Interim Results for 6 months to 30 September 2017

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

 

 

These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

 

1              GENERAL

 

Myanmar Strategic Holdings Limited (the "Company") is a public company limited by shares incorporated and domiciled in Singapore with its principal place of business and registered office at 69B Boat Quay, #03-00, Singapore 049857. The Company was listed on the Main Market of the London Stock Exchange on 22 August 2017.

 

The principal activities of the Company is investment and trading in Myanmar related to investment projects.

 

The Company's immediate and ultimate holding company is Macan Pte. Ltd., a company incorporated and domiciled in Singapore.

 

 

2              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

2.1          Basis of preparation

 

The financial statements have been drawn up in accordance with the provisions of the Singapore Companies Act, Chapter 50 and International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") which comprise standards and interpretations approved by IASB and International Financial Reporting Interpretations Committee ("IFRIC"), and are prepared under the historical cost convention, except as disclosed in the accounting policies below.

 

Approval has been granted to the Company for the relief of preparation of financial statements in accordance with Singapore Financial Reporting Standards by Accounting and Corporate Regulatory Authority ("ACRA") under section 202 of the Companies Act, Chapter 50.

 

The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the statement of financial position of the Company are presented in United States dollar ("US$") which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

 

The preparation of financial statements in compliance with IFRS requires management to make judgements, estimates and assumptions that affect the Group's application of accounting policies and reported amounts of assets, liabilities, revenue and expenses. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from those estimates. The areas where such judgements or estimates have significant effect on the financial statements are disclosed in Note 3 to the financial statements.

 

The Group has adopted all the new and revised IFRS that are relevant to its operations and effective for the current financial period. The adoption of these new/revised IFRS did not result in changes to the Group's accounting policies and had no material effect on the amounts reported for the current or prior financial periods.

 

2              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

IFRS issued but not yet effective 

 

At the date of authorisation of these financial statements, the following IFRS and IFRIC of the IASB that may be relevant to the Group were issued but not yet effective and have not been adopted early in these financial statements:

 

			Effective date (annual periods beginning on or after)
IFRS 2 (Amendments)	:	Classification and Measurement of Share-based Payment Transactions	1 January 2018
IFRS 9	:	Financial instruments	1 January 2018
IFRS 15	:	Revenue from contracts with customers	1 January 2018
IFRS 15 (Amendments)	:	Clarification to IFRS 15 Revenue from contracts with customers	1 January 2018
IFRS 16	:	Leases	1 January 2019
IFRIC 22	:	Foreign currency transactions and advance consideration	1 January 2018

 

Consequential amendments were also made to various standards as a result of these new or revised standards.

 

The management anticipates that, based on the Group's and the Company's current operations, the adoption of the above IFRS and IFRIC in future periods will not have a material impact on the financial statements of the Group in the period of their initial adoption except as discussed below.

 

IFRS 9 Financial Instruments

 

IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement with new requirements for the classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting.

 

Classification and measurement

 

Under IFRS 9, financial assets are classified into financial assets measured at fair value or at amortised cost depending on the Group's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Fair value gains or losses will be recognised in profit or loss except for certain equity investments, for which the Group can elect to recognise the gains and losses in other comprehensive income. Debt instruments that meet the Solely Payments of Principal and Interest contractual cash flow characteristics test and where the Group is holding the debt instrument to both collect the contractual cash flows and to sell the financial assets can also be measured at fair value through other comprehensive income.

 

IFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from IAS 39, except for financial liabilities that are designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, IFRS 9 retains the requirements in IAS 39 for de-recognition of financial assets and financial liabilities.

 

The Group has completed its preliminary assessment of the classification and measurement of its financial assets and financial liabilities and does not expect any significant changes to the classification and measurement of its financial assets and liabilities currently measured at amortised cost.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

IFRS issued but not yet effective (Continued)

 

Impairment

 

IFRS 9 introduces a new forward-looking impairment model based on expected credit losses to replace the incurred loss model in IAS 39. This determines the recognition of impairment provisions as well as interest revenue. For financial assets at amortised cost or fair value through other comprehensive income, the Group will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition under the three-stage model or from initial recognition if the simplified model is applied.

 

The new impairment requirements are expected to result in changes to and likely increases in impairment loss allowances on trade and other receivables, due to earlier recognition of credit losses. The Group expects to adopt the simplified model for its trade receivables and will record an allowance for lifetime expected losses from initial recognition. The Group will initially provide 12 months expected losses under the three-stage model. The Group is still in the process of determining how it will estimate expected credit losses and the sources of forward-looking data.

 

Transition

 

The Group plans to adopt IFRS 9 in the financial year beginning on 1 April 2018 with retrospective effect in accordance with the transitional provisions and intends to elect not to restate comparatives for the previous financial year and will include additional disclosures in its financial statements in the year when IFRS 9 is adopted.

