ANNUAL REPORT 2025 149 NOTES TO THE FINANCIAL STATEMENTS 2 Basis of preparation and material accounting policy information (Continued) (m) Financial assets at amortised cost Financial assets at amortised cost are debt instruments that are held for collection of contractual cash fl ows where those cash fl ows represent solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition of the fi nancial assets at amortised cost and are subsequently measured at amortised cost less impairment. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement based on expected credit loss (“ECL”) model. Interest income using the eff ective interest method is recognised in the income statement. (n) Trade and other receivables Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the eff ective interest method, less provision for impairment. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement. (o) Inventories Inventories consist mainly of replacement parts and are stated at the lower of cost and net realisable value. Cost is calculated on the weighted average basis. (p) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value, and bank overdrafts, if any. (q) Borrowings and borrowing costs The borrowings are initially measured at fair value, net of transaction costs, and are subsequently carried at amortised cost. Any diff erence between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the period of the borrowings using the eff ective interest method. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period in which they are incurred. (r) Trade and other payables Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost using the eff ective interest method. (s) Provisions Provisions are recognised when it is probable that an outfl ow of economic benefi ts will be required to settle a present obligation as a result of past events and a reliable estimate can be made of the amount of the obligation. (t) Asset impairment Impairment of fi nancial assets The Group applies the ECL model to assess impairment of fi nancial assets classifi ed at amortised cost and debt instruments measured at FVOCI. The impairment methodology to be applied depends on whether there has been a signifi cant increase in credit risk. For trade receivables, the Group applies the simplifi ed approach permitted by HKFRS 9, which requires lifetime expected losses for amounts due from customers to be recognised from initial recognition of the trade receivables.
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