Ascletis Pharma Inc. — Annual Report 2020

Apr 27, 2021

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Contents

	Page
Corporate Information ...........................................................................................................................	2
Summary of Notice of Annual General Meeting ......................................................................................	3
Chairman’s Statement ..........................................................................................................................	4
Management Discussion and Analysis ...................................................................................................	6
Biographical Details of Directors and Senior Management ......................................................................	8
Corporate Governance Report ..............................................................................................................	11
Environmental, Social and Governance Report ......................................................................................	21
Directors’ Report ..................................................................................................................................	24
Independent Auditor’s Report ...............................................................................................................	31
Consolidated Statement of Profit or Loss and Other Comprehensive Income ..........................................	37
Consolidated Statement of Financial Position ........................................................................................	38
Consolidated Statement of Changes in Equity .......................................................................................	40
Consolidated Statement of Cash Flows .................................................................................................	41
Notes to the Consolidated Financial Statements ....................................................................................	43
Financial Summary ...............................................................................................................................	126

1

World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Information

BOARD OF DIRECTORS

Executive Directors

Mr. Lee Tat Hing (Chairman) Ms. Fung Mei Po (Vice Chairperson and Chief Executive Officer) Mr. Lee Chun Sing (Vice Chairman) Mr. Lee Kwok Sing Stanley

Non-executive Director

Mr. Cheung Tze Man Edward

Independent Non-executive Directors

Mr. Tsui Chi Him Steve Mr. Ho Tak Kay Mr. Hui Chi Kuen Thomas

Mr. Shang Sze Ming

PRINCIPAL BANKERS

Standard Chartered Bank HSBC Bank of China Hang Seng Bank DBS Hong Kong

AUDITOR

Deloitte Touche Tohmatsu Registered Public Interest Entity Auditors

SHARE REGISTRARS AND TRANSFER OFFICES

In Hong Kong

Tricor Secretaries Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

QUALIFIED ACCOUNTANT

Mr. Leung Cho Wai, FCCA, CPA

COMPANY SECRETARY

Mr. Tsui Chi Yuen, CPA

PRINCIPAL OFFICE

Flat C, 18th Floor Bold Win Industrial Building 16-18 Wah Sing Street Kwai Chung New Territories Hong Kong

In the Cayman Islands

The R&H Trust Co. Ltd. P.O. Box 897 Windward 1 Regatta Office Park Grand Cayman KY1-1103 Cayman Islands

STOCK CODE

713

COMPANY’S WEBSITE

http://www.worldhse.com

REGISTERED OFFICE

P.O. Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

2

World Houseware (Holdings) Limited ◆ Annual Report 2020

Summary of Notice of Annual General Meeting

Set out below is a summary of the notice of annual general meeting, the full version of which is set out in the circular to shareholders dispatched at 28 April 2021.

An Annual General Meeting of World Houseware (Holdings) Limited (the “Company”) will be held at The Jade Room, 6th Floor, The Marco Polo Hongkong Hotel, Harbour City, Kowloon, Hong Kong at 3:30 p.m. on Friday, 25 June 2021 for the following purposes:

1. To receive and adopt the audited Financial Statements of the Company and its subsidiaries and the Reports of the Directors and Auditors for the year ended 31 December 2020.

2. To re-elect Directors and to authorise the Board to fix the Directors’ remuneration.

3. To re-appoint Auditors and authorise the Board to fix their remuneration.

4. A. To grant a general mandate to the Directors to allot shares.

5. B. To grant a general mandate to the Directors to repurchase the Company’s own shares.

6. C. To add the nominal amount of the shares repurchased under resolution 4B to the mandate granted to the Directors under resolution 4A.

By Order of the Board

Lee Tat Hing

Chairman Hong Kong 30 March 2021

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Chairman’s Statement

BUSINESS REVIEW

For the year ended 31 December 2020, the Group recorded a consolidated turnover of HK$817,298,000, representing an increase of 0.9% when comparing with HK$809,809,000 last year. Gross profit and gross profit margin were HK$167,431,000 and 20.5% respectively. Profit for the year was HK$68,984,000.

During the year of 2020, due to the Sino-American Trade War and the continued outspread of the novel coronavirus, the Group experienced difficulties in its business of the Company. The Group had stopped its manufacturing activities in PRC from February 2020 to mid of March 2020 due to mandatory government quarantine measures in an effort to contain the spread of the pandemic.

For the household products business, the business turnover was HK$174,746,000 which represented an increase of 6.5% when comparing with HK$164,036,000 last year. The business had recorded a segment profit of HK$3,735,000.

For PVC pipes and fittings manufacturing business, the business turnover was HK$637,318,000 representing an increase of 0.3% when comparing with HK$635,451,000 last year. The impairment loss recognised on plant and equipment were HK$34,634,000. The impairment losses under expected credit loss model was HK$25,845,000 and the business had recorded a segment loss of HK$49,669,000.

For the Hong Kong Ecopark feed production from food waste recycling business, the Group had terminated this business on 1 July 2020. The business turnover up to 30 June 2020 was HK$1,924,000 representing a decrease of 67.9% when comparing with HK$5,987,000 last year. The impairment losses under expected credit loss model was HK$335,000 and the business had recorded a segment loss of HK$15,374,000.

During the year under review, the Group had rented out part of the unused factory premises and land in Zhongshan. The rental income had increased to HK$8,070,000 when comparing with HK$4,335,000 last year, representing an increase of 86.2%. The redevelopment of the Shenzhen Pingshan Urban Renewal Project was progressing smoothly by the developer in accordance with the timeline as specified in the agreements. The loss arising from changes in fair value of investment properties were HK$1,825,000 and gain arising from changes in fair value of long-term other assets were HK$207,210,000.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Chairman’s Statement

PROSPECTS

Looking ahead, the Sino-American Trade War and the Covid-19 pandemic will continue to bring about a lot of challenges and difficulties to the business of the Group.

The Group will continue to adopt preventive measures to protect the health of its employees and to ensure the smooth operation of the business, and will also strive to implement the Group’s strategy of the business so as to generate profit to the Group.

The Group will follow through with the Shenzhen Pingshan Urban Renewal Project which is named by the developer as 「 Fantasia CIFI Good Time Home 」*. It is expected that the allotment of the shopping mall, carparks and residential flats and related premises will be completed and handed over to the Group as scheduled so as to meet the target development strategy and to generate satisfactory results for the Group.

Regarding the Group’s announcement on 4 January 2021 concerning the intention of the Chinese Government for the resumption to buy of the Group’s land lot G05701-4 situated at 33 Xinxia Road, Pinghu Street Office, Longgang District, Shenzhen City, Guangdong Province, the People’s Republic of China, the Group is still anticipating for further directions and notices from the PRC government.

In the face of difficulties and unexpected challenges, the Group will strive to do its best to adjust its strategy, to control production costs, increase competitiveness so as to strengthen its core business through innovations and exploring new technologies and the Group expects a bright future.

By Order of the Board

Lee Tat Hing

Chairman Hong Kong 30 March 2021

• The English name is translated for identification purpose only.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Management Discussion and Analysis

RESULTS

• The Group recorded a turnover of HK$817,298,000 for the year ended 31 December 2020, representing an increase of 0.9% as compared to the same period last year.

• Gross profit and gross profit margin of the Group recorded were HK$167,431,000 and 20.5%, representing an increase of HK$46,536,000 and an increase of 38.5% respectively as compared to the same period last year.

• Profit for the year was HK$68,984,000, as compared to a loss of HK$96,282,000 for the same period last year.

• Basic profit per share was 9.03 HK cents, as compared to loss per share of 12.60 HK cents for the same period last year.

LIQUIDITY, FINANCIAL RESOURCES AND FUNDING

The Group finances its operations from internally generated cash flows, term loans and trade finance facilities provided by banks in Hong Kong and the PRC. At 31 December 2020, the Group had bank balances and cash and pledged bank deposits of approximately HK$126,111,000 (31.12.2019: HK$46,927,000) and had interest-bearing secured bank borrowings of approximately HK$197,110,000 (31.12.2019: HK$214,884,000). The Group’s interest-bearing secured bank borrowings was mainly computed at Hong Kong Inter-Bank Offering Rate plus a margin. The Group’s total banking facilities available as at 31 December 2020 amounted to HK$575,368,000; of which HK$197,110,000 of the banking facilities was utilised (utilisation rate was at 34.3%).

The Group continued to conduct its business transactions principally in Hong Kong dollars (“HK$”), US dollars and Renminbi (“RMB”). The Group’s exposure to the foreign exchange fluctuations has not experienced any material difficulties in the operations or liquidity as a result of fluctuations in currency exchange.

At 31 December 2020, the Group had current assets of approximately HK$624,983,000 (31.12.2019: HK$546,260,000). The Group’s current ratio was approximately 1.14 as at 31 December 2020 as compared with approximately 1.15 as at 31 December 2019. Total shareholders’ funds of the Group as at 31 December 2020 increase by 9.8% to HK$1,854,197,000 (31.12.2019: HK$1,689,028,000). The gearing ratio (measured as total liabilities/total shareholders’ funds) of the Group as at 31 December 2020 was 0.57 (31.12.2019: 0.56).

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Management Discussion and Analysis

CHARGES ON ASSETS

Certain leasehold land and buildings, investment properties, right-of-use assets and bank deposits with an aggregate net book value of HK$164,469,000 (31.12.2019: HK$163,307,000) were pledged to banks for general banking facilities granted to the Group.

In addition, the Group also pledged the life insurance to a bank to secure general banking facilities granted to the Group.

STAFF AND EMPLOYMENT

At 31 December 2020, the Group employed a total workforce of about 796 staff (31.12.2019: 862) including 768 staff (31.12.2019: 816) in our factories located in the PRC. The total staff remuneration incurred during the year was HK$76,694,000 (31.12.2019: HK$80,395,000). It is the Group’s policy to review its employees’ pay levels and performance bonus system regularly to ensure that the remuneration policy is competitive within the relevant industries. It is the Group’s policy to encourage its subsidiaries to send the management and staff to attend training classes or seminars that related to the Group’s business. Tailor made internal training programmes ware also provided to staff in our PRC factories.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Biographical Details of Directors and Senior Management

EXECUTIVE DIRECTORS

LEE Tat Hing , aged 83, is the Chairman of the Group. Mr. Lee has over 40 years’ experience in the trading and manufacture of household products and is responsible for the strategic planning and business development of the Group.

