Significant Accounting Policies

Apart from the accounting policies presented within the corresponding notes to the financial statements, other significant accounting policies are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 1 Basis of preparation The Company, Sa Sa International Holdings Limited, and its subsidiaries are collectively referred to as the Group in the consolidated financial statements. The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRS ). The consolidated financial statements have been prepared under the historical cost convention. 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 Group s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Accounting Policy No. 14. 2 Changes in accounting policies and disclosures New, amended and revised standards and new interpretations adopted by the Group effective for the financial year beginning 1 April 2013 HKFRS 7 (Amendment), Financial Instruments: Disclosures Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2013). The amendments require new disclosure requirements which focus on quantitative information about recognized financial instruments that are offset in the statement of financial position, as well as those recognized financial instruments that are subject to master netting or similar arrangements irrespective of whether they are offset. The amendment results only in additional disclosures. HKFRS 13, Fair Value Measurements (effective for annual periods beginning on or after 1 January 2013). It improves consistency and reduces complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across HKFRSs. The new standard results only in additional disclosures. HKAS 1 (Amendment), Presentation of Financial Statements (effective for annual periods beginning on or after 1 July 2012). The main change resulting from these amendments is a requirement for entities to group items presented in Other Comprehensive Income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The change in accounting policy results only in additional disclosures. HKAS 19 (Amendment), Employee Benefits (effective for annual periods beginning on or after 1 January 2013). The amendment posted significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. These amendments eliminate the corridor approach and calculate finance costs on a net funding basis. The revised standard had no material impact on the Group s consolidated financial statements. Sa Sa International Holdings Limited Annual Report 2013/14 165

2 Changes in accounting policies and disclosures (continued) New, amended and revised standards and new interpretations adopted by the Group effective for the financial year beginning 1 April 2013 (continued) The following new, amended and revised standards and new interpretation are effective for financial year beginning on or after 1 April 2013 but are not relevant to the Group. HKFRS 1 (Amendment), First Time Adoption on Government Loans (effective for annual periods beginning on or after 1 January 2013) HKFRS 10, Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2013) HKFRS 11, Joint Arrangements (effective for annual periods beginning on or after 1 January 2013) HKFRS 12, Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2013) HKFRSs 10, 11 and 12 (Amendment), Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (effective for annual periods beginning on or after 1 January 2013) HKAS 27 (Revised 2011), Separate Financial Statements (effective for annual periods beginning on or after 1 January 2013) HKAS 28 (Revised 2011), Investments in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2013) (HK)IFRIC Int 20, Stripping Costs in the Production Phase of a Surface Mine (effective for annual periods beginning on or after 1 January 2013) Annual improvement 2011, Amendments to several HKFRSs, (effective for annual periods beginning on or after 1 January 2013) Annual improvement 2012, Amendment to HKFRS 13, Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013) Annual improvement 2013, Amendment to HKFRS 1, First Time Adoption (effective for annual periods beginning on or after 1 January 2013) 166 Sa Sa International Holdings Limited Annual Report 2013/14

2 Changes in accounting policies and disclosures (continued) Early adoption of new, amended standards and new interpretation where early adoption is permitted Amendments to HKFRS 10, HKFRS 12 and HKAS 27 (Revised 2011) Investment Entities (effective for annual periods beginning on or after 1 January 2014). The amendments provide an exception to the consolidation requirements in HKFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendments also set out disclosure requirements for investment entities. The early adoption of amendments to HKFRS 10, HKFRS 12 and HKAS 27 does not have any material impact to the Group as the Group does not have investment entities. Amendment to HKFRS 14 Regulatory Deferral Accounts (effective for annual periods beginning on or after 1 January 2016), describes regulatory deferral account balances as amounts of expense or income that would not be recognized as assets or liabilities in accordance with other standards, but that qualify to be deferred in accordance with HKFRS 14 because the amount is included, or is expected to be included, by the rate regulator in establishing the price that an entity can charge to customers for rate-regulated goods or services. The early adoption of amendment to HKFRS 14 does not have any material impact to the Group as the Group is not first-time adopter of HKFRS and does not have any regulatory deferral accounts. Amendment to HKAS 19 regarding defined benefit plans (effective for annual periods beginning on or after 1 July 2014). This narrow scope amendment applies to contributions from employees or third parties to defined benefit plans. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period. The early adoption of amendment to HKAS 19 does not have any material impact to the Group as there is no contribution made by employees or third parties to defined benefit plans of the Group. HKAS 32 (Amendment) Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2014). The amendments clarify the requirements for offsetting financial instruments on the statement of financial position: the meaning of currently has a legally enforceable right of set-off ; and that some gross settlement systems may be considered equivalents to net settlement. The early adoption of HKAS 32 (Amendment) does not have any material impact to the Group as the Group has already followed this requirement for offsetting. Sa Sa International Holdings Limited Annual Report 2013/14 167