 

IFRS 15 Revenue from Contracts with Customers

 

IFRS 15 introduces a comprehensive model that applies to revenue from contracts with customers and supersedes all existing revenue recognition requirements under IFRS. The model features a five-step analysis to determine whether, how much and when revenue is recognised, and two approaches for recognising revenue: at a point in time or over time. The core principle is that an entity recognises revenue when control over promised goods or services is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also introduces extensive qualitative and quantitative disclosure requirements which aim to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

 

On initial adoption of this standard, the Group has preliminarily assessed that there will be no significant impact on the timing and pattern on the revenue recognition.

 

The Group plans to adopt IFRS 15 in the financial year beginning 1 April 2018 with full or cumulative retrospective effect in accordance with transitional provisions, and will include the required additional disclosures in its financial statements for the financial year.

 

IFRS 16 Leases

 

IFRS 16 supersedes IFRS 17 Leases and introduces a new single lessee accounting model which eliminates the current distinction between operating and finance leases for lessees. IFRS 16 requires lessees to capitalise all leases on the statement of financial position by recognising a 'right-of-use' asset and a corresponding lease liability for the present value of the obligation to make lease payments, except for certain short-term leases and leases of low-value assets. Subsequently, the lease assets will be depreciated and the lease liabilities will be measured at amortised cost.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

IFRS issued but not yet effective (Continued)

 

IFRS 16 Leases (Continued)

 

From the perspective of a lessor, the classification and accounting for operating and finance leases remains substantially unchanged under IFRS 16. IFRS 16 also requires enhanced disclosures by both lessees and lessors.

 

On initial adoption of this standard, there may be an insignificant impact on the accounting treatment for leases, particularly rented office premises, which the Group, as lessee, currently accounts for as operating leases. On adoption of IFRS 16, the Group will be required to capitalise its rented office premises and other operating facilities on the statement of financial position by recognising them as 'right-of-use' assets and their corresponding lease liabilities for the present value of future lease payments. The Group plans to adopt the standard in the financial year beginning on 1 April 2019 using modified retrospective method in accordance with the transitional provisions, and will include the required additional disclosures in its financial statements for that financial year.

 

2.2          Basis of consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Subsidiaries are entities over which the Group has control. The Group controls an investee if the Group has power over the investee, exposure to variable returns from the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

Subsidiaries are consolidated from the date on which control is obtained by the Group up to the effective date on which control is lost, as appropriate.

 

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated on consolidation. Unrealised losses may be an impairment indicator of the asset concerned.

 

The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company, using consistent accounting policies. Where necessary, accounting policies of subsidiaries are changed to ensure consistency with the policies adopted by other members of the Group.

 

Non-controlling interests in subsidiaries relate to the equity in subsidiaries which is not attributable directly or indirectly to the owners of the parent. They are shown separately in the consolidated statements of comprehensive income, financial position and changes in equity.

 

Non-controlling interests in the acquiree that are a present ownership interest and entitle its holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value, of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.2          Basis of consolidation (Continued)

 

When the Group loses control of a subsidiary it derecognises the assets and liabilities of the subsidiary and any non-controlling interest. The profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

 

Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or joint venture.

 

In the separate financial statements of the Company, investment in subsidiaries are carried at cost, less any impairment loss that has been recognised in profit or loss.

 

2.3          Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable. Revenue is presented net of estimated customer returns, rebates, other similar allowances and sales related taxes.

 

Management fees

 

Management fees earned from hotels, restaurants and language centre managed by the Group, usually under long-term contracts with the hotel, restaurant and language centre owners, are recognised when services are rendered with reference to the terms of the contracts. The fees are incentive fees, which are based on the hotels' restaurants' and language centre's profitability.

 

The Group may commit to provide annual or monthly advances to the owners of the managed hotels pursuant to each operation and management agreement. These advances are considered, together with all other relevant operating expenses, a deduction to the revenues of the underlying operations in the calculation of the management fee. If the Group is not entitled to any management fee, such advances are recognised as hotel related operating expense in the profit or loss.

 

Technical support service fees

 

Technical support service fees earned from hotels and language centre managed by the Group are recognised as and when services are rendered with reference to the terms of the contracts.

 

Royalty fees

 

Royalty fee income is determined based on the agreed royalty rate with reference to the operations of "Wall Street English" language centre in Myanmar based on the total gross revenue for the year.

 

2.4          Employee leave entitlements

 

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated undiscounted liability for annual leave expected to be settled wholly within 12 months from the reporting date as a result of services rendered by employees up to the end of the financial year.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.5          Share-based payments

 

The Group issues equity-settled based payments to certain employees. Equity-settled share-based payments are measured at fair value of the equity instruments (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period with a corresponding credit to the share-based payment reserve, based on the Group's estimate of the number of equity instruments that will eventually vest and adjusted for the effect of non-market-based vesting conditions. At the end of each financial year, the Group revises the estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period with a corresponding adjustment to the share-based payment reserve.