FUNG Mei Po , aged 65, is the wife of Mr. Lee Tat Hing and the Vice Chairperson and Chief Executive Officer of the Group. She has over 30 years’ experience in marketing, production planning and factory management and has been with the Group for over 30 years. Ms. Fung is in charge of sales of the Group’s North American markets and the Group’s Hong Kong operations and administration.

LEE Chun Sing , aged 60, is the son of Mr. Lee Tat Hing and the Vice Chairman of the Group. He is responsible for the planning and production management of the Group’s PRC operations and has been with the Group since 1985.

LEE Kwok Sing Stanley , aged 58, is the son of Mr. Lee Tat Hing. He is responsible for the administration and management of factory in the PRC. He joined the Group in 1989 and has over 20 years’ experience in factory management.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Biographical Details of Directors and Senior Management

NON-EXECUTIVE DIRECTOR

CHEUNG Tze Man Edward , aged 68, is a practising solicitor in Hong Kong. He obtained his Bachelor of Laws degree from the University of London and Master of Laws in Chinese Law from University of Hong Kong and is a member of the Law Society in Hong Kong and in England and Wales. He is also a member of the Institute of Chartered Secretaries and Administrators.

INDEPENDENT NON-EXECUTIVE DIRECTORS

TSUI Chi Him Steve , aged 65, had engaged in managerial positions in major British and Chinese banks in Hong Kong in the past with more than 20 years’ experience in credit, credit audit and credit risk management, involving many medium size and some large corporations listed in China or in Hong Kong. Mr. Tsui joined the Group in 2007.

HO Tak Kay , aged 64, is a fellow member of the Association of Chartered Certified Accountants as well as the Hong Kong Institute of Certified Public Accountants. He had worked in certain international accounting firms before and has over 30 years experience in audit, accounting and financial fields. Mr. Ho joined the Group in 2004.

HUI Chi Kuen Thomas , aged 64, is a professional accountant. He is a fellow member of the Hong Kong Institute of Certified Public Accountants and a member of the Institute of Chartered Accountants in Australia and CPA Australia. He has over 20 years’ experience in accounting, taxation and financial management gained in certain multinational corporations and publicly listed companies in Hong Kong and Australia. Mr. Hui joined the Group in 2004.

SHANG Sze Ming , aged 61, graduated from The Ohio State University of The United States of America with a bachelor’s degree of Science in Business Administration and obtained his Master’s degree of Business Administration in Finance and Master’s degree of Science in Financial Services – Investment from Golden Gate University of The United States of America. He has extensive experience in investment and management for over eighteen years. He was appointed as Senior Investment Analyst in two securities companies and as Investor Relations Manager in a large listed company. Mr. Shang joined the Group in 2012.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Biographical Details of Directors and Senior Management

SENIOR MANAGEMENT

LEUNG Cho Wai , aged 54, is the Financial Controller and Qualified Accountant of the Group. He joined the Group in 2007. He is a fellow member of the Association of Chartered Certified Accountants in the United Kingdom and a member of the Hong Kong Institution of Certified Public Accountants. He has gained extensive experience in auditing, accounting, taxation and financial management by working in certified public accountants firm and publicly listed companies in Hong Kong. He is responsible for the overall financial management and planning of the Group.

TSUI Chi Yuen , aged 56, is the secretary of the Company and joined the Group in 2007. He is a member of the Hong Kong Institute of Certified Public Accountants. Mr. Tsui has over 25 years of experience in auditing, accounting and financial management.

LEE Fung Mei Belinda , aged 55, is the daughter of Mr. Lee Tat Hing and senior sales manager of the Group. Ms. Lee graduated from York University in Canada with a Bachelor’s degree in Economics. Ms. Lee assists Ms. Fung Mei Po in the marketing of the Group’s products in the United States of America and Canada and she has been with the Group since 1989.

LEE Hon Sing Alan , aged 57, is the son of Mr. Lee Tat Hing. Mr. Lee is responsible for the administration, management and production of the production plant in the PRC. He joined the Group in 1989 and has over 18 years’ experience in factory management.

WANG Wen Bi , aged 55, graduated from the Taiwan Culture University. He is the engineering and technology manager of PVC pipes and fittings segment. He joined the Group in 1995 and has over 14 years’ experience in technological management, production and administration.

LAI Lai Wah , aged 63, is the wife of Mr. Lee Chun Sing, Madam Lai is responsible for the administration, management and production of the production plant the PRC factory. Madam Lai has been with the Group over 20 years, and has over 15 years’ experience in factory management.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

CORPORATE GOVERNANCE PRACTICES

The Board of Directors (the “Board”) of World Houseware (Holdings) Limited (the “Company”) believes that corporate governance is essential to the success of the Company and has adopted various measures to ensure that a high standard of corporate governance is maintained. The Board regularly reviews the Company’s corporate governance guidelines and developments. The Company has applied the principles and complied with the requirements of the Code on Corporate Governance Practices (the “Code”) of the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than the required standard set out in Appendix 10 of the Listing Rules (the “Model Code”). Having made specific enquiry of all the directors, all the directors confirmed that they have complied with the required standard set out in the Model Code and the code of conduct regarding securities transactions by directors adopted by the Company.

BOARD OF DIRECTORS

The Board of the Company currently comprises:

Executive Directors:

Lee Tat Hing (Chairman) Fung Mei Po (Vice Chairperson and Chief Executive Officer) Lee Chun Sing (Vice Chairman) Lee Kwok Sing Stanley

Non-executive Director:

Cheung Tze Man Edward

Independent Non-executive Directors:

Tsui Chi Him Steve Ho Tak Kay Hui Chi Kuen Thomas Shang Sze Ming

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

BOARD OF DIRECTORS – continued

One Non-executive Director and four Independent Non-executive Directors are persons of high calibre, with academic and professional qualifications in the fields of legal, accounting and business management. With their experience gained from senior positions held in other companies, they provide strong support towards the effective discharge of the duties and responsibilities of the Board. Each Independent Non-executive Director has given an annual confirmation of his independence to the Company, and the Company considers these directors to be independent under Rule 3.13 of the Listing Rules.

Ms. Fung Mei Po, the Vice Chairperson and Chief Executive Officer, is the wife of Mr. Lee Tat Hing, the Chairman whereas Mr. Lee Chun Sing, the Vice Chairman and Mr. Lee Kwok Sing Stanley, an executive director are the sons of Mr. Lee Tat Hing, the Chairman.

During the year, seven full board meetings were held and the attendance of each director is set out as follows:

	Number of
	board meetings
Name of directors	attended in 2020	Attendance rate
Lee Tat Hing	7/7	100%
Fung Mei Po	7/7	100%
Lee Chun Sing	7/7	100%
Lee Kwok Sing Stanley	7/7	100%
Cheung Tze Man Edward	7/7	100%
Tsui Chi Him Steve	7/7	100%
Ho Tak Kay	7/7	100%
Hui Chi Kuen Thomas	7/7	100%
Shang Sze Ming	7/7	100%

The Board formulates overall strategy of the Company, monitors its financial performance and maintains effective oversight over the management. The Board members are fully committed to their roles and have acted in good faith to maximise the shareholders’ value in the long run, and have aligned the Company’s goals and directions with the prevailing economic and market conditions. Daily operations and administration are delegated to the management.

The regular Board meeting schedule for any year is planned in the preceding year. At least 14 days notice of all board meetings is given to all directors and they can include matters for discussion in the agenda if the need arises. The Company Secretary assists the Chairman in preparing the agenda for meetings and ensures that all relevant rules and regulations are followed. The agenda and the accompanying board papers are sent to all directors at least 3 days before the date of every board meeting so that the directors have the time to review the documents. Minutes of every board meeting are circulated to all directors for their perusal prior to confirmation of the minutes at the following board meeting.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

BOARD OF DIRECTORS – continued

Every board member is entitled to have access to board papers and related materials and has unrestricted access to the advice and services of the Company Secretary, and has the liberty to seek external professional advice if so required. The Company Secretary continuously updates all directors on the latest development of the Listing Rules and other applicable regulatory requirements to ensure compliance and upkeep of good corporate governance practice.

The Board has a defined schedule of matters reserved for the Board decision in various major categories and events.

When the Board considers any material proposal or transaction in which a substantial shareholder or a Director has a conflict of interest, a board meeting is held and Independent Non-executive Directors who have no material interest in the transaction present at such board meeting. At the meeting, the Director who has interests declares his interest and is required to abstain from voting.

The Company has arranged appropriate insurance cover in respect of legal actions against its Directors and officers. The Board reviews the extent of this insurance annually.

Composition of the Board, by category of Directors, including names of Chairman, Executive Directors, Independent Non-executive Directors and Non-executive Director is disclosed in all corporate communications.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The Chairman and the Chief Executive Officer of the Company are Mr. Lee Tat Hing and Ms. Fung Mei Po respectively. The roles of the Chairman and the Chief Executive Officer are segregated and assumed by two separate individuals to strike a balance of power and authority so that the job responsibilities are not concentrated on any one individual. The Chairman of the Board is responsible for the leadership and effective running of the Board, while the Chief Executive Officer is delegated with the authorities to manage the business of the Company in all aspects effectively. The division of responsibilities between the Chairman and the Chief Executive Officer have been clearly established and set out in writing.

APPOINTMENT AND RE-ELECTION OF DIRECTORS

The Company has fixed a term of 3 years’ appointment for Non-executive Director and subject to re-election at the annual general meeting of the Company in accordance with the Articles of Association of the Company.

All directors appointed to fill casual vacancy be subject to election by shareholders at the first general meeting after their appointment, and every director, including those appointed for a specific term, be subject to retirement by rotation at least once every three years.

DIRECTORS’ TRAINING

According to Code provision A6.5 of the Corporate Governance Code, all directors should participate in continuous professional development to develop and refresh their knowledge and skills to ensure that their contribution to the board remains informed and relevant.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

REMUNERATION COMMITTEE

The Remuneration Committee of the Company comprises the Chairman, one Executive Director, one Nonexecutive Director and four Independent Non-executive Directors.

