ChatDOC/OCRFlux-bench-single huggingface dataset:
# 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

# 3.15 Financial instruments (Cont’d)

# Financial assets (Cont’d)

# Financial assets at FVTPL (Cont’d)

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets and is included in the other revenue and other income line item. Fair value is determined in the manner described in note 4 to the consolidated financial statements.
# 4 FINANCIAL RISK MANAGEMENT (Continued)

# (a) Financial risk factors (Continued)

# (i) Credit risk (Continued)

# Trade receivables

The Group’s trade receivables have been grouped into categories for shared credit risk characteristics:

– primary properties market transactions

– other transactions

For trade receivables from primary properties market transactions, the counterparties are primarily large corporations and have strong financial position and management considers the credit risk is close to zero.

For trade receivables from other transactions, the counterparties are primarily individuals. When there is objective evidence that individual trade receivable is impaired, the loss allowances for these trade receivables is assessed and measured at an amount equal to lifetime expected credit losses.

For the remaining trade receivables from other transactions which no objective evidence is available without undue cost to measure the lifetime expected credit loss, the Group applies the HKFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for these trade receivables collectively.

To measure the expected credit losses, these trade receivables have been grouped based on the days past due and the sectors of the transacted properties (i.e. commercial properties, shops and industrial properties).

The expected loss rates are based on the latest completed historical payment profile of sales over a period of 12 month and the corresponding historical credit losses experienced within that period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables, if any.
# 4 FINANCIAL RISK MANAGEMENT (Continued)

# (a) Financial risk factors (Continued)

# (i) Credit risk (Continued)

# Trade receivables (Continued)

On these basis, the loss allowances for trade receivables as at 31 December 2020 and 31 December 2019 were determined as follows:

# As at 31 December 2020

Expected
loss rate	Gross
carrying
amount	Loss allowance
Individually
assessed	Collectively
assessed	Total
%	HK$’000	HK$’000	HK$’000	HK$’000
Current (not yet due)	4.5%-15.0%	81,268	(460)	(4,138)	(4,598)
Less than 30 days past due	0.8%-7.7%	10,854	(75)	(597)	(672)
31-60 days past due	3.7%-19.0%	3,006	–	(405)	(405)
61-90 days past due	7.9%-31.0%	2,163	(1,345)	(56)	(1,401)
More than 90 days past due	13.0%-100%	29,329	(24,021)	(4,665)	(28,686)
126,620	(25,901)	(9,861)	(35,762)

# As at 31 December 2019

Expected
loss rate	Gross
carrying
amount	Loss allowance
Individually
assessed	Collectively
assessed	Total
%	HK$’000	HK$’000	HK$’000	HK$’000
Current (not yet due)	3.6%-6.2%	75,912	(893)	(2,955)	(3,848)
Less than 30 days past due	0.4%-5.5%	10,303	(96)	(245)	(341)
31-60 days past due	1.3%-13.9%	3,729	(1,601)	(363)	(1,964)
61-90 days past due	2.4%-19.6%	2,369	–	(375)	(375)
More than 90 days past due	36.0%-100%	27,449	(17,104)	(8,884)	(25,988)
119,762	(19,694)	(12,822)	(32,516)

Note: The customers are obliged to settle the amounts due upon the completion of or pursuant to the terms and conditions of the relevant agreements. The loss allowance provided for trade receivables not yet due includes the credit risk arising from bad debts and fallen through transactions. The loss allowance provided for overdue trade receivables includes only the credit risk arising from bad debts.
# Expense ratios by line of business

For the years ended December 31,
2017	2016	2015
Auto	24.8	28.2	34.0
Homeowners	45.6	161.9	136.8
Other personal lines	37.5	37.5	42.9
Total expense ratio	25.7	31.7	35.2

# Impact of specific costs and expenses on the expense ratio

For the years ended December 31,
2017	2016	2015
Amortization of DAC	2.4	2.5	2.5
Advertising expense	8.3	11.2	12.6
Amortization of purchased intangible assets	0.2	1.4	2.2
Other costs and expenses	14.6	16.6	17.9
Restructuring and related charges	0.2	—	—
Total expense ratio	25.7	31.7	35.2

Expense ratio decreased 6.0 points in 2017 compared to 2016. Esurance uses a direct distribution model, therefore its primary acquisition-related costs are advertising as opposed to commissions. Esurance advertising expense ratio decreased 2.9 points in 2017 compared to 2016, primarily due to reductions in homeowners marketing. Other costs and expenses, including salaries of phone sales personnel and other underwriting costs related to customer acquisition, were lower in 2017 compared to 2016 due to the implementation of process efficiencies. Expense ratio includes amortization of purchased intangible assets from the original acquisition in 2011. Starting in 2017, the portion of the remaining purchased intangible asset related to the Esurance brand name was classified as an infinite-lived intangible and is no longer being amortized, but instead tested for impairment on an annual basis.

We continue to review our advertising spend to ensure our acquisition costs meet our targeted returns. Esurance incurs substantially all of its acquisition costs in the year of policy inception. As a result, the Esurance expense ratio will be higher or lower depending on the advertising expenditures incurred related to our profitability actions. Esurance’s annual combined ratio is below 100, after the year of policy inception (in which substantially all acquisition costs are incurred), driven by pricing changes, customer mix and renewal experience.

Expense ratio decreased 3.5 points in 2016 compared to 2015. Esurance has continued to invest in growth, including offering a comprehensive suite of products such as homeowners, motorcycle and usage-based insurance as well as expanding into the Canadian market. Esurance advertising expense ratio decreased 1.4 points in 2016 compared to 2015 in conjunction with our profitability actions. Strategic reductions in marketing spending were made on auto while homeowners advertising spending was increased. Other costs and expenses, including salaries of phone sales personnel and other underwriting costs related to customer acquisition, were lower in 2016 than 2015.
# Other Income

With the decrease in net exchange difference of approximately HK\$0.9 million and decrease in royalty income of approximately HK\$2.5 million from one of the Group’s branded timber products for a timber flooring project, the Group’s other income decreased significantly by approximately HK\$3.1 million, or approximately 62.0%, from approximately HK\$5.0 million for the year ended 31 March 2019 to approximately HK\$1.9 million for the year ended 31 March 2020.

# Selling and Distribution Expenses

The Group’s selling and distribution expenses mainly comprised business development expenses, transportation expenses and storage expenses. The total selling and distribution expenses increased by approximately HK\$2.3 million, or approximately 35.9%, from approximately HK\$6.4 million for the year ended 31 March 2019 to approximately HK\$8.7 million for the year ended 31 March 2020, mainly being an increase in business development expenses incurred to explore potential business opportunities and maintain business relationships.

# Administrative Expenses

The Group’s administrative expenses slightly increased by approximately HK\$2.2 million, or approximately 7.6%, from approximately HK\$28.8 million for the year ended 31 March 2019 to approximately HK\$31.0 million for the year ended 31 March 2020. Staff cost has increased by approximately HK\$1.1 million, as the average number of staff and average monthly salary has been increased during the year ended 31 March 2020. In addition, impairment and written off on assets has increased by approximately HK\$1.0 million.

# Finance Costs

The Group’s finance costs increased by approximately HK\$0.4 million, or approximately 30.8%, from approximately HK\$1.3 million for the year ended 31 March 2019 to approximately HK\$1.7 million for the year ended 31 March 2020. Despite the effective interest rate decreased as Hong Kong Monetary Authority reduced its base rate by 25 basis points to 2 percent in late October 2019, average bank borrowings increased and hence the finance costs for the year ended 31 March 2020 also increased.

# Income Tax Expenses and Effective Tax Rate

The Group’s income tax expenses decreased by approximately HK\$0.3 million, or approximately 60.0%, from approximately HK\$0.5 million for the year ended 31 March 2019 to approximately HK\$0.2 million for the year ended 31 March 2020. Such decrease was attributed to the turnaround effect from profits to loss for the year ended 31 March 2020.

The Group’s effective tax rates for the years ended 31 March 2020 and 2019 were approximately negative 0.6% and 41.3% respectively.
# Net (Loss)/Profit and Net Profit Margin

The Group’s net profit decreased by approximately HK\$24.6 million, from net profit of approximately HK\$0.8 million for the year ended 31 March 2019 to net loss of approximately HK\$23.8 million for the year ended 31 March 2020. The decrease in net profit was mainly due to decreases in revenue and gross profit as mentioned above.

The Group’s net profit margins were approximately negative 15.2% and 0.3% for the years ended 31 March 2020 and 2019 respectively, and the decrease was mainly due to reasons illustrated above.

# Liquidity and Financial Resources Review

The Group had normally funded its liquidity and capital requirements primarily through bank borrowings and net cash generated from operating activities.

# Total equity and net current assets

The total equity of the Group mainly comprises share capital, share premium and reserves. The total equity of the Group as at 31 March 2020 was approximately HK\$145.2 million (2019: approximately HK\$169.1 million).

As at 31 March 2020, the Group’s net current assets were approximately HK\$115.1 million (2019: approximately HK\$138.1 million).

# Cash and cash equivalents

As at 31 March 2020, the Group had cash and cash equivalents of approximately HK\$59.3 million (2019: approximately HK\$56.5 million).

# Bank borrowings

As at 31 March 2020, the Group had bank borrowings of approximately HK\$41.4 million (2019: approximately HK\$38.9 million), and all of the Group’s bank borrowings were at floating interest rates (2019: HK\$38.9 million).
# Strategic Enabler:

Community engagement and investment

We align our community investment strategy with our business purpose, taking into consideration our stakeholders’ areas of interests.

# Our approach to community investment

Our strategy remains focused on health issues relevant to communities where we operate, education (specifically financial education) and building community resilience through safety. In living our purpose, we contribute to improving lives and leaving a lasting impact on society through our employee engagement and volunteer programmes. We continue to build on the long-term relationships we have with our community partners, ofering both financial and skills-based support.

# Governance of community investment

Our Group-wide Community Investment Policy and the Group’s ESG strategy guide our approach to community investment and engagement. Within this framework, our businesses have the autonomy to manage their own community investment programmes. In Asia and Africa, Prudence Foundation, a unified charitable organisation governed by a statutory Board of Directors, regularly reviews our strategy and funding for community investment programmes with the aim of maximising positive outcomes in the regions where we operate. The Responsibility and Sustainability Working Group (RSWG) oversees our community engagement and investment activities on behalf of the Board.

Our Group-wide Community Investment Policy sets out minimum standards, including not permitting any investment or contributions that are prohibited by law or regulation, those under the Political Donations Policy, and those to any religious organisation whose principal aim is to propagate a particular faith. It is the Group’s policy neither to make donations to political parties nor to incur political expenditure, within the meaning of those expressions as defined in the UK Political Parties, Elections and Referendums Act 2000. The Group did not make any such donations or incur any such expenditure in 2021.

Monitoring and measuring community investment

Our community investment performance metrics are aligned to the Business for Societal Impact (B4SI) Framework, which is used to monitor progress and guide the valuation of cash contributions.

In 2021, direct cash donations to charitable organisations totalled \$5.9 million (2020: \$9.7 million), reflecting donations made during the reporting year by continuing operations, excluding JVs. 2020 figures have been restated on this basis. For a breakdown, please refer to the charts.
(c) The Company may seek separate approval by the Shareholders in general meeting for granting options beyond the 10% limit under sub-paragraph (a) and (b) above provided the options in excess of the 10% limit are granted only to participants specifically identified by the Company before such approval is sought. In such event, the Company must send a circular to the Shareholders containing a generic description of such grantees, the number and terms of such options to be granted and the purpose of granting options to them with an explanation as to how the terms of the options will serve such purpose and all other information required under the GEM Listing Rules.

(d) The aggregate number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not, in aggregate, exceed 30% of the shares in issue from time to time. No options may be granted under the Share Option Scheme or any other share option schemes of the Company, if this will result in the limit being exceeded.

# (F) Maximum entitlement of each participant

The total number of shares issued and to be issued upon exercise of options granted to each participant (including both exercised and outstanding options) under the Share Option Scheme of the Company, in any 12-month period up to the date of grant shall not exceed 1% of the shares in issue. Where any further grant of options to a participant would result in the shares issued and to be issued upon exercise of all options granted and to be granted to such participant (including exercised, cancelled and outstanding options) in the 12 months period up to and including the date of such further grant representing in aggregate over 1% of the shares in issue, must be separately approved by Shareholders in general meeting with such participant and his close associates abstaining from voting, and the number and terms (including the subscription price) of the options to be granted to such participant must be fixed before the Shareholder’s approval. In such event, the Company must send a circular to the Shareholders containing the identity of the participant, the number and terms of the options to be granted (and options previously granted to such participant), and all other information required under the GEM Listing Rules. The date of the Board meeting proposing such further grant should be taken as the date of grant for the purpose of calculating the subscription price.

# (G) Grant of options to certain connected persons

(a) Any grant of options to a Director, chief executive or substantial shareholder of the Company or any of their respective associates must be approved by the independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the option).
(b) Where any grant of options to a substantial Shareholder or an independent non-executive Director or any of their respective associates will result in the total number of shares issued and to be issued upon exercise of all options already granted and to be granted to such person under the Share Option Scheme (including options exercised, cancelled and outstanding) and any other share option schemes of the Company to such person in any 12-month period up to and including the date of grant:

(i) representing in aggregate over 0.1% of the shares in issue; and

(ii) having an aggregate value, based on the closing price of the shares at the date of each grant, in excess of HK\$5.0 million,

such further grant of options is required to be approved by Shareholders at a general meeting of the Company, with voting to be taken by way of poll. The Company shall send a circular to the Shareholders containing all information as required under the GEM Listing Rules in this regard. The grantee, his associate and all core connected persons of the Company shall abstain from voting (except where any of such person intends to vote against the proposed grant and his/her intention to do so has been stated in the aforesaid circular). Any change in the terms of an option granted to a substantial shareholder or an independent non-executive Director or any of their respective associates is also required to be approved by Shareholders in the aforesaid manner.

# (H) Restrictions on the times of grant of options

(a) No offer for the grant of options may be made after any inside information has come to the knowledge of the Group until such inside information has been announced pursuant to the requirements of the GEM Listing Rules and the Securities and Futures Ordinance (the “SFO”) (Chapter 571 of the Laws of Hong Kong). No option may be granted during the period commencing one month immediately preceding the earlier of:

(i) the date of the Board meeting (such date to first be notified to the Stock Exchange in accordance with the GEM Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or other interim period (whether or not required under the GEM Listing Rules); and

(ii) the deadline for the Company to publish an announcement of the results for any year or half-year under the GEM Listing Rules, or quarterly or any other interim period (whether or not required under the GEM Listing Rules).

(b) Further to the restrictions in paragraph (a) above, no option may be granted to a Director on any day on which financial results of the Company are published and:

(i) during the period of 60 days immediately preceding the publication date of the annual results or, if shorter, the period from the end of the relevant financial year up to the publication date of the results; and

(ii) during the period of 30 days immediately preceding the publication date of the quarterly results and half-year results or, if shorter, the period from the end of the relevant quarterly or half-year period up to the publication date of the results.
# 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

# (e) Financial Instruments (Continued)

# Financial assets (Continued)

# Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

# Financial liabilities and equity

# Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

# Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

# Financial liabilities

All financial liabilities are subsequently measured at amortised cost using the effective interest method.

# Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
# CONTINGENT LIABILITIES

No material contingent liability had come to the attention of the Directors in 2016 and up to the date of results announcement and annual report issuance of the Company.

# EVENT AFTER THE REPORTING PERIOD

Up to the date of this report, the Group conducted and completed a placing of its new 18,000,000 shares after the year ended 31 December 2016. For details please refer to relevant announcements.