 

Fair value is measured using the Black-Scholes pricing model. The estimated life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restoration and behavioural considerations.

 

2.6          Taxes

 

Income tax expense represents the sum of the tax currently payable and deferred tax.

 

Current income tax

 

The tax currently payable is based on taxable profit for the financial year. Taxable profit differs from profit reported as profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group's liability for current tax is recognised at the amount expected to be paid or recovered from the taxation authorities and is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and its subsidiaries operate by the end of the financial year.

 

Current income taxes are recognised in profit or loss, except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

 

Deferred tax

 

Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at the end of each financial year and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Group operates by the end of the financial year.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.6          Taxes (Continued)

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the group expects to recover or settle its assets and liabilities.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Deferred tax is recognised in profit or loss, except when it relates to items recognised outside profit or loss, in which case the tax is also recognised either in other comprehensive income or directly in equity.

 

Sales tax

 

Revenue, expenses and assets are recognised net of the amount of sales tax except:

 

•        when the sales taxation that is incurred on purchase of assets or services is not  recoverable from the taxation authorities, in which case the sales tax is recognised as part of cost of acquisition of the asset or as part of the expense item as applicable; and

•        receivables and payables that are stated with the amount of sales tax included.

 

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

 

2.7          Foreign currency transactions and translations

 

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency ("foreign currencies") are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each financial year, monetary items denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial year. Non-monetary 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. Nonmonetary 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 retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in United States dollar using exchange rates prevailing at the end of the financial year. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, are recognised initially in other comprehensive income and accumulated in the Group's foreign exchange reserve.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign exchange reserve.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.7          Foreign currency transactions and translations (Continued)

 

On disposal of a foreign operation, the accumulated foreign exchange reserve relating to that operation is reclassified to profit or loss.

 

2.8          Plant and equipment

 

All items of plant and equipment are initially recognised at cost. The cost includes its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Dismantlement, removal or restoration costs are included as part of the cost if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the plant and equipment.

 

Subsequent expenditure on an item of plant and equipment is added to the carrying amount of the item if it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. All other costs of servicing are recognised in profit or loss when incurred.

 

Plant and equipment are subsequently stated at cost less accumulated depreciation and any accumulated impairment losses.

 

Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases:

 

Computers                                         :               3 years

Furniture and fittings                    :               3 years

 

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

 

The estimated useful lives, residual values and depreciation methods are reviewed, and adjusted as appropriate, at the end of each financial year.

 

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

 

The gain or loss arising on disposal or retirement of an item of 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.

 

2.9          Intangible assets

 

Computer software licence

 

Acquired computer software licence is initially capitalised at cost which includes the purchase price (net of any discounts and rebates) and other directly attributable costs of preparing the software for its intended use. Direct expenditure which enhances or extends the performance of computer software beyond its specifications and which can be reliably measured is added to the original cost of the software. Costs associated with maintaining computer software are recognised as an expense as incurred.

 

Computer software licence is subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives of 3 years.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.9          Intangible assets (Continued)

 

Area development fees and centre fees

 

An area development fee is paid for the exclusive rights to develop and operate the "Wall Street English" language centre in Myanmar. The area development fee is capitalised and amortised over the period of 10 years from the date operation commences.

 

Centre fees are required to be paid in respect of the opening of a new "Wall Street English" language centre in Myanmar. The centre fees paid are capitalised and amortised over the period of 10 years from the date when the respective centre commences operations.

 

The area development fees and centre fees are initially capitalised at cost and subsequently measured at cost less any accumulated amortisation and any accumulated losses.

 

2.10        Impairment of non-financial assets

 

At the end of each financial year, the Group reviews the carrying amounts of its non-financial assets 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). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its 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.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.11        Financial instruments

 

Financial assets and financial liabilities are recognised on the statements of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

Effective interest method

 

The effective interest method is a method of calculating the amortised cost of a financial instrument and allocating the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period, to the net carrying amount of the financial instrument. Income and expense are recognised on an effective interest basis for debt instruments other than those financial instruments at fair value through profit or loss.

 

Financial assets

 

All financial assets are initially recognised at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially recognised at fair value.

 

The Group classifies its financial assets as loans and receivables. The classification depends on the nature and purpose for which these financial assets were acquired and is determined at the time of initial recognition.

 

Loans and receivables

 

Non-derivative financial assets which have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost, using the effective interest method, less impairment. Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

The Group's loans and receivables in the statements of financial position comprise trade and other receivables (excluding prepayments) and cash and cash equivalents.

 

Impairment of financial assets

 

Financial assets are assessed for indicators of impairment at the end of each financial year. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment have been impacted.

 

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

 

The carrying amounts of all financial assets are reduced by the impairment loss directly with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.11        Financial instruments (Continued)

 

Financial assets (Continued)

 

Impairment of financial assets (Continued)

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial assets at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

                Derecognition of financial assets

 

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

 

On derecognition, any difference between the carrying amount and the sum of proceeds received and amounts previously recognised in other comprehensive income is recognised in profit or loss.

