhumation lots renewal fees and other service fees are collectively referred as "Service Fees". Service Fees are recognised when the relevant services are rendered. Dividend income from investments is recognised when the shareholders' rights to receive payment have been established. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. The Board's accounting policy for recognition of revenue from operating leases is described in the accounting policy for leasing below. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Board as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Foreign currencies In preparing the financial statements of each individual entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise

23 3. SIGNIFICANT ACCOUNTING POLICIES - continued Retirement benefit costs Payments to the Mandatory Provident Fund Scheme are recognised as an expense when employees have rendered service entitling them to the contributions. Short-term and other long-term employee benefits Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset. A liability is recognised for benefits accruing to employees (such as wages and salaries) after deducting any amount already paid. Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Board in respect of services provided by employees up to the reporting date. Any changes in the liabilities' carrying amounts resulting from service cost, interest and remeasurements are recognised in profit or loss except to the extent that another HKFRS requires or permits their inclusion in the cost of an asset. Property, plant and equipment Property, plant and equipment are stated in the statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Board's accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of the reporting period, with the effect of any changes in estimate accounted for on a prospective basis. If an item of property, plant and equipment becomes an investment property because its use has changed as evidenced by end of owner-occupation, any difference between the carrying amount and the fair value of that item (including the relevant prepaid lease payments) at the date of transfer is recognised in other comprehensive income and accumulated in building revaluation reserve. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to accumulated funds

24 3. SIGNIFICANT ACCOUNTING POLICIES - continued Property, plant and equipment - continued An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Leasehold land and building When a lease includes both land and building elements, the Board assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Board, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease. To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as "prepaid lease payments" in the statement of financial position and is amortised over the lease term on a straight-line basis except for those that are classified and accounted for as investment properties under the fair value model. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease. Investment properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values. All of the Board's property interests held under operating leases to earn rentals or for capital appreciation purposes are classified and accounted for as investment properties and are measured using the fair value. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss in the period in which they arise. Construction costs incurred for investment properties under construction are capitalised as part of the carrying amount of the investment properties under construction. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised

25 3. SIGNIFICANT ACCOUNTING POLICIES - continued Intangible assets Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. 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. Costs comprise architectural consultancy fees, construction costs and other direct costs attributable to the development and formation of columbarium, grave and niche spaces. Impairment on tangible and intangible assets At the end of the reporting period, the Board reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Board estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cashgenerating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that they may be impaired. Recoverable amount is the higher of fair value less costs of disposal and 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 for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a prorata basis based on the carrying amount of each asset in the unit. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard

26 3. SIGNIFICANT ACCOUNTING POLICIES - continued Impairment on tangible and intangible assets - continued Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that standard. Inventories Inventories, which comprise of grave, niche and urn spaces, are stated at the lower of cost and net realisable value. Costs of inventories, which comprise development, formation and construction costs of the grave, niche and urn spaces, are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Provisions Provisions are recognised when the Board has a present obligation as a result of a past event, it is probable that the Board will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Financial instruments Financial assets and financial liabilities are recognised when the Board becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss