Grande AR (E). - the grande holdings limited

notes to financial statements
31 December 2005
2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS
(continued)
(b) Owner-occupied leasehold interest in land:
The adoption of HKAS 17 has resulted in a change in accounting policy relating
to leasehold land. In previous years, owner-occupied leasehold land and
buildings were included in property, plant and equipment and carried at
valuation less accumulated depreciation. In the current year, under HKAS 17,
the land and buildings elements of a lease of land and buildings are considered
separately for the purposes of lease classification, unless the lease payments
cannot be allocated reliably between the land and buildings elements, in which
case, the entire lease is generally treated as a finance lease. To the extent that
the allocation of the lease payments between the land and buildings elements
can be made reliably, the leasehold interests in land are reclassified to prepaid
lease payments under operating leases, which are carried at cost and amortised
over the lease term on a straight-line basis. Alternatively, where the allocation
between the land and buildings elements cannot be made reliably, the leasehold
interests in land continue to be accounted for as property, plant and equipment.
In restating the Group’s results for prior years on the basis of the new and
revised policies to comply with HKAS 17, the capital reserve (reflecting the
revaluation surplus in prior years) and deferred tax liabilities of the Group as at
1 January 2004 have been reduced by HK$96 million and HK$20 million,
respectively, in respect of the reversal of surplus on revaluation of leasehold
land in prior years, the retained profits brought forward as at 1 January 2004
have been reduced by HK$16 million, and the net profit of the Group for the
year ended 31 December 2004 have been increased by HK$4 million in respect
of the adjustments for amortisation of land lease prepayment and deferred
taxation. As a result of this change in accounting policy, the profit for the year
has been increased by HK$4 million.
(c)
Business combinations:
The adoption of HKFRS 3, HKAS 21, HKAS 36 and HKAS 38 has resulted in
changes in accounting policies in impairment of assets and goodwill.
Goodwill:
In previous years, goodwill arising on acquisitions prior to 1 January 2001 was
held in reserves, and goodwill arising on acquisitions after 1 January 2001
was capitalised and amortised over its estimated useful life. The Group has
applied the relevant transitional provisions in HKFRS 3. Goodwill previously
recognised in reserves of HK$124 million has been transferred to the Group’s
retained earnings on 1 January 2005. With respect to goodwill previously
capitalised on the balance sheet, the Group on 1 January 2005 eliminated the
carrying amount of the related accumulated amortisation of HK$36 million with
a corresponding decrease in the cost of goodwill (note 21). The Group has
discontinued amortising such goodwill from 1 January 2005 onwards and such
goodwill will be tested for impairment at least annually. Goodwill arising on
acquisitions after 1 January 2005 is measured at cost less accumulated
impairment losses (if any) after initial recognition. As a result of this change in
accounting policy, no amortisation of goodwill has been charged in the current
year, the profit for the year has been increased by HK$16 million.
40 The Grande Holdings Limited Annual Report 2005