 

Financial liabilities and equity instruments

 

Classification as debt or equity

 

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into 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 the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. The Company classifies ordinary shares as equity instruments.

 

Financial liabilities

 

The Group classified its financial liabilities as other financial liabilities.

 

Other financial liabilities

 

Trade and other payables

 

Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, where applicable, using the effective interest method, with interest expense recognised on an effective yield basis.

 

 

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.11        Financial instruments (Continued)

 

Financial liabilities and equity instruments

 

Other financial liabilities (Continued)

 

Convertible bonds

 

Convertible bonds with conversion option are accounted for as financial liability with an embedded equity conversion derivative based on the terms of the contract. On issuance of convertible bonds, the embedded option is recognised at its fair value as derivative liability with subsequent changes in fair value recognised in profit or loss. The remainder of the proceeds is allocated to the liability component that is carried at amortised cost until the liability is extinguished on conversion or redemption. When an equity conversion option is exercised, the carrying amounts of the liability component and the equity conversion option are derecognised with a corresponding recognition of share capital.

 

Derecognition of financial liabilities

 

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount and the consideration paid is recognised in profit or loss.

 

2.12        Cash and cash equivalents

 

Cash and cash equivalents in the statement of financial position comprise of cash on hand, cash at bank and demand deposits which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

 

2.13        Operating leases

 

Rentals payable under operating leases (net of any incentives received from lessors) are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

 

2.14        Provisions

               

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the 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 financial year, taking into account the risks and uncertainties surrounding the obligation. Where 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.

 

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. The increase in the provision due to the passage of time is recognised in the statement of comprehensive income as finance expense.

 

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in profit or loss when the changes arise.

 

 

2              SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

2.15        Related party

 

A related party is defined as follows:

 

(a)          A person or a close member of that person's family is related to the Group if that person:

 

(i)           has control or joint control over the Company;

(ii)          has significant influence over the Company; or

(iii)         is a member of the key management personnel of the Company or of a parent of the Company.

 

(b)          An entity is related to the Group if any of the following conditions applies:

 

(i)           the entity and the Company are members of the same Group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii)          one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a company of which the other entity is a member).

(iii)         both entities are joint ventures of the same third party.

(iv)         one entity is a joint venture of a third entity and other entity is an associate of the third entity.

(v)          the entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company;

(vi)         the entity is controlled or jointly controlled by a person identified in (a);

(vii)        a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

 

 

3              CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

                In the application of the Group's accounting policies, which are described in Note 2 to the financial statements, management made judgements, estimates and assumptions about the carrying amounts of assets and liabilities that were not readily apparent from other sources. The estimates and associated assumptions were based on historical experience and other factors that were considered to be reasonable under the circumstances. Actual results may differ from these estimates.

 

These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

3              CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)

 

3.1          Critical judgements made in applying the entity's accounting policies

 

The following are the critical judgments, apart from those involving estimations (see below) that management has made in the process of applying the Group's accounting policies and which have a significant effect on the amounts recognised in the financial statements.

 

i)   Evaluation of control over managed hotels, restaurants and language centre

 

Management has assessed if the management contracts with the hotel owners provide the company control over the hotel operations which would require the hotel operations to be consolidated under IFRS 10. Whilst the management contracts have initial terms of up to 10 years and give the Group key decision making rights in operating the hotels, management is of the view that the management fees, consisting of fixed fees and variable fees, fee are in line with the industry practice and provide a market-based remuneration for the services provided. Consolidation of the operating results, assets and liabilities under IFRS 10 is therefore not required.

 

ii)  Impairment of investments in subsidiaries

 

At the end of each financial year, an assessment is made on whether there is objective evidence that the investments in subsidiaries are impaired. The management's assessment is based on the estimation of the value-in-use of the cash generating unit by forecasting the expected future cash flows for a period up to 5 years, using a suitable discount rate in order to calculate the present value of those cash flows.

 

3.2          Key sources of estimation uncertainty

 

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the financial year, 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.

 

i)   Allowance for trade and other receivables

 

The management establishes allowance for trade and other receivables on a case-by-case basis when they believe that payment of amounts owed is unlikely to occur. In establishing these allowances, the management considers its historical experience and changes to its customers' financial position. If the financial conditions of customers were to deteriorate, resulting in impairment of their abilities to make the required payments, additional allowances may be required. The carrying amount of trade and other receivables (excluding prepayments) for the Group is disclosed in Note 9 to the financial statements.

 

ii)  Impairment of intangible assets

 

The management determines whether intangible assets are impaired at least on an annual basis. Intangible assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of the Group's intangible asset is disclosed in Note 8 to the financial statements.

 

4              REVENUE

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Management fees	70,641	-	101,037
Technical support service fees	191,720	90,000	210,000
Royalty fee	63,129	-	19,037
	325,490	90,000	330,074

 

 

5              EMPLOYEE BENEFITS EXPENSE

                               

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Salaries and bonus *	485,454	185,912	478,219
Contributions to defined contribution plans	12,048	5,588	26,160
Share-based compensation	51,965	-	-
	549,467	191,500	504,379

 

* Included in these expenses are Directors' fees and remuneration as disclosed in Note 17 to the financial statements.

 

Equity-settled employee share options

 

On 23 May 2017, share options were granted by the Company to certain employees. The exercise price of the options is US$11 per ordinary share. The options vest i) with effect from the second anniversary of the date of the agreement in respect of fifty percent (50%) of the share options, ii) with effect from the third anniversary of the date of the agreement in respect of a further thirty percent (30%) of the share options and iii) with effect from the fourth anniversary of the date of the Agreement in respect of a further twenty percent (20%) of the share options. The share options will only be exercisable in respect of share options that have already vested. The contractual life of the share options granted is 10 years. The share options will immediately lapse and cease to have effect if the employees give or are given notice of termination of their employment. There are no cash settlement alternatives.

 

 

 

 

5              EMPLOYEE BENEFITS EXPENSE (Continued)

               

Employee share options (Continued)

 

Movement of share options during the financial period/year

 

The following table illustrates the number and movements in share options during the financial period/year:

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	No. of shares	No. of shares	No. of shares
Outstanding at beginning of financial period/year	-	-	-
-  Granted	117,000	-	-
-  Exercised	-	-	-
-  Expired	-	-	-
Outstanding at end of financial period/year	117,000	-	-
Exercisable at end of financial period/year	-	-	-

 

Fair value of the share options granted

 

The estimated fair value of each share option granted on 23 May 2017 was US$3.33. The fair value of the share options granted is estimated at the grant date using Black-Scholes option pricing model, taking into account the terms and conditions upon which the share options were granted.

 

The Black-Scholes option pricing model uses the following assumptions:

 

			Grant date
			23 May 2017
Grant date share price			US$10.00
Exercise price			US$11.00
Expected volatility			23.15%
Expected life of option			10 years
Risk-free interest rate			2.25% p.a.
Dividend yield			0.00%

 

The expected life of the share options is based on the contractual life of the option and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the option is indicative of future trends, which may not necessarily be the actual outcome.

 

The Group recognised total expenses of US$51,965 (30 September 2016: NIL, 31 March 2017: NIL) related to equity-settled share-based payment transactions during the period.

 

 

6              FINANCE COST

 

Finance costs relates to interest charged on the convertible bonds (Note 12). The accrued interest was converted into ordinary shares on conversion of the convertible bonds as at the date of initial public offering as detailed in Note 12 to the financial statements.

 

7              LOSS BEFORE INCOME TAX

 

In addition to the charges and credits disclosed elsewhere in the financial statements, the above includes the following charges:

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Expenses pursuant to the listing application	362,641	166,507	428,476
Professional fees	133,667	214,559	482,415
Rental of office	45,521	61,796	126,917
Travelling expenses	32,878	50,764	93,272
Royalty expense	63,129	-	19,037
Allowance for impairment of other receivables	-	-	550,327
Hotel related operating expenses	-	-	289,673
Foreign exchange loss	-	-	79,569
Bad debts written off	-	-	12,000
Marketing expenses	-	-	11,344

 

 

8              INTANGIBLE ASSETS

 

	Area development fee	Computer software	Total
	US$	US$	US$
Cost
At 1 April 2016	-	-	-
Additions from 1 April 2016 to 30 September 2016	150,000	-	150,000
At 30 September 2016	150,000	-	150,000
Additions from 1 October 2016 to March 2017	-	20,000	20,000
At 31 March 2017	150,000	20,000	170,000
Additions from 1 April 2017 to 30 September 2017	-	-	-
At 30 September 2017	150,000	20,000	170,000
Accumulated amortisation
At 1 April 2016	-	-	-
Amortisation from 1 April 2016 to 30 September 2016	-	-	-
At 30 September 2016	-	-	-
Amortisation from 1 October 2016 to March 2017	2,500	1,111	3,611
At 31 March 2017	2,500	1,111	3,611
Amortisation from 1 April 2017 to 30 September 2017	7,500	3,333	10,833
At 30 September 2017	10,000	4,444	14,444
Net carrying amount
At 30 September 2016	150,000	-	150,000
At 31 March 2017	147,500	18,889	166,389
At 30 September 2017	140,000	15,556	155,556

 

9              TRADE AND OTHER RECEIVABLES

 