2 Changes in accounting policies and disclosures (continued) Early adoption of new, amended standards and new interpretation where early adoption is permitted (continued) Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets (effective for annual periods beginning on or after 1 January 2014). The amendments remove the requirement to disclose the recoverable amount of a cash generating unit (CGU) when it contains goodwill or intangible assets with indefinite useful lives when there has been no impairment. The amendments also expand the disclosure requirements for an individual asset (including goodwill) and a CGU for which an impairment loss has been recognized or reversed during the reporting period. The early adoption of amendments to HKAS 36 results in additional disclosure requirement related to impairment of non-financial assets. HKAS 39 (Amendment) Financial Instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting (effective for annual periods beginning on or after 1 January 2014). The HKAS 39 (Amendment) provides relief from discontinuing hedge accounting when novation of the derivative contract which is designated as a hedging instrument to a central counterparty meets specified criteria. The early adoption of HKAS 39 (Amendment) does not have any material impact to the Group as the Group does not enter into any hedging instruments that subject to clearing by central counterparties. HK (IFRIC) Int 21 Levies (effective for annual periods beginning on or after 1 January 2014). It sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when should a liability be recognized. The early adoption of HK (IFRIC) Int 21 does not have any material impact to the Group as the Group is not currently subjected to significant levies. Annual improvement to HKFRSs, 2010 2012 cycle (effective for annual periods beginning on or after 1 July 2014). It clarifies some definitions and disclosure requirement on some standards. The early adoption of Annual improvement to HKFRSs, 2010 2012 cycle does not have any material impact to the Group as the Group has already followed these clarifications. Annual improvement to HKFRSs, 2011 2013 cycle (effective for annual periods beginning on or after 1 July 2014). It clarifies some definitions and disclosure requirement on some standards. The early adoption of Annual improvement to HKFRSs, 2011 2013 cycle does not have any material impact to the Group as the Group has already followed these clarifications. (iii) The following amended standards have been issued but are not effective for the financial year beginning 1 April 2013 and have not been early adopted HKFRS 9, Financial Instruments (hedge accounting and amendments to HKFRS 9, HKFRS 7 and HKAS 39) (effective date not yet determined) 168 Sa Sa International Holdings Limited Annual Report 2013/14

3 Consolidation A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intra-group transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group s accounting policies. 4 Financial statements of the Company Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend and receivable. Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee s net assets including goodwill. 5 Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Receipts or payments made under operating leases (net of any incentives paid to lessees or received from the lessors) are recognized as income or expenses in the income statement on a straight-line basis over the period of the lease. 6 Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized 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 other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Sa Sa International Holdings Limited Annual Report 2013/14 169

7 Financial assets Classification The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. 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 Group s loans and receivables comprise trade and other receivables (Note 18 and 19) and cash and bank balances (Note 20) in the statement of financial position. Recognition and measurement Regular purchases and sales of financial assets are recognized on the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are carried at amortized cost using the effective interest method. The Group 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. 8 Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( functional currency ). The consolidated financial statements are presented in Hong Kong dollars ( HK$ ), which is the Company s functional and the Group s and the Company s presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. 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 recognized in the consolidated income statement, except when deferred in equity as qualifying cash flow hedges. Foreign exchange gains and losses that relate to cash and cash equivalents are presented in the income statement within other gains net. 170 Sa Sa International Holdings Limited Annual Report 2013/14

8 Foreign currency translation (continued) (iii) Group companies The results and financial positions of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognized in other comprehensive income. 9 Employee benefits Employee leave entitlements Employee entitlements to annual leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. Employee entitlements to sick leave and maternity leave are not recognized until the time of leave. Retirement benefit obligations The Group operates various post-employments scheme, including defined contribution and defined benefit retirement plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Sa Sa International Holdings Limited Annual Report 2013/14 171

9 Employee benefits (continued) Retirement benefit obligations (continued) Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognized immediately in income. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. (iii) Long service payments The Group s net obligation in respect of amounts payable on cessation of employment in certain circumstances under the employment law of the respective countries in which the Group operates is the amount of future benefit that employees have earned in return for their service in the current and prior periods. Long service payments are assessed using the projected unit credit method. The cost of providing the long service payment liabilities is charged to the income statement so as to spread the cost over the service lives of employees in accordance with the advice of the actuaries. Long service payments are discounted to determine the present value of obligation and reduced by entitlement accrued under the Group s defined contribution plans that are attributable to contributions made by the Group. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognized immediately in income. (iv) Bonus plan The expected cost of bonus payments is recognized as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. Liability for bonus plan is expected to be settled within 12 months and is measured at the amount expected to be paid when it is settled. 172 Sa Sa International Holdings Limited Annual Report 2013/14

10 Share-based payment Equity-settled share-based payment transactions The Group operates an equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: including any market performance conditions (for example, an entity s share price); and excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-marketing performance and service conditions. It recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium. Share-based payment transactions among Group entities The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognized over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts. 11 Contingent liabilities and contingent assets A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group and of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognized but is disclosed in the notes to the consolidated financial statements. When a change in the probability of an outflow occurs so that outflow is probable, it will then be recognized as a provision. Sa Sa International Holdings Limited Annual Report 2013/14 173

12 Dividend distribution Dividend distribution to the Company s shareholders is recognized as a liability in the Group s and the Company s financial statements in the period in which the dividends are approved by the Company s shareholders. 13 Financial risk management 13.1 Financial risk factors The Group s activities expose it to a variety of financial risks: foreign exchange risk, credit risk, liquidity risk and interest rate risk. The Group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group s financial performance. Risk management is carried out by management who identifies, evaluates and mitigate financial risks in close co-operation with the Group s operating subsidiaries. The Group manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. Foreign exchange risk The Group operates in various countries and is exposed to foreign exchange risk against Hong Kong dollars arising from foreign exchange exposure. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operation. Most of the assets, receipts and payments of the Group are either in Hong Kong dollar, US dollar, Euro or Renminbi. The Group minimizes its foreign exchange exposure by way of buying against order by entering into forward contracts with reputable financial institutions or at spot and maintain no material long position. The hedging policies are reviewed by the Group regularly. As at 31 March 2014, if Hong Kong dollar had weakened/strengthened by 1% against Euro with all other variables held constant, profit for the year would have been lower/higher by HK$254,000 (2013: HK$274,000), mainly as a result of foreign exchange gains/losses on translation of Eurodenominated cash and bank balances and financial liabilities. As at 31 March 2014, if Hong Kong dollars had weakened/strengthened by 1% against Renminbi with all other variables held constant, profit for the year would have been higher/lower by HK$1,010,000 (2013: HK$622,000), mainly as a result of foreign exchange gains/losses on translation of Renminbi denominated cash and bank balances, financial assets and liabilities. 174 Sa Sa International Holdings Limited Annual Report 2013/14

13 Financial risk management (continued) 13.1 Financial risk factors (continued) Credit risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, other receivables, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. As at 31 March 2014, all bank balances and bank deposits are held at reputable financial institutions. In respect of wholesale customers, individual risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The utilisation of credit limits is regularly reviewed. Sales to retail customers are settled in cash or using major credit cards. No material credit limits were exceeded during the reporting period, and management does not expect any material losses from non-performance by these counterparties. Trade receivables are due within 90 days from the date of billings. As at 31 March 2014, 99.8% of the total trade receivables were due within 90 days (2013: 99.4%). The maximum exposure to credit risk is represented by the carrying amount of trade receivables in the consolidated statement of financial position. Further quantitative disclosures in respect of the Group s exposure to credit risk arising from trade receivables are set out in Note 18. (iii) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and making available an adequate amount of committed credit facilities with staggered maturities to reduce refinancing risk in any year and to fund working capital, dividend payments, new investments and close out market positions if required. The Group has steady cash inflow from operations and has adequate financial resources to fund its operations and future expansions. As at 31 March 2014, the Group s financial liabilities were mainly trade payables and other payables amounting to HK$536,243,000 (2013: HK$539,789,000), which were due within 12 months. (iv) Interest rate risk The Group s interest rate risk resulted from timing differences in the repricing of interest bearing assets or liabilities. Major interest bearing assets of the Group are short-term bank deposits and time deposits, details of which have been disclosed in Note 20. The Group s exposure to changes in interest rates is also attributable to its borrowings, details of which have been disclosed in Note 23. The Group s borrowings were carried at floating rate and expose the Group to cash flow interest rate risk. The Group has not used any interest rate swaps to hedge its exposure against cash flow interest rate risks as management considers that the Group s borrowing is relatively short term and insignificant. As any reasonable changes in interest rate would not result in a significant change in the Group s results, no sensitivity analysis is presented for interest rate risk. The Group monitors its interest rate risk through management of maturity profile and choice of fixed or floating interest rates. Sa Sa International Holdings Limited Annual Report 2013/14 175