The Remuneration Committee was formed in September 2005 and meetings shall be held at least once a year. One meeting was held in 2020. The attendance of each member is set out as follows:

	Number of meetings
Name of members	attended in 2020	Attendance rate
Tsui Chi Him Steve (Chairman of remuneration committee)	1/1	100%
Lee Tat Hing	1/1	100%
Lee Chun Sing	1/1	100%
Cheung Tze Man Edward	1/1	100%
Ho Tak Kay	1/1	100%
Hui Chi Kuen Thomas	1/1	100%
Shang Sze Ming	1/1	100%

The emoluments payable to directors will depend on their respective contractual terms under employment contracts, if any, and as recommended by the Remuneration Committee. Details of the directors’ remuneration are set out in note 12 (i) to the financial statements.

The major roles and functions of the Remuneration Committee are as follows:

1. To review annually and recommend to the Board the overall remuneration policy for the directors, the Chief Executive Officer and key senior management officers.

2. To review annually the performance of the Executive Directors, the Chief Executive Officer and key senior management officers and recommend to the Board specific adjustments in remuneration and/or reward payments.

3. To ensure that the level of remuneration for Non-executive Director and Independent Non-executive Directors are linked to their level of responsibilities undertaken and contribution to the effective functioning of the Board of Company.

4. To review and approve the compensation payable to Executive Directors, the Chief Executive Officer and key senior management officers in connection with any loss or termination of their office or appointment.

5. To review and approve compensation arrangements relating to dismissal or removal of directors for misconduct.

6. To ensure that no director is involved in deciding his own remuneration.

The terms of reference of the Remuneration Committee are available from the Company Secretary on request.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

NOMINATION COMMITTEE

The Nomination Committee of the Company comprises the Chairman, two Executive Directors and four independent Non-executive Directors. The Nomination Committee was formed in September 2007 and meetings shall be held at least once a year. One meeting was held in 2020. The attendance of each member is set out as follows:

	Number of meetings
Name of members	attended in 2020	Attendance rate
Lee Tat Hing (Chairman of nomination committee)	1/1	100%
Fung Mei Po	1/1	100%
Lee Chun Sing	1/1	100%
Tsui Chi Him Steve	1/1	100%
Ho Tak Kay	1/1	100%
Hui Chi Kuen Thomas	1/1	100%
Shang Sze Ming	1/1	100%

The Nomination Committee which has written term of reference, is responsible for making recommendations to the Board on all board appointments and re-appointments. The Nomination Committee responsibilities are as follows:

• a. to review the structure, size and composition of the Board on a regular basis and make recommendations to the Board regarding any proposed changes;

• b. to identify suitable individuals qualified to become Board members and make recommendations to the Board on suitable candidates to be nominated for directorships;

• c. to establish a mechanism for formal assessment and to perform periodic assessment on the effectiveness of the Board;

• d. to assess the independence of independent non-executive directors on its appointment or when their independence is called into question;

• e. to make recommendations to the Board on relevant matters relating to the appointment or reappointment of directors and succession planning for directors.

World Houseware (Holdings) Limited ◆ Annual Report 2020 15

Corporate Governance Report

NOMINATION COMMITTEE – continued

The terms of reference of the Nomination Committee are available from the Company Secretary on request.

The Board recognize the importance and benefit of diversity of Board members. While all Board appointments will continue to be made on a merit basis, the Company will ensure that the Board has a balance of a number of factors, including but not limited to gender, age, cultural and educational background and professional experience.

With the existing Board members coming from a variety of business and professional background and one out of the nine Board members being woman, the Company considers that the Board possesses a balance of skills, experience, expertise and diversity of perspectives appropriate to the requirements of the company’s business.

ACCOUNTABILITY AND AUDIT

The directors are responsible for overseeing the preparation of accounts of each financial period, which give a true and fair view of the state of affairs of the Company and of the results and cash flow for that period. In preparing the accounts for the year ended 31 December 2020, the directors have selected suitable accounting policies and have applied them consistently, adopted appropriate Hong Kong Financial Reporting Standards (“HKFRSs”) and Hong Kong Accounting Standards (“HKASs”) which are pertinent to its operations and relevant to the financial statements, made judgements and estimates that are prudent and reasonable, and have prepared the accounts on the going concern basis.

AUDIT COMMITTEE

The Audit Committee of the Company comprises one Non-executive Director and four Independent Nonexecutive Directors.

The Audit Committee shall meet at least two times a year. Three meetings were held during the year. The minutes of the Audit Committee meetings were tabled to the Board for noting and for action by the Board where appropriate. The attendance of each member is set out as follows:

	Number of meetings
Name of members	attended in 2020	Attendance rate
Tsui Chi Him Steve (Chairman of audit committee)	3/3	100%
Cheung Tze Man Edward	3/3	100%
Hui Chi Kuen Thomas	3/3	100%
Ho Tak Kay	3/3	100%
Shang Sze Ming	3/3	100%

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

AUDIT COMMITTEE – continued

During the meetings held in 2020 the Audit Committee had performed the following work:

• (i) reviewed the financial reports for the year ended 31 December 2019 and for the six months ended 30 June 2020;

• (ii) reviewed the effectiveness of internal control system;

• (iii) discussed with the external auditors the audit fee in respect of the financial statements for the year ended 31 December 2019.

The major roles and functions of the Audit Committee are as follows:

1. To consider the appointment of the external auditors, the audit fees, and any questions of resignation or dismissal of the external auditors of the Company.

2. To discuss with the external auditors the nature and scope of the audit.

3. To review the interim and annual financial statements before submission to the Board.

4. To discuss problems and reservations arising from the interim review and final audit, and any matters the auditors may wish to discuss.

The terms of reference of the Audit Committee are available from the Company Secretary on request.

AUDITORS’ REMUNERATION

During the year under review, the remuneration paid to the Company’s auditors, Messrs Deloitte Touche Tohmastu, is set out as follows:

Services rendered Audit services Review on interim financial statements Non-audit services – taxation and other services	Fees paid/payable HK$’000 2,680 530 195
	3,405

World Houseware (Holdings) Limited ◆ Annual Report 2020 17

Corporate Governance Report

RISK COMMITTEE

The Risk Committee of the Company comprises the Chairman, two Executive Directors, a Non-executive Director, four independent Non-executive Directors and the Financial Controller. The Risk Committee was formed in 1 April 2016. One meeting was held in 2020. The attendance of each member is set out as follows:

	Number of meetings
Name of members	attended in 2020	Attendance rate
Tsui Chi Him Steve (Chairman of risk committee)	1/1	100%
Lee Tat Hing	1/1	100%
Fung Mei Po	1/1	100%
Lee Chun Sing	1/1	100%
Cheung Tze Man Edward	1/1	100%
Ho Tak Kay	1/1	100%
Hui Chi Kuen Thomas	1/1	100%
Shang Sze Ming	1/1	100%
Leung Cho Wai	1/1	100%

The Risk Committee is responsible for monitoring the Group’s business, assess the Group’s ability to respond to changes in its business and external environment; deciding the Group’s risk level and risk appetite; and to consider solutions and provide appropriate guidance. Oversee the Group’s risk management and internal control systems, review the effectiveness of the systems including the financial control system, operation control system and compliance control system.

RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

Responsibility of the Board

The Board is committed to the maintenance of good corporate governance practices and procedures, and implements an effective risk management and internal control systems of the Group. However, such systems are designed to manage rather than eliminate risk of failure to achieve business objective, and can only provide reasonable and not absolute assurance against material misstatement or loss.

OUR RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK

Risk Management and Risk Assessment

The Board has the overall responsibilities of the risk management and internal controls systems of the Group. With the support from the Risk Committee, the Board monitors the Group’s risk exposures, oversees the actions of management and monitors the overall effectiveness of the risk management system on an ongoing basis.

Management is responsible for setting the appropriate tone from the top, performing risk assessments, and owning the design, implementation and maintenance of internal controls. Essential to the Group’s risk management and internal control systems are policies and procedures that are documented and communicated to employees.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

OUR RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK – continued

Risk Management and Risk Assessment – continued

To provide sound and effective risk management, the Group has established a risk management system which includes the following key features:

• An organisational structure for different responsible parties with defined authority, responsibilities and risk management roles;

• The Board sets forth the proper risk management culture and risk appetite for the Group, evaluates and determines the level of risk that the Group should take and monitor regularly;

• A Risk Management Policy has been established to provide a framework, which includes a risk assessment process, for the identification, analysis, evaluation, treatment, monitoring and reporting of the Group’s key risks to support the achievement of the organisation’s overall strategic objectives.

Risk assessment has been performed by management to evaluate the nature and extent of the risks to which the Group is willing to take in achieving its strategic objectives. During the risk assessment process, the Group has identified a number of key risks that may impact the Group’s strategic objectives and to respond to the changes in the business and external environment. These risks are prioritised according to the likelihood of their occurrence and the significance of their impact on the business of the Group. Remedial measures are developed to manage these risks to an acceptable level. The results of risk assessment is reported to and discussed with the Board.

INTERNAL CONTROL

The Company maintains a comprehensive and effective internal control system. The Company’s internal control cover a number of procedures and policies which covers all material controls, including financial, operational, compliance controls and risk management functions.

The management of the Company had reviewed the Company’s internal control system for the year ended 31 December 2020 and had submitted the results of the review and its recommendations and opinions for consideration by the Audit Committee and the Board.

REVIEW OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

Through the Risk Committee, the Board has conducted an annual review of the effectiveness of the risk management and internal control systems of the Group and considered the risk management and internal control systems effective and adequate. The review covers all material controls, including financial, operational and compliance controls, and risk management functions. The scope and quality of ongoing monitoring of risk management and the internal control systems have been assessed. No significant areas of concern that may affect the Group to achieve strategic goals have been identified.

The Board has also reviewed and is satisfied with the adequacy of resources, qualifications and experience of staff of the Group’s accounting, internal audit and financial reporting functions, and their training programmes and budget.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Corporate Governance Report

COMMUNICATIONS WITH SHAREHOLDERS AND INVESTORS

The Board recognises the importance of good communications with all shareholders. The Company’s annual general meeting is a valuable forum for the Board to communicate directly with the shareholders. The Chairman of the Board as well as Chairmen of the Audit, Remuneration and Nomination Committees together with the external auditors are present to answer shareholders’ questions. An annual general meeting circular is distributed to all shareholders at least 21 days before the annual general meeting. It sets out the procedures for demanding and conducting a poll and other relevant information of the proposed resolutions. The Chairman explains the procedures for demanding and conducting a poll again at the beginning of the annual general meeting and (except where a poll is demanded) reveals how many proxies for and against have been filed in respect of each resolution. The results of the poll, if any, will be published in our investor relations website.