	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Trade receivables
Third party	-	12,000	-
Related party	191,701	-	93,074
Total trade receivables	191,701	12,000	93,074
Other receivables
Related parties	1,136,482	473,149	1,175,479
Less: Allowance for impairment	(270,000)	-	(270,000)
	866,482	473,149	905,479
Third parties	562,539	495,369	331,136
Less: Allowance for impairment	(280,327)	-	(280,327)
	282,212	495,369	50,809
Advances for hotel operations	74,001	377,558	219,538
Sundry receivables	44,748	8,623	68,174
Deposits	2,030	3,446	3,816
Prepayments	125,536	178,672	43,107
Total other receivables	1,395,009	1,536,817	1,290,923
Total trade and other receivables	1,586,710	1,548,817	1,383,997
Total trade and other receivables (excluding prepayments)	1,461,174	1,370,145	1,340,890
Add: Cash and cash equivalents (Note 10)	3,953,518	2,248,350	4,462,642
Total loans and receivables	5,414,692	3,618,495	5,803,532

 

Trade receivables

 

Trade receivables are non-interest bearing and are generally on 15 (30 September 2016: 30,
31 March 2017: 15) days credit term. They are measured at their original invoice amounts which represent their fair value on initial recognition.

 

Other receivables

 

Amount due from related parties are non-trade in nature, unsecured, interest-free and are repayable on demand.

 

Included in the amount due from related parties are US$1,136,482 (30 September 2016: US$473,149, 31 March 2017: US$1,175,479) arising from advances to a firm where a Director of the subsidiaries has significant influence in the related party.

 

 

 

9              TRADE AND OTHER RECEIVABLES (Continued)

 

Other receivables (Continued)

 

Allowance for impairment of receivable for a related party amounting US$270,000 (30 September 2016: NIL, 31 March 2017: US$270,000) is in respect of advances for the operations of the two managed restaurants. Since both the managed restaurants have ceased operations in March 2017, recoverability is in doubt.

 

Receivables that are past due but not impaired

 

The Group has no (30 September 2016: NIL, 31 March 2017: NIL) trade receivables that are past due at the end of the reporting period but not impaired.

 

Receivables that are either past due or impaired

 

The Group has no trade receivables (30 September 2016: NIL, 31 March 2017: NIL) that are impaired at the end of the reporting period.

 

 

10           CASH AND CASH EQUIVALENTS

 

	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Cash at bank	3,943,554	2,241,468	4,455,744
Cash on hand	9,964	6,882	6,898
	3,953,518	2,248,350	4,462,642

 

Cash at bank earns interest at floating rates based on daily bank deposit rates.

 

 

 

 

11           TRADE AND OTHER PAYABLES

 

	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Trade payables
Third party	19,010	-	11,141
Accrued royalty expenses	-	-	10,321
Total trade payables	19,010	-	21,462
Other payables
Third parties	17,121	4,879	15,240
Immediate holding company	4,180	4,180	4,180
Related party	-	3,237	2,528
Accruals	230,506	115,240	119,294
Total other payables	251,807	127,536	141,242
Total trade and other payables	270,817	127,536	162,704
Total trade and other payables	270,817	127,536	162,704
Add: Convertible bonds (Note 12)	-	-	3,742,922
Total financial liabilities carried at amortised cost	270,817	127,536	3,905,626

 

Trade payables

 

Trade payable amount due to third party is unsecured, non-interest bearing and is on 15
(30 September 2016: 15, 31 March 2017: 15) days credit term.

 

Other payables

 

The non-trade amount due to third parties, related party and immediate holding company is non-trade in nature, unsecured, interest-free and repayable on demand.

 

 

 

 

12           CONVERTIBLE BONDS

 

	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Balance at beginning of financial period/year	3,742,922	-	-
Issued during the financial period/year	40,000	-	3,711,400
Amortisation of interest charged during the financial period/year	140,718	-	31,522
Converted to share capital during the financial period/year	(3,923,640)	-	-
Balance at end of financial period/year	-	-	3,742,922

 

On 1 March 2017, the Group issued convertible bonds amounting to US$3,711,400, which were subscribed by existing shareholders and third parties. On 15 July 2017, the Group issued additional convertible bonds amounting to US$40,000 to third parties. Interest at 10% per annum was charged from the date of issuance until the conversion date. On the date of initial public offering, the principal and the accrued interest were converted into ordinary shares at US$10 per share (Note 13).