13 Financial risk management (continued) 13.2 Capital risk management The Group s policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain future development of the business. The Group defines the capital of the Group as the total shareholders equity. As at 31 March 2014, the Group was in a net cash position (total borrowings were less than cash and cash equivalents). Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total borrowings divided by total equity. The gearing ratios as at 31 March 2014 and 2013 were as follows: 2014 2013 HK$ 000 HK$ 000 Total borrowings (Note 23) 80,000 Total equity 2,325,129 1,975,474 Gearing ratio 3.4% 13.3 Fair value estimation The table below analyses the Group s financial instruments carried at fair value as at 31 March 2014 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorized into three levels within a fair value hierarchy as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). 176 Sa Sa International Holdings Limited Annual Report 2013/14

13 Financial risk management (continued) 13.3 Fair value estimation (continued) As at 31 March 2014 Level 1 Level 2 Level 3 Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Assets Derivatives used for hedging Forward foreign exchange contracts 167 167 Total assets 167 167 Liabilities Derivatives used for hedging Forward foreign exchange contracts 168 168 Total liabilities 168 168 As at 31 March 2013 Liabilities Level 1 Level 2 Level 3 Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Derivatives used for hedging Forward foreign exchange contracts 656 656 Total liabilities 656 656 Sa Sa International Holdings Limited Annual Report 2013/14 177

14 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Income taxes and deferred tax The Group is subject to income taxes in several jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. At 31 March 2014, the Group did not recognize deferred tax assets of HK$49,658,000 in respect of tax losses and capital allowances amounting to HK$190,064,000 and HK$31,521,000 respectively that could be carried forward against future taxable income as the realization of the related tax benefits through future taxable profit is not probable. Estimating the amount of deferred tax asset arising from tax losses requires a process that involves determining appropriate provisions for income tax expense, forecasting future year s taxable income and assessing our ability to utilize tax benefits through future earnings. In cases where the actual future profits generated are different from original estimates than expected, such differences will impact the recognition of deferred tax assets and income tax charges in the period in which such circumstances are changed. Impairment of investments in subsidiaries and non-financial assets The Company conducts impairment reviews of investments in subsidiaries and non-financial assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable or tests for impairment annually in accordance with the relevant accounting standards. Determining whether an asset is impaired requires an estimation of the value in use, which requires the Group to estimate the future cash flows and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. In current financial year, after reviewing the business environment as well as the Group s objectives and past performance of the investments, management has concluded that there was no material impairment loss for the above assets at 31 March 2014. 178 Sa Sa International Holdings Limited Annual Report 2013/14

14 Critical accounting estimates and judgements (continued) (iii) Write-downs of inventories to net realisable value The Group writes down inventories to net realisable value based on an estimate of the realisability of inventories. Write-downs on inventories are recorded where events or changes in circumstances indicate that the balances may not realized. The identification of write-downs requires the use of estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of inventories and write-downs of inventories in the periods in which such estimate has been changed. (iv) Fair value estimation of share options The Group estimates the fair value of share options using a binomial lattice methodology which involves the use of estimates. Details of significant inputs to the valuation model are disclosed in Note 26. (v) Useful lives, residual values and depreciation of property, plant and equipment The Group determines the estimated useful lives, residual values and related depreciation charges for its property, plant and equipment with reference to the estimated periods that the Group intends to derive future economic benefits from the use of these assets. In addition, an independent professional valuer s report which has taken into account the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions, was also prepared to facilitate management decision. Management will revise the depreciation charge where useful lives or residual values are materially different from those previously estimated. Actual economic lives may differ from estimated useful lives and actual residual values may differ from estimated residual values. Periodic review could result in a change in depreciable lives and residual values and therefore depreciation expenses in the future periods. Sa Sa International Holdings Limited Annual Report 2013/14 179