A key element of effective communication with shareholders and investors is the prompt and timely dissemination of information in relation to the Company. The Company has announced its annual and interim results in a timely manner as laid down in the Listing Rules after the end of the relevant periods in 2020.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Environmental, Social and Governance Report

SCOPE AND REPORTING PERIOD

Reference made to the Environmental, Social and Governance Reporting Guide as described in Appendix 27 of the Listing Rules and Guidance set out by the Stock Exchange.

ENVIRONMENTAL PROTECTION

The Group practice environmental and sustainable development concept, the companies are actively taking measures to protect the environment in their operations.

The Group actively fulfills social responsibility, adhere to both of the concept development and environmental protection, rational resource utilisation and practises of environmental protection in actual actions. One of the businesses of the Group is engaged in food waste recycling business, food waste is sufficiently used for recycling and turns info feed for livestock farming and aquaculture, effective recycling for more efficient use of resources. The teams manage programs to cut down hazardous and non-hazardous waste. Simultaneously, proper treatment of industrial waste water and hazardous waste has been put into practice.

The Group practice paper saving initiatives, such as reminder for staff to have environmentally friendly photocopying habit, suggest double-sided printing and copying, and encourage staff to save water in their daily lives.

• A1: Emissions KPIs Greenhouse gas, the head office of the company performance on sustainable development in terms of greenhouse gas emissions is summarized as follows:

		For the year ended	31 December
		2020	2019
Water	Consumption quantity	370 m3	340 m3
	Intensity (based on head office surface area)	0.37 m3/m2	0.34 m3/m2
Electricity	Consumption quantity	95,336 KWh	98,560 KWh
	Intensity (based on head office surface area)	96 KWh/m2	99.24 KWh/m2
Paper	Consumption quantity	1,173 kgs	1,387 kgs
	Intensity (based on head office surface area)	1.18 kgs/m2	1.4 kgs/m2

The company actively enhance employees’ awareness of energy saving and emission reduction for the purpose of reducing greenhouse gas emission.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Environmental, Social and Governance Report

A2: Use of Resources KPIs, the resources used in our factory are summarised as follows:

			For the year ended 31 December	For the year ended 31 December
KPI			2020	2019
A2.1	Water	Consumption quantity	245,046 m3	272,963 m3
		Intensity (based on the sales quantity)	4.28 m3/tons	4.6 m3/tons
A2.2	Electricity	Consumption quantity	35,773,600 KWh	34,558,890 KWh
		Intensity (based on the sales quantity)	625 KWh/tons	582 KWh/tons
A2.5	Paper	Consumption quantity	5,100 kgs	6,573 kgs
		Intensity (based on the sales quantity)	0.09 kgs/tons	0.11 kgs/tons

The consumption of water, electricity and paper in the company varies, depending on the types of products, nature of fabrics, production processes as well as weather and temperature.

LABOUR STANDARDS

No child or forced labour in the Group’s operations in the reporting period, it is in compliance with the Employment Ordinance, Chapter 57 of the Laws of Hong Kong in terms of employment management. The Group’s in China factory recruitment and utilization standards are implemented in strict compliance with the relevant labour laws of the PRC. The Group will regularly review the recruitment measures; ensure full compliance with the Employment Ordinance and Labour Law of the PRC.

Talented person are our most important asset for development business, we will attract professional person and retaining talent to match up the Group’s environmental protection business to rapid development for the business sustainable growth.

The recruitment process is strictly abided by the guidelines of the Group’s Human Resource Department. Every job applicant is required to fill in their information in a recruitment questionnaire, which is checked by Human resource Department to ensure information’s accuracy. This also allows the Group to hire suitable candidate in accordance with the job requirements and candidates’ expectations.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Environmental, Social and Governance Report

EQUAL OPPORTUNITY

Equal opportunities are given to employees in respect of recruitment, job advancement, training, compensation and benefits. The employees are not discriminated against or deprived of such opportunities on the basis of gender, sexual orientation, age, ethnic, skin color, religion, disability, pregnancy or any other discrimination.

EMPLOYEE HEALTH AND SAFETY

The Group has put the health and safety of the employees as the priority of productions, ensures that provided a safe and healthy working environment for employees, and every workers who operate factory plants are required to train for how to use the equipment and plant safely. Regularly encourage employees to discern the workplace which may affect the safe place, and to take precautions to mitigate the risks. Not result in work related fatality during the reporting period.

OPERATIONAL MANAGEMENT

The Group attaches great importance to product quality. The Group carries out long-term quality monitoring and regular reviews on all suppliers, assessment of qualified suppliers to made the “Qualified Supplier List” and only make purchases in the list. In case of a significant change in supplier qualification or serious quality issue, the Company stops the supplier delivery immediately, ensure the product quality.

ANTI-CORRUPTION

In strict compliance with national laws and regulations and its internal policies, The Group requires its employees abstaining from such misconducts as offering or accepting bribery and corruption in any circumstance.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Directors’ Report

The directors present their report and the audited consolidated financial statements for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES

The Company is an investment holding company. The activities of its principal subsidiaries are set out in note 41 to the consolidated financial statements.

RESULTS AND APPROPRIATIONS

The results of the Group for the year ended 31 December 2020 are set out in the consolidated statement of profit or loss and other comprehensive income on page 37.

The directors do not recommend the payment of a dividend for the year ended 31 December 2020.

INVESTMENT PROPERTIES

The investment properties held by the Group were revalued at 31 December 2020, resulting in a net decrease in fair value of HK$1,825,000, which has been debited directly to profit or loss.

Details of these and other movements of investment properties of the Group are set out in note 15 to the consolidated financial statements.

PROPERTY, PLANT AND EQUIPMENT

During the year, the Group incurred expenditure of approximately HK$34,877,000 on additions to production and other facilities. Details of these and other movements in property, plant and equipment of the Group during the year are set out in note 16 to the consolidated financial statements.

SHARE CAPITAL

Details of movements in the share capital of the Company during the year are set out in note 30 to the consolidated financial statements.

DISTRIBUTABLE RESERVES OF THE COMPANY

The Company’s reserves available for distribution to shareholders as at 31 December 2020 represent the aggregate of share premium, special reserve and accumulated losses which amounted to approximately HK$230,385,000 (2019: HK$255,920,000). Under the Companies Law in the Cayman Islands and the provisions of the Memorandum and Articles of Association of the Company, all reserves of the Company are available for distribution to shareholders, either by way of dividend or bonus issue of shares, provided that the Company will be able to pay its debts as they fall due in the ordinary course of business immediately following the date on which any such distribution is proposed to be paid.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Directors’ Report

DIRECTORS

The directors of the Company during the year and up to the date of this report were:

Executive directors:

Lee Tat Hing (Chairman) Fung Mei Po (Vice Chairperson and Chief Executive Officer) Lee Chun Sing (Vice Chairman) Lee Kwok Sing Stanley

Non-executive director:

Cheung Tze Man Edward

Independent non-executive directors:

Tsui Chi Him Steve Ho Tak Kay Hui Chi Kuen Thomas Shang Sze Ming

In accordance with Article 116 of the Company’s Articles of Association, Mr. Lee Kwok Sing Stanley, Mr. Hui Chi Kuen Thomas and Mr. Ho Tak Kay retire by rotation and, being eligible, offer themselves for re-election.

DIRECTORS’ SERVICE AGREEMENTS

All directors have entered into service agreements with the Company for a term of three years, the details are as follows:

Name of directors	Date of commencement	Date of Expiration
Mr. Lee Tat Hing	18 June 2019	17 June 2022
Ms. Fung Mei Po	12 June 2020	11 June 2023
Mr. Lee Chun Sing	12 June 2020	11 June 2023
Mr. Lee Kwok Sing Stanley	27 June 2018	26 June 2021
Mr. Cheung Tze Man Edward	12 June 2020	11 June 2023
Mr. Tsui Chi Him Steve	12 June 2020	11 June 2023
Mr. Ho Tak Kay	6 September 2020	5 September 2023
Mr. Hui Chi Kuen Thomas	6 September 2020	5 September 2023
Mr. Shang Sze Ming	1 November 2018	31 October 2021

Other than as disclosed above, no director proposed for re-election at the forthcoming annual general meeting has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

World Houseware (Holdings) Limited ◆ Annual Report 2020 25

Directors’ Report

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SHARES

At 31 December 2020, the interests of the directors, chief executive and their associates in the shares of the Company and its associated corporations, as recorded in the register maintained by the Company pursuant to Section 352 of the Securities and Futures Ordinance (“SFO”), or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, were as follows:

Name of directors Lee Tat Hing Fung Mei Po Lee Chun Sing Lee Kwok Sing Stanley Hui Chi Kuen Thomas Tsui Chi Him Steve Cheung Tze Man Edward

Number of issued ordinary shares held Percentage of the issued share capital of the Company Personal interests Family interests Corporate interests Other interests Total 14,256,072 58,121,087 (a) 28,712,551 (c) 280,895,630 (d) 381,985,340 49.98% 58,121,087 42,968,623 (b) – 280,895,630 (d) 381,985,340 49.98% 27,815,830 2,526,000 (e) – 280,895,630 (d) 311,237,460 40.72% 2,481,280 – – 280,895,630 (d) 283,376,910 37.08% 1,300,000 – – – 1,300,000 0.17% 1,200,000 – – – 1,200,000 0.16% 2,000,000 – – – 2,000,000 0.26%

Notes:

• (a) Mr. Lee Tat Hing is the husband of Ms. Fung Mei Po whose personal interests are therefore also the family interests of Mr. Lee Tat Hing.

• (b) Ms. Fung Mei Po is the wife of Mr. Lee Tat Hing whose personal and corporate interests are therefore also the family interests of Ms. Fung Mei Po.

• (c) The shares are held by Lees International Investments Limited, a company wholly owned by Mr. Lee Tat Hing.

• (d) 280,895,630 shares are wholly owned by a discretionary trust company namely Goldhill Profits Limited of which Mr. Lee Tat Hing, Ms. Fung Mei Po, Mr. Lee Chun Sing and Mr. Lee Kwok Sing Stanley and other persons who are not directors and chief executive of the Company are the beneficiaries of the Company.

• (e) The shares are held by Ms. Lai Lai Wah, the wife of Mr. Lee Chun Sing whose personal interests are also the family interests of Mr. Lee Chun Sing.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Directors’ Report

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SHARES – continued

At 31 December 2020, the following directors had personal interests in the deferred non-voting shares of certain subsidiaries of the Company:

		Number of
		deferred
		non-voting
Name of director	Name of subsidiary	shares held
Fung Mei Po	World Home Linen Manufacturing Company Limited	100

The deferred shares do not carry any rights to vote at general meetings of these subsidiaries or to participate in any distributions of profits until the profits of these subsidiaries which are available for dividend exceed HK$10 billion, or to receive a return of capital until a total sum of HK$10 billion has been distributed to the ordinary shareholders of each of these subsidiaries.

At 31 December 2020, save as aforesaid and options holdings disclosed under the heading of “Share Options and Directors’ Rights to Acquire Shares or Debentures” and other than certain nominee shares in subsidiaries held by directors in trust for the Group, none of the directors, chief executives or their associates had any interests or short positions in the shares or any securities of the Company and its associated corporations.

SUBSTANTIAL SHAREHOLDERS

At 31 December 2020, the register of substantial shareholders maintained by the Company pursuant to Section 336 of the SFO shows that, other than the interests in shares disclosed above in respect of the directors of the Company, the Company has not been notified of any other interests representing 5 percent or more of the Company’s issued share capital as at 31 December 2020.

SHARE OPTIONS AND DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Particulars of the Company’s share option scheme are set out in note 31 to the consolidated financial statements.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Directors’ Report

SHARE OPTIONS AND DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES – continued

The following table discloses movements in the Company’s share options during the year:

Date of grant Exercise price Exercisable period HK$ (Note 1) Category 1: Directors Lee Tat Hing 01.09.2015 0.580 01.09.2015 to 31.08.2025 22.12.2020 0.357 22.12.2020 to 21.12.2030 Fung Mei Po 22.12.2020 0.357 22.12.2020 to 21.12.2030 Lee Chun Sing 12.11.2012 0.309 12.11.2012 to 11.11.2022 01.09.2015 0.580 01.09.2015 to 31.08.2025 22.12.2020 0.357 22.12.2020 to 21.12.2030 Lee Kwok Sing Stanley 12.11.2012 0.309 12.11.2012 to 11.11.2022 01.09.2015 0.580 01.09.2015 to 31.08.2025 22.12.2020 0.357 22.12.2020 to 21.12.2030 Cheung Tze Man Edward 01.09.2015 0.580 01.09.2015 to 31.08.2025 Tsui Chi Him Steve 01.09.2015 0.580 01.09.2015 to 31.08.2025 Hui Chi Kuen Thomas 01.09.2015 0.580 01.09.2015 to 31.08.2025 Ho Tak Kay 24.10.2011 0.237 24.10.2011 to 23.10.2021 12.11.2012 0.309 12.11.2012 to 11.11.2022 01.09.2015 0.580 01.09.2015 to 31.08.2025 Shang Sze Ming 01.09.2015 0.580 01.09.2015 to 31.08.2025 Category 2: Employees 24.10.2011 0.237 24.10.2011 to 23.10.2021 12.11.2012 0.309 12.11.2012 to 11.11.2022 01.09.2015 0.580 01.09.2015 to 31.08.2025 22.12.2020 0.357 22.12.2020 to 21.12.2030	Outstanding as at 31.12.2019 6,500,000 – – 6,500,000 3,000,000 – 4,500,000 3,000,000 – 500,000 300,000 300,000 600,000 600,000 300,000 300,000 2,000,000 6,000,000 9,100,000 – 43,500,000	Granted during the year – 7,500,000 7,500,000 – – 5,000,000 – – 1,100,000 – – – – – – – – – – 5,700,000 26,800,000	Outstanding as at 31.12.2020 6,500,000 7,500,000 7,500,000 6,500,000 3,000,000 5,000,000 4,500,000 3,000,000 1,100,000 500,000 300,000 300,000 600,000 600,000 300,000 300,000 2,000,000 6,000,000 9,100,000 5,700,000
			70,300,000

Note 1: These share options are exercisable, starting from the date of options granted for a period of 10 years.

Other than as disclosed above, at no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

There were no contracts of significance subsisting to which the Company or any of its subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Directors’ Report

MAJOR CUSTOMERS AND SUPPLIERS

The largest customer of the Group by itself and together with the next four largest customers accounted for 8.3% and 23.2%, respectively, of the Group’s turnover for the year.

The largest supplier of the Group by itself and together with the next four largest suppliers accounted for 33.8% and 60.3%, respectively, of the Group’s purchases for the year.

None of the directors, their associates or any shareholders which, to the knowledge of the directors, owns more than 5% of the Company’s issued share capital has a beneficial interest in the share capital of any of the above major customers and suppliers of the Group.

PURCHASE, SALE OR REDEMPTION OF SHARES

There was no purchase, sale or redemption of the Company’s shares by the Company or any of its subsidiaries during the year.

CONVERTIBLE SECURITIES, OPTIONS, WARRANTS OR OTHER SIMILAR RIGHTS

Other than the share options as disclosed above, the Company had no convertible securities, options, warrants or other similar rights in issue during the year or at 31 December 2020.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s Articles of Association, or the laws of Cayman Islands, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

EMOLUMENT POLICY

The emolument policy of the employees of the Group is set up on the basis of their merit, qualifications and competence.

The emoluments of the directors of the Company are decided, having regard to the Company’s operating results, individual performance and comparable market statistics.

The Company had adopted a share option scheme as an incentive to directors and eligible employees, details of which are set out in note 31 to the consolidated financial statements.

29

World Houseware (Holdings) Limited ◆ Annual Report 2020

Directors’ Report

INDEPENDENCY OF INDEPENDENT NON-EXECUTIVE DIRECTORS

The Company has received, from each of the independent non-executive directors, an annual confirmation of the independency pursuant to Rule 3.13 of the Rules Governing the Listing Securities on the Stock Exchange. The Company considers all of the independent non-executive directors are independent.

SUFFICIENCY OF PUBLIC FLOAT

The Company has maintained a sufficient public float throughout the year ended 31 December 2020.

DONATIONS

During the year, the Group made charitable donations amounting to HK$99,000.

AUDITOR

A resolution will be submitted to the annual general meeting to re-appoint Messrs. Deloitte Touche Tohmatsu as auditor of the Company.

On behalf of the Board

Lee Tat Hing

CHAIRMAN

Hong Kong

30 March 2021

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Independent Auditor’s Report

TO THE SHAREHOLDERS OF WORLD HOUSEWARE (HOLDINGS) LIMITED

(incorporated in the Cayman Islands with limited liability)

Opinion

We have audited the consolidated financial statements of World Houseware (Holdings) Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 37 to 125, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for Opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Independent Auditor’s Report

Key Audit Matters – continued

Key audit matter

How our audit addressed the key audit matter

Valuation of Compensated Properties included in long-term other assets

We identified the valuation of the Compensated Properties included in the consideration for the disposal of the Group’s land and building arising from the Redevelopment Project (details in note 19) as a key audit matter due to the significant judgements and estimation required by the management in assessing the fair value of the Compensated Properties.

As disclosed in note 19 to the consolidated financial statements, the Group disposed the land and building under a Redevelopment Project and part of the consideration included certain residential or commercial properties (the “Compensated Properties”) to be received upon the completion of Redevelopment Project. The fair value of the Compensated Properties to be received is based on the valuations performed by an independent firm of qualified professional property valuer (the “Valuer”). The valuations was determined based on direct comparison method making reference to market observable transactions of similar properties and adjust to reflect the conditions and locations of the subject properties. Other key inputs and significant assumptions which involve judgements, included discount rate and time to completion. As at 31 December 2020, the carrying amount of the Compensated Properties is HK$1,682,013,000.

Our procedures in relation to evaluating the valuation of the Compensated Properties included:

• Understanding the key controls relating to the valuation assessment process used by the management including the fair value calculation;

• Evaluating the competence, capabilities and objectivity of the Valuer;

• Understanding the Valuer’s valuation basis and methodology, the performance of the property markets, significant assumptions adopted and key inputs used in the valuations; and

• Assessing the reasonableness of key inputs and significant assumptions used in the valuations by 1) comparing to relevant market information of transaction prices in other similar properties in the neighborhood, 2) assessing the estimated time to completion with the latest available information and 3) benchmarking the discount rates against historical data, market trend and applicable market yields, with the involvement of our valuation specialists.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Independent Auditor’s Report

Key Audit Matters – continued

Key audit matter

How our audit addressed the key audit matter

Impairment assessment on property, plant and equipment and right-of-use assets relating to the PVC pipes and fittings segment

We identified the impairment assessment of the cash-generating unit (the “CGU”) with certain property, plant and equipment and right-of-use assets relating to PVC pipes and fittings segment as a key audit matter because the estimation of the recoverable amount of the CGU involved significant management judgement and estimation with respect to the assumptions used.

Our procedures in relation to evaluating the impairment assessment on the CGU included:

• Understanding the impairment assessment process of the Group with the involvement of the Valuer engaged by the management of the Group to estimate the recoverable amounts of the CGU;

At 31 December 2020, the carrying amounts of the CGU amounted to approximately HK$215,810,000. During the year ended 31 December 2020, impairment losses of HK$34,634,000 in respect of plant and machinery in property, plant and equipment have been recognised.

As disclosed in note 4 to the consolidated financial statements, the management of the Group considered there was indication for impairment for the CGU due to the changes in market conditions after the outbreak of COVID-19. The management of the Group prepared discounted cash flow projections for the CGU based on the financial budget approved by the management of the Group and engaged the Valuer to conduct impairment assessment on the recoverable amounts of the CGU as at 31 December 2020. The key assumptions adopted by the management of the Group in the discounted cash flow projections are the pre-tax discount rate, growth rates and expected changes in selling prices and direct costs in the approved financial budget.

• Evaluating the competence, capabilities and objectivity of the Valuer;

• Assessing the reasonableness of the key assumptions adopted by the management of the Group in determining the recoverable amounts of CGU including growth rates and expected changes in selling prices and direct costs in the approved financial budget by comparing the management’s expectations for the market development to relevant industry growth forecasts and with reference to market information based on our knowledge of the business;

• Assessing the reasonableness of the discount rate applied in the discounted cash flow projections by developing independent expectations for the discount rate based on market data and certain company specific input data, as well as evaluating the reasonableness of input data applied by the Valuer, with the involvement of our valuation specialists; and

• Performing sensitivity test on reasonably possible changes of the pre-tax discount rate to assess the potential impact on the recoverable amount.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Independent Auditor’s Report

Other Information

The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Independent Auditor’s Report

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements – continued

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

35

World Houseware (Holdings) Limited ◆ Annual Report 2020

Independent Auditor’s Report

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements – continued

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in the independent auditor’s report is Kwok Lai Sheung.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 30 March 2021

36

World Houseware (Holdings) Limited ◆ Annual Report 2020

Consolidated Statement of Profit or Loss and Other Comprehensive Income

NOTES Turnover 5 Cost of sales Gross profit Other income 6 Other gains and losses 7 Gain (loss) arising from change in fair value of long-term other assets 19 Selling and distribution costs Administrative expenses Impairment losses under expected credit loss model, net of reversal 8 Impairment loss recognised on property, plant and equipment Finance costs 9 Profit (loss) before taxation Taxation (charge) credit 10 Profit (loss) for the year 11 Other comprehensive income (expense) Item that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of financial statements of foreign operations Total comprehensive income (expense) for the year Earnings (loss) per share 14 Basic Diluted	For the year ended 31 December 2020 2020 2019 HK$’000 HK$’000 817,298 809,809 (649,867) (688,914) 167,431 120,895 21,612 18,405 (26,155) 5,261 207,210 (22,322) (81,096) (87,206) (111,933) (101,269) (26,180) (14,069) (34,634) – (19,470) (21,849) 96,785 (102,154) (27,801) 5,872 68,984 (96,282) 90,581 (27,903) 159,565 (124,185) HK cents HK cents 9.03 (12.60) 9.01 (12.60)	For the year ended 31 December 2020 2020 2019 HK$’000 HK$’000 817,298 809,809 (649,867) (688,914) 167,431 120,895 21,612 18,405 (26,155) 5,261 207,210 (22,322) (81,096) (87,206) (111,933) (101,269) (26,180) (14,069) (34,634) – (19,470) (21,849) 96,785 (102,154) (27,801) 5,872 68,984 (96,282) 90,581 (27,903) 159,565 (124,185) HK cents HK cents 9.03 (12.60) 9.01 (12.60)
		120,895 18,405 5,261 (22,322) (87,206) (101,269) (14,069) – (21,849)
		(102,154) 5,872
		(96,282) (27,903)
		(124,185)
		HK cents (12.60)
		(12.60)

World Houseware (Holdings) Limited ◆ Annual Report 2020 37

Consolidated Statement of Financial Position

At 31 December 2020

NOTES Non-current assets Investment properties 15 Property, plant and equipment 16 Right-of-use assets 17 Deposits paid for acquisition of property, plant and equipment Deposit and prepayments for a life insurance policy 18 Long-term prepayment 19 Long-term other assets 19 Current assets Inventories 20 Trade and other receivables 21 Contract assets 22 Taxation recoverable Pledged bank deposits 23 Bank balances and cash 23 Current liabilities Trade and other payables 24 Contract liabilities 25 Amounts due to directors 26 Taxation payable Lease liabilities 27 Secured bank borrowings 28 Net current assets Total assets less current liabilities Non-current liabilities Lease liabilities 27 Amounts due to directors 26 Deposits received 19 Deferred taxation 29 Net assets	2020 HK$’000 35,735 372,656 59,243 16,849 48,490 10,750 1,741,890 2,285,613 157,274 331,550 9,507 541 6,162 119,949 624,983 303,510 9,940 30,492 6,312 613 197,110 547,977 77,006 2,362,619 – 137,578 118,186 252,658 508,422 1,854,197	2019 HK$’000 37,560 387,229 61,009 17,769 48,937 10,750 1,517,432
		2,080,686
		159,650 328,946 9,405 1,332 6,158 40,769
		546,260
		216,106 16,033 21,760 5,304 2,732 214,884
		476,819
		69,441
		2,150,127
		1,238 129,352 107,608 222,901
		461,099
		1,689,028

38

World Houseware (Holdings) Limited ◆ Annual Report 2020

Consolidated Statement of Financial Position

At 31 December 2020

NOTES Capital and reserves Share capital 30 Reserves Total equity	2020 HK$’000 76,432 1,777,765 1,854,197	2019 HK$’000 76,432 1,612,596
		1,689,028

The consolidated financial statements on pages 37 to 125 were approved and authorised for issue by the Board of Directors on 30 March 2021 and are signed on its behalf by:

LEE TAT HING CHAIRMAN

FUNG MEI PO VICE-CHAIRPERSON AND CHIEF EXECUTIVE OFFICER

39

World Houseware (Holdings) Limited ◆ Annual Report 2020

Consolidated Statement of Changes in Equity

For the year ended 31 December 2020

At 1 January 2019 Loss for the year Other comprehensive expense for the year Total comprehensive expense for the year Deemed contribution arising from cash flow estimates on amounts due to a director Release of lapsed share options Transfers At 31 December 2019 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Recognition of equity-settled share-based payments Transfers At 31 December 2020				Attributable t	o owners of the	Company
		Share capital HK$’000 76,432 – – – – – – 76,432 – – – – – 76,432	Share premium Non- distributable reserve HK$’000 HK$’000 (Note a) 343,659 251,393 – – – – – – – – – – – – 343,659 251,393 – – – – – – – – – – 343,659 251,393	Capital reserve HK$’000 (Note b) – – – – 9,910 – – 9,910 – – – – – 9,910	Share option reserve HK$’000 9,957 – – – – (452) – 9,505 – – – 5,604 – 15,109	Translation reserve HK$’000 216,580 – (27,903) (27,903) – – – 188,677 – 90,581 90,581 – – 279,258	PRC statutory surplus reserve HK$’000 (Note c) 39,993 – – – – – 3,071 43,064 – – – – 3,835 46,899	Retained profits HK$’000 865,289 (96,282) – (96,282) – 452 (3,071) 766,388 68,984 – 68,984 – (3,835) 831,537	Total HK$’000 1,803,303
									(96,282) (27,903)
									(124,185)
									9,910 –
									–
									1,689,028
									68,984 90,581
									159,565
									5,604
									–
									1,854,197

Notes:

• (a) The non-distributable reserve of the Group arose as a result of capitalisation of retained profits by subsidiaries.

• (b) The capital reserve of the Group arose from deemed contribution from the owners of the Company (note 26).

• (c) As stipulated by the relevant laws and regulations for foreign investment enterprises in the People’s Republic of China (the “PRC”), the PRC subsidiaries are required to maintain a statutory surplus reserve fund. Statutory surplus reserve fund is non-distributable. Appropriations to such reserve are made out of net profit after taxation of the PRC subsidiaries at the discretion of its board of directors. The statutory surplus reserve fund can be used to make up prior year losses, if any, and can be applied to convert into capital by means of capitalisation issue.

40

World Houseware (Holdings) Limited ◆ Annual Report 2020

Consolidated Statement of Cash Flows

For the year ended 31 December 2020

Cash flows from operating activities Profit (loss) before taxation Adjustments for: Allowance for inventories, net Bank interest income COVID-19 related rent concessions Depreciation of property, plant and equipment Depreciation of right-of-use assets Foreign exchange difference on inter-company balances (Gain) loss arising from changes in fair value of long-term other assets Loss (gain) arising from changes in fair value of investment properties Loss on modification of lease Loss on disposal/write-off of property, plant and equipment Loss on disposal of right-of-use assets Impairment loss recognised on property, plant and equipment Impairment loss recognised on trade receivables Impairment loss (reversed) recognised on other receivables Imputed interest income from compensation income receivable from Redevelopment Project Interest income from a deposit placed for a life insurance policy Finance costs Premium charges on a life insurance policy Share-based payments Operating cash flows before movements in working capital Decrease in inventories (Increase) decrease in trade and other receivables Decrease (increase) in contract assets Increase (decrease) in trade and other payables Decrease in contract liabilities Net cash generated from operations Income tax paid in the PRC Withholding tax paid Net cash generated from operating activities	2020 HK$’000 96,785 – (73) (1,380) 42,581 4,057 21,525 (207,210) 1,825 – 1,536 151 34,634 26,353 (173) (4,063) (1,180) 19,470 1,595 5,604 42,037 12,155 (6,322) 541 63,078 (6,678) 104,811 (3,337) (2,223) 99,251	2019 HK$’000 (102,154) 1,049 (112) – 39,769 4,776 (6,818) 22,322 (1,170) 64 995 – – 12,870 1,199 (5,414) (1,164) 21,849 1,572 –
		(10,367) 7,937 29,017 (594) (5,077) (3,064)
		17,852 (2,937) –
		14,915

41

World Houseware (Holdings) Limited ◆ Annual Report 2020

Consolidated Statement of Cash Flows

For the year ended 31 December 2020

Cash flows from investing activities Compensation received from Redevelopment Project Proceeds from disposal of property, plant and equipment Proceed from disposal of right-of-use assets Interest received Purchase of property, plant and equipment Deposits paid for acquisition of property, plant and equipment Withdrawal of pledged bank deposits Placement of pledged bank deposits Net cash used in investing activities Cash flows from financing activities Bank loans raised Advances from directors Repayments of bank loans Net decrease in trust receipts and import loans Interest paid Repayments of lease liabilities Repayments to directors Net decrease in bank overdrafts Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes Cash and cash equivalents at 31 December, represented by bank balances and cash	2020 HK$’000 25,457 1,428 750 73 (29,500) (535) – – (2,327) 94,047 13,802 (104,071) (13,958) (7,582) (1,977) – – (19,739) 77,185 40,769 1,995 119,949	2019 HK$’000 25,514 66 – 112 (29,011) (421) 1,409 (14)
		(2,345)
		120,832 24,821 (125,572) (13,475) (10,264) (4,437) (400) (271)
		(8,766)
		3,804 37,014 (49)
		40,769

42

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

1. GENERAL

World Houseware (Holdings) Limited (the “Company” and its subsidiaries (collectively referred to as the “Group”)) is a public limited company incorporated in the Cayman Islands and under the Companies Law of the Cayman Islands and registered as an exempted company and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its ultimate controlling parties are Mr. Lee Tat Hing and his spouse, Ms. Fung Mei Po, who are also the Chairman and Chief Executive Officer of the Company, respectively. The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information section of the annual report.

The Company is an investment holding company. The principal activities of its principal subsidiaries are set out in note 41.

The consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is also the functional currency of the Company.

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

Amendments to HKFRSs that are mandatorily effective for the current year

In the current year, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the consolidated financial statements:

Amendments to HKAS 1 and HKAS 8 Definition of Material Amendments to HKFRS 3 Definition of a Business Amendments to HKFRS 9, HKAS 39 and HKFRS 7 Interest Rate Benchmark Reform

In addition, the Group has early applied the Amendment to HKFRS 16 “COVID-19-Related Rent Concessions”.

Except as described below, the application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to HKFRSs in the current year had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

World Houseware (Holdings) Limited ◆ Annual Report 2020 43

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) – continued

Amendments to HKFRSs that are mandatorily effective for the current year – continued

2.1 Impacts on application of Amendments to HKAS 1 and HKAS 8 Definition of Material

The Group has applied the Amendments to HKAS 1 and HKAS 8 for the first time in the current year. The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity”. The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current year had no impact on the consolidated financial statements.

2.2 Impacts on early application of Amendment to HKFRS 16 COVID-19-Related Rent Concessions

The Group has applied the amendment for the first time in the current year. The amendment introduces a new practical expedient for lessees to elect not to assess whether a COVID-19related rent concession is a lease modification. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 that meets all of the following conditions:

• the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

• any reduction in lease payments affects only payments originally due on or before 30 June 2021; and

• there is no substantive change to other terms and conditions of the lease.

A lessee applying the practical expedient accounts for changes in lease payments resulting from rent concessions the same way it would account for the changes applying HKFRS 16 Leases if the changes were not a lease modification. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period in which the event occurs.

44

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

2. APPLICATION OF AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) – continued

New and amendments to HKFRSs in issue but not yet effective

The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective:

Insurance Contracts and the related Amendments[[1]] Reference to the Conceptual Framework[[2]] Interest Rate Benchmark Reform – Phase 2[[4]]

HKFRS 17 Insurance Contracts and the related Amendments[[1]] Amendments to HKFRS 3 Reference to the Conceptual Framework[[2]] Amendments to HKFRS 9, Interest Rate Benchmark Reform – Phase 2[[4]] HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 Amendments to HKFRS 10 Sale or Contribution of Assets between an Investor and HKAS 28 and its Associate or Joint Venture[3] Amendments to HKAS 1 Classification of Liabilities as Current or Non-current and related amendments to Hong Kong Interpretation 5 (2020)[1] Amendments to HKAS 16 Property, Plant and Equipment – Proceeds before Intended Use[2] Amendments to HKAS 37 Onerous Contracts – Cost of Fulfilling a Contract[2] Amendments to HKFRSs Annual Improvements to HKFRSs 2018 – 2020[2]

• 1 Effective for annual periods beginning on or after 1 January 2023. 2 Effective for annual periods beginning on or after 1 January 2022. 3 Effective for annual periods beginning on or after a date to be determined. 4 Effective for annual periods beginning on or after 1 January 2021.

The directors of the Company anticipate that the application of all these new and amendments to HKFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) and by the Hong Kong Companies Ordinance (the “CO”).

The consolidated financial statements have been prepared on the historical cost basis except for investment properties and long-term other assets that are measured at fair values at the end of each reporting period, as explained in the accounting policies set out below.

45

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.1 Basis of preparation of consolidated financial statements – continued

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 “Share-based Payment”, leasing transactions that are accounted for in accordance with HKFRS 16 “Lease”, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 “Inventories” or value in use in HKAS 36 “Impairment of Assets”.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

46

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Revenue from contracts with customers

The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.

World Houseware (Holdings) Limited ◆ Annual Report 2020 47

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Revenue from contracts with customers – continued

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

• the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;

• the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or

• the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.

A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9. In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

A contract asset and a contract liability relating to a contract are accounted for an presented on a net basis.

Over time revenue recognition: measurement of progress towards complete satisfaction of a performance obligation

Output method

The progress towards complete satisfaction of a performance obligation is measured based on output method, which is to recognise revenue on the basis of direct measurements of the value of the goods or services transferred to the customer to date relative to the remaining goods or services promised under the contract, that best depict the Group’s performance in transferring control of goods or services.

48

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Revenue from contracts with customers – continued

Incremental costs of obtaining a contract

Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.

The Group applies the practical expedient of expensing all incremental costs to obtain a contract if these costs would otherwise have been fully amortised to profit or loss within one year.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values, adjusted to exclude any prepaid or accrued operating lease income.

Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the property is derecognised.

Property, plant and equipment

Property, plant and equipment are tangible assets that are held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress) are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

49

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Property, plant and equipment – continued

When the Group makes payments for ownership interests of properties which includes both leasehold land and building elements, the entire consideration is allocated between the leasehold land and the building elements in proportion to the relative fair values at initial recognition. To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land is presented as “right-of-use assets” in the consolidated statement of financial position (except for those that are classified and accounted for as investment properties under the fair value model). When the consideration cannot be allocated reliably between non-lease building element and undivided interest in the underlying leasehold land, the entire properties are classified as property, plant and equipment.

Depreciation is recognised so as to write off the cost of assets other than construction in progress over their estimated useful lives. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, 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.

Leases

Definition of a lease

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

For contracts entered into or modified or after the date of initial application or arising from business combinations, the Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception, modification date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.

50

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee

Allocation of consideration to components of a contract

For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

The Group also applies practical expedient not to separate non-lease components from lease component, and instead account for the lease component and any associated non-lease components as a single lease component.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to leases of leasehold land and buildings and motor vehicles that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the recognition exemption for lease of low-value assets. Lease payments on short-term leases and leases of lowvalue assets are recognised as expense on a straight-line basis or another systematic basis over the lease term.

Right-of-use assets

The cost of right-of-use asset includes:

• the amount of the initial measurement of the lease liability;

• any lease payments made at or before the commencement date, less any lease incentives received;

• any initial direct costs incurred by the Group; and

• an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

51

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee – continued

Right-of-use assets – continued

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.

Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

When the Group obtains ownership of the underlying leased assets at the end of the lease term, upon exercising purchase options, the cost of the relevant right-of-use assets and the related accumulated depreciation and impairment loss are transferred to property, plant and equipment.

Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.

Refundable rental deposits

Refundable rental deposits paid are accounted under HKFRS 9 Financial Instruments (“HKFRS 9”) and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments and included in the cost of right-of-use assets.

52

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee – continued

Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

The lease payments include:

• fixed payments (including in-substance fixed payments) less any lease incentives receivable;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; and

• payments of penalties for terminating a lease, if the lease term reflects the Group exercising an option to terminate the lease.

After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.

The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever:

• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of reassessment.

• the lease payments change due to changes in market rental rates following a market rent review, in which case the related lease liability is remeasured by discounting the revised lease payments using the initial discount rate.

The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.

World Houseware (Holdings) Limited ◆ Annual Report 2020 53

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Leases – continued

The Group as a lessee – continued

Lease modifications

Except for COVID-19-related rent concession in which the Group applied the practical expedient, the Group accounts for a lease modification as a separate lease if:

• the modification increases the scope of the lease by adding the right to use one or more underlying assets; and

• the consideration for the leases increases by an amount commensurate with the standalone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the modified contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

COVID-19-related rent concessions

In relation to rent concessions that occurred as a direct consequence of the COVID-19 pandemic, the Group has elected to apply the practical expedient not to assess whether the change is a lease modification if all of the following conditions are met:

• the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

• any reduction in lease payments affects only payments originally due on or before 30 June 2021; and

• there is no substantive change to other terms and conditions of the lease.

A lessee applying the practical expedient accounts for changes in lease payments resulting from rent concessions the same way it would account for the changes applying HKFRS 16 if the changes are not a lease modification. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period in which the event occurs.

54

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Leases – continued

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight line basis over the term of the relevant lease.

Allocation of consideration to components of a contract

When a contract includes both leases and non-lease components, the Group applies HKFRS 15 to allocate consideration in a contract to lease and non-lease components. Non-lease components are separated from lease component on the basis of their relative stand-alone selling prices.

Refundable rental deposits

Refundable rental deposits received are accounted for under HKFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.

Lease modification

Changes in considerations of lease contracts that were not part of the original terms and conditions are accounted for as lease modifications, including lease incentives provided through forgiveness or reduction of rentals.

The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. 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. Non-monetary 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 the retranslation of monetary items, are recognised in the profit or loss in the period in which they arise.

55

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

3.2 Significant accounting policies – continued

Foreign currencies – continued

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) using the exchange rates prevailing at the end of each reporting period. Income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

Borrowing costs

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. Any specific borrowing that remain outstanding after the related asset is ready for its intended use or sale is included in the general borrowing pool for calculation of capitalisation rate on general borrowings. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.

Government grants related to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Such grants are presented under “other income”.

56

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme (“MPF Scheme”) in Hong Kong and retirement benefit schemes in the PRC are recognised as an expense when employees have rendered service entitling them to the contributions.

Short-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset.

A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and sick leave) after deducting any amount already paid.

Taxation

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

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from “profit (loss) before taxation” as reported in the consolidated statement of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax 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.

57

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Taxation – continued

Deferred tax – continued

Deferred tax liabilities are recognised for taxable temporary differences associated with 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. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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 assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies HKAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. Temporary differences on initial recognition of the relevant right-of-use assets and lease liabilities are not recognised due to application of the initial recognition exemption. Temporary differences arising from subsequent revision to the carrying amounts of right-ofuse assets and lease liabilities, resulting from remeasurement of lease liabilities and lease modifications, that are not subject to initial recognition exemption are recognised on the date of remeasurement or modification.

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 to the same taxable entity by the same taxation authority.

Current and deferred tax are recognised in profit or loss.

58

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Long-term other assets

Long-term other assets, representing compensated properties and comprehensive income receivable, are initially measured at fair value and subsequently at fair value through profit or loss (“FVTPL”).

Impairment losses on property, plant and equipment and right-of-use assets

At the end of the reporting period, the Group reviews the carrying amounts of its property, plant and equipment and right-of-use assets with finite useful lives 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 relevant asset is estimated in order to determine the extent of the impairment loss, if any.

The recoverable amount of property, plant and equipment and right-of-use assets are estimated individually. When it is not possible to estimate the recoverable amount individually, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

In testing a cash-generating unit for impairment, corporate assets are allocated to the relevant cash-generating unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be established. The recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating unit or group of cashgenerating units.