 

 

13           SHARE CAPITAL

 

Issued and fully paid ordinary shares

 

	Unaudited			Unaudited			Audited
	As at			As at			As at
	30 September 2017			30 September 2016			31 March 2017
	No. of			No. of			No. of
	shares	US$		shares	US$		shares	US$
Class A - Non-voting shares
At beginning of financial period/year	-	-		548,269	3,563,749		548,269	3,563,749
Shares issued during the financial period/year	-	-		264,200	1,717,300		264,200	1,717,300
Reclassification	-	-		-	-		(812,469)	(5,281,049)
At end of financial period/year	-	-		812,469	5,281,049		-	-
Class B - Voting shares
At beginning of financial period/year	-	-		1,020,000	120,000		1,020,000	120,000
Reclassification	-	-		-	-		(1,020,000)	(120,000)
At end of financial period/year	-	-		1,020,000	120,000		-	-
Ordinary shares
At beginning of financial period/year	1,832,469	5,401,049		-	-		-	-
Conversion of bonds (Note 12)	392,364	3,923,640		-	-		-	-
Shares issued during the financial period/year	42,300	423,000		-	-		-	-
Share issuance expense	-	(1,647)		-	-		-	-
Reclassification	-	-		-	-		1,832,469	5,401,049
At end of financial period/year	2,267,133	9,746,042		-	-		1,832,469	5,401,049
Total share capital	2,267,133	9,746,042		1,832,469	5,401,049		1,832,469	5,401,049

 

13           SHARE CAPITAL (Continued)

 

Pursuant to the Company's conversion into a public company as disclosed in Note 1 to the financial statements, 812,469 Class A - Non-voting ordinary shares and 1,020,000 Class B - Voting ordinary shares were reclassified into new ordinary shares of the Company.

 

Previous Class A shareholders are entitled to distribution of profits and dividends including the voting rights.

 

Previous Class B shareholders are entitled to distribution of profits and dividends including the voting rights.

 

During the financial period, the Company issued additional 42,300 ordinary shares at US$1.00 per share as a result of its initial public offering.

 

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares have no par value and carry one vote per share without restriction.

 

 

14           RESERVES AND ACCUMULATED LOSSES

 

Equity reserve which represents the effects of changes in ownership interests in subsidiaries when there is no change in control.

 

Share options reserve which represents the equity-settled share options granted to employees
(Note 5). The reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the expiry or exercise of the share options.

 

Accumulated losses represents all other net gains and losses and transactions with owners not recognised elsewhere.

 

 

15           OPERATING LEASE COMMITMENTS

 

As at the end of the financial period, commitments in respect of non-cancellable operating leases in respect of office premises are as follows:

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Within one financial year	40,360	92,052	162,704

 

Leases are negotiated for a term of one year where certain leases have an option to renew.

 

 

 

 

16           LOSS PER SHARE

 

Basic loss per share is calculated by dividing the loss for the financial period/year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial period/year.

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
Loss for the financial period/year attributable to owners of the Company (US$)	(1,081,427)	(653,200)	(2,372,969)
Weighted average number of ordinary shares during the financial period/year applicable to basic loss per share	1,941,135	1,705,936	1,773,780
Basic and diluted	(0.56)	(0.38)	(1.34)

 

 

17           SIGNIFICANT RELATED PARTY TRANSACTIONS

 

During the financial period/year, in addition to the information disclosed elsewhere in these financial statements, the Group entered into the following significant transactions with related parties at rates and terms agreed between the parties:

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
With immediate holding company:
-     Repayments	-	(5,838)	-
-     Payments on behalf	-	-	5,838
With related parties*:
-     Technical support service fees	101,720	90,000	30,000
-     Management fee	70,641	-	54,037
-     Royalty fee	63,129	-	19,037
-     Advances to	(38,997)	363,351	1,065,681
With a Director of the subsidiaries:
-     Advances to	-	-	-
-     Professional fees	39,000	39,000	79,500

 

*Related parties refer to entities where a Director of the subsidiaries have beneficial interests.

 

Key management personnel remuneration

 

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. The Group's key management personnel are the Directors of the Company and its subsidiaries.
 

 

17           SIGNIFICANT RELATED PARTY TRANSACTIONS

 

Key management personnel remuneration (Continued)

 

The remuneration of Directors of the Company and its subsidiaries during the financial period/year are as follows:

 

	Unaudited	Unaudited	Audited
	6 months ended	6 months ended	Year ended
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
Directors of the Company
-     short-term benefits	112,650	46,664	183,759
-     post-employment benefits	22,093	-	9,830
Directors of subsidiaries
-     short-term benefits	54,000	54,000	129,000
	188,743	100,664	322,589

 

 

18           FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT

 

The Group's activities have exposure to credit risks, market risks (including foreign currency risks) and liquidity risks arising in the ordinary course of business. The Group has no significant exposure to interest rate risk. The Group's overall risk management strategy seeks to minimise adverse effects from the volatility of financial markets on the Group's financial performance.

 

The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group. The Group's management then establishes the detailed policies such as risk identification and measurement, exposure limits and hedging strategies, in accordance with the objectives and underlying principles approved by the Board of Directors.

 

There has been no change to the Group's exposure to these financial risks or the manner in which the risks are managed and measured.

 

The Group does not hold or issue derivative financial instruments for trading purposes or to hedge against fluctuations, if any, in interest rates and foreign exchange rates.

 

18.1        Credit risks

 

Credit risks refer to the risk that counterparty will default on its contractual obligations resulting in a loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group performs ongoing credit evaluation of its counterparties' financial condition and generally do not require collaterals.

 

As at reporting date, the Group has significant credit exposure arising from related parties amounting to US$1,058,183 (30 September 2016: US$473,149; 31 March 2017: US$990,365). The management is of the opinion that these receivables are fully recoverable (Note 9).

 

The carrying amounts of financial assets recorded in the financial statements, grossed up for any allowances for impairment losses, represents the Group's maximum exposure to credit risks.

 

The Group's major classes of financial assets are trade and other receivables and cash and cash equivalents.

 

 

18           FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)

 

18.1        Credit risks (Continued)

 

The Group's cash and cash equivalents are mainly deposited with major and reputable banks located in Singapore with good external credit ratings.

 

18.2        Market risks

 

Foreign currency risks

 

The Group is exposed to changes in foreign exchange rates arising from foreign currency transactions and balances and changes in fair values. The Group's overall financial risk management programme seeks to minimise potential adverse effects on the financial performance and position of the Group. The Group's overall risk management are determined and carried out by the management. The Group do not hold or issue derivative financial instruments for speculative purposes.

 

The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro, Singapore dollar and Myanmar Kyat. The Group monitors the movement in foreign currency exchange rates closely to minimise the exposure.

 

The breakdown of the carrying amounts of financial assets and financial liabilities at the reporting date by currency are as follows:

 

	Financial Assets
	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
United States Dollar	5,215,183	2,429,236	5,427,730
Euro	14,332	1,115,801	323,418
Singapore Dollar	12,019	61,783	31,852
Myanmar Kyat	173,158	11,675	20,532
	5,414,692	3,618,495	5,803,532

 

	Financial Liabilities
	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
United States Dollar	163,946	12,296	3,867,537
Singapore Dollar	106,871	64,690	38,089
	270,817	76,986	3,905,626

 

 

 

 

18           FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL MANAGEMENT (Continued)

 

18.2        Market risks (Continued)

 

Foreign currency risks (Continued)

 

Foreign currency sensitivity analysis

 

The following table details the sensitivity of the Group's profit before tax and equity to a reasonably possible change in Euro (EUR) and Myanmar Kyat (MMK) against United States dollar (USD), with all variables held constant.

 

	Profit or loss / Equity
	Unaudited	Unaudited	Audited
	As at	As at	As at
	30 September 2017	30 September 2016	31 March 2017
	US$	US$	US$
EUR
Strengthened against USD - nil
(30 September 2016: 3%,  31 March 2017: 10%)	-	33,474	32,342
Weakened against USD - nil
(30 September 2016: 3%,  31 March 2017: 10%)	-	(33,474)	(32,342)
MMK
Strengthened against USD - 10%
(30 September 2016: nil,  31 March 2017: nil)	17,316	-	-
Weakened against USD - 10%
(30 September 2016: nil,  31 March 2017: nil)	(17,316)	-	-

 

18.3        Liquidity risks

 

Liquidity risk refers to the risk in which the Group encounters difficulties in meeting its short-term obligations. Liquidity risk is managed by matching the payment and receipt cycle.

 

The Group actively manages its operating cash flows so as to ensure that all repayment needs are met. As part of its overall prudent liquidity management, the Group minimises liquidity risk by maintaining sufficient level of cash to meet its working capital requirements.

 

The financial liabilities are repayable on demand or due within one year from the end of the financial period.

 

 

19           FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

 

The Group's financial assets and financial liabilities include cash and cash equivalents, trade and other receivables (excluding prepayments), trade and other payables and convertible bonds.

 

The carrying amount of these financial assets and liabilities are a reasonable approximate of their fair values due to their short-term maturity of these financial instruments.

 

 

20           CAPITAL RISK MANAGEMENT POLICIES AND OBJECTIVES

 

The Group manages its capital to ensure that the Group is able to continue as a going concern and maintains an optimal capital structure so as to maximise shareholder's value.

 

The capital structure of the Group consists of equity attributable to the equity holder of the Company comprising issued capital, equity reserves and accumulated losses.

 

The Group's management reviews the capital structure on an annual basis. As part of this review, management considers the cost of capital and the risks associated with each class of capital. The Group's overall strategy remains unchanged from the previous financial periods.

 

The Group is not subject to externally imposed capital requirements for the financial periods ended 30 September 2017, 30 September 2016 and 31 March 2017.

 

 

21           SUBSEQUENT EVENTS

 

On 13 May 2017, the Group signed a ten-year operation and management agreement in relation to the Mya Khan Thar Hotel in New Bagan, Myanmar. Upon completion of the refurbishment, the hotel features 58 beds over 13 rooms and trades under the name Ostello Bello Bagan Pool (subject to regulatory approval). The hotel re-opened on 21 November 2017.

 

On 6 September 2017, the Group signed a centre franchise agreement in relation to a second Wall Street English centre to be operated within the City Mall at St. John in Yangon. The centre is due to open in December 2017.