Recoverable amount is the higher of fair value less costs of disposal and 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 (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. For corporate assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a cash-generating unit, the Group compares the carrying amount of a group of cash-generating units, including the carrying amounts of the corporate assets or portion of corporate assets allocated to that group of cash-generating units, with the recoverable amount of the group of cash-generating units. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit or the group of cash-generating units. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit or the group of cashgenerating units. An impairment loss is recognised immediately in profit or loss.

59

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

  • Impairment losses on property, plant and equipment and right-of-use assets – continued

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

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with HKFRS 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and 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 asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

60

World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets

Classification and subsequent measurement of financial assets

Financial assets that meet the following conditions are subsequently measured at amortised cost:

• the financial asset is held within a business model whose objective is to collect contractual cash flows; and

• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

In addition, the Group may irrevocably designate a financial asset that are required to be measured at the amortised cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

Amortised cost and interest income

Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired. For financial assets that have subsequently become creditimpaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit-impaired.

61

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9

The Group performs impairment assessment under expected credit loss (“ECL”) model on financial assets (including compensation income receivable included in long-term other assets, trade receivables, other receivables, pledged bank deposit and bank balances), and contract assets which are subject to impairment assessment under HKFRS 9. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

The Group always recognises lifetime ECL for trade receivables and contract assets. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively based on internal credit rating.

For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, in which case the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

62

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

Significant increase in credit risk – continued

In particular, the following information is taken into account when assessing whether credit risk has increased significantly:

• an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;

• significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor;

• existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;

• an actual or expected significant deterioration in the operating results of the debtor;

• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an internal or external credit rating of “investment grade” as per globally understood definitions.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

63

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

Definition of default

For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full.

Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

• (a) significant financial difficulty of the issuer or the borrower;

• (b) a breach of contract, such as a default or past due event;

• (c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

• (d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

• (e) the disappearance of an active market for that financial asset because of financial difficulties.

Write-off policy

The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.

64

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Financial instruments – continued

Financial assets – continued

Impairment of financial assets and other item subject to impairment assessment under HKFRS 9 – continued

Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forwardlooking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights.

Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.

Lifetime ECL for trade receivables and contract assets are considered on a collective basis taking into consideration past due information and relevant credit information such as forward looking macroeconomic information.

For collective assessment, the Group takes into consideration the following characteristics when formulating the grouping:

• Past-due status;

• Nature, size and industry of debtors; and

• External credit ratings where available.

The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on amortised cost of the financial asset.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables where the corresponding adjustment is recognised through a loss allowance account.

65

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

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 instruments

Classification as debt or equity

Debt and equity instruments issued by a group entity 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.

Financial liabilities at amortised cost

Financial liabilities including trade and other payables, amounts due to directors, secured bank borrowings and deposits received 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.

66

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

3. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES – continued

• 3.2 Significant accounting policies – continued

Share-based payment arrangements

Equity-settled share-based payment transactions

Share options granted to employees, directors and non-executive directors

Equity-settled share based payments to employees, directors and non-executive directors are measured at the fair value of the equity instruments at the grant date.

The fair value of the equity-settled share-based payments determined at the grant date without taking into consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting period, based on the Group’s estimate equity instruments that will eventually vest, with a corresponding increase in equity (share option reserve). At the end of the reporting period, the Group revises its estimates of the number of options that are expected to vest based on assessment of all relevant non-market vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share option reserve. For share options that vest immediately at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss.

When share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to retained profits.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The 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.

Critical judgement in applying accounting policies

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

67

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY – continued

Critical judgement in applying accounting policies – continued

Determination of incremental borrowing rates of lease contracts

In determining incremental borrowing rates of lease contracts, the Group applies judgement to determine the applicable rates, taking into account the nature of the underlying assets, the terms and condition of the leases, creditworthiness of the relevant group entities and economic environment, at both the commencement date and the effective date of the modification to calculate the present value of lease payments. The incremental borrowing rates of the Group applied significantly affect the amounts of lease liabilities and right-of-use assets recognised.

Key sources of estimation uncertainty

The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Estimated impairment of property, plant and equipment and right-of-use assets relating to PVC pipes and fittings segment

In determining whether certain property, plant and equipment and right-of-use assets relating to PVC pipes and fittings segment (the “CGU”) are impaired, the management of the Group has to exercise significant judgement and make estimation on the recoverable amounts of the CGU. Changes in the key assumptions, including the pre-tax discount rate, growth rates and expected changes in selling prices and direct costs of approved financial budget in the discounted cash flow projections, could materially affect the recoverable amounts. These key assumptions are subject to greater uncertainties in the current year for how the COVID-19 pandemic may progress and evolve. The management of the Group considered there was indication for impairment for the CGU due to the changes in market conditions after the outbreak of COVID-19. The management of the Group prepared discounted cash flow projections for the CGU based on the financial budget approved by the management of the Group and engaged an independent professional valuer to conduct impairment assessment on the recoverable amounts of the CGU.

As at 31 December 2020, the carrying amounts of property, plant and equipment and right-of-use assets subject to impairment assessment were HK$215,810,000 (2019: HK$240,715,000) respectively, after taking into account the impairment losses of HK$34,634,000 (2019: nil) in respect of plant and machinery in property, plant and equipment that have been recognised. Details of the impairment of property, plant and equipment are disclosed in note 16.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY – continued

Key sources of estimation uncertainty – continued

Provision of ECL for trade receivables

Trade receivables with significant balances and credit-impaired are assessed for ECL individually.

In addition, for trade receivables which are individually insignificant or when the Group does not have reasonable and supportable information that is available without undue cost or effort to measure ECL on individual basis, collective assessment is performed by grouping debtors based on the Group’s internal credit ratings.

The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group’s trade receivables are disclosed in notes 8, 21 and 36 respectively.

Valuation of Compensated Properties included in long-term other assets (as defined in note 19)

The Compensated Properties included in long-term other assets of HK$1,682,013,000 at 31 December 2020 (2019: HK$1,439,851,000) are measured at fair value. The amount was based on a valuation conducted by Asset Appraisal Limited, an independent firm of qualified professional property valuer (the “Valuer”). The valuations was determined based on direct comparison method making reference to market observable transactions of similar properties and adjust to reflect the conditions and locations of the Compensated Properties. Other key inputs and significant assumptions which involve judgements, included discount rate and time to completion.

The basis of valuation is disclosed in note 19. Changes to these assumptions and inputs would result in changes in the fair value of the Compensated Properties and corresponding adjustments to the amount of gain or loss reported in the profit or loss.

In estimating the fair value of the Compensated Properties, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages the Valuer to perform the valuation of the Group’s Compensated Properties included in long-term other assets. At the end of the reporting period, the designated team works closely with the Valuer to establish and determine the appropriate valuation techniques and inputs for Level 2 and Level 3 fair value measurements. The Group will first consider and adopt Level 2 inputs where inputs can be derived from observable quoted prices in the active market. When Level 2 inputs are not available, the Group will adopt valuation techniques that include Level 3 inputs. When there is a material change in the fair value of the assets, the causes of the fluctuations will be reported to the board of directors of the Company.

69

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY – continued

Key sources of estimation uncertainty – continued

Deferred tax asset

As at 31 December 2020, a deferred tax asset of HK$8,442,000 (2019: HK$7,845,000) in relation to unused tax losses has been recognised in the Group’s consolidated statement of financial position. No deferred tax asset has been recognised on the tax losses of HK$350,805,000 (2019: HK$331,991,000) due to the unpredictability of future profit streams. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future taxable profits generated are less or more than expected, or change in facts and circumstances which result in revision of future taxable profits estimation, a material reversal or further recognition of deferred tax asset may arise, which would be recognised in profit or loss for the period in which such a reversal or further recognition takes place.

Estimated impairment loss of inventories

The Group makes allowance for inventories based on an assessment of the net realisable value of inventories. Allowances are applied to inventories where events or changes in circumstances indicate that the net realisable value is lower than the cost of inventories. The identification of obsolete inventories requires the use of judgement and estimates on the conditions and usefulness of the inventories. The amount of allowance would be changed as a result of the changes in the current market conditions subsequently.

The carrying amount of inventories at 31 December 2020 is HK$157,274,000 (net of allowance for inventories of HK$2,705,000 and write-off of inventories of HK$2,084,000 respectively) (2019: HK$159,650,000 (net of allowance for inventories of HK$4,629,000)). No impairment loss on the above amount was recognised during the year.

70

World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

5. TURNOVER AND SEGMENT INFORMATION

Information reported to the executive directors of the Company, being the chief operating decision makers, for the purposes of resource allocation and assessment of segment performance focuses on types of goods delivered. This is also the basis upon which the Group is arranged and organised.

Specifically, the Group’s reportable and operating segments under HKFRS 8 “Operating Segment” are as follows:

Household products	–	manufacture and distribution of household products
PVC pipes and fittings	–	manufacture and distribution of PVC pipes and fittings
Property investments	–	investment in properties
Food waste recycling	–	food waste recycling business (discontinued in current year)

No operating segments have been aggregated in arriving at the reportable segments of the Group.

Segment turnover and results

The following is an analysis of the Group’s turnover and results by operating and reportable segments.

For the year ended 31 December 2020

Turnover Sales of goods recognised at a point in time Service income recognised over time Revenue from contracts with customers Rental income Total segment revenue Segment profit (loss) Bank interest income Interest income from a deposit placed for a life insurance policy Finance costs Premium charges on a life insurance policy Unallocated corporate expenses Profit before taxation	Household products HK$’000 172,663 – 172,663 2,083 174,746 3,735	PVC pipes and fittings HK$’000 634,641 – 634,641 2,677 637,318 (49,669)	Property investments HK$’000 – – – 3,310 3,310 213,456	Food waste recycling HK$’000 – 1,924 1,924 – 1,924 (15,374)	Consolidated HK$’000 807,304 1,924
					809,228 8,070
					817,298
					152,148 73 1,180 (19,470) (1,595) (35,551)
					96,785

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. TURNOVER AND SEGMENT INFORMATION – continued

Segment turnover and results – continued

For the year ended 31 December 2019

Turnover Sales of goods recognised at a point in time Service income recognised over time Revenue from contracts with customers Rental income Total segment revenue Segment profit (loss) Bank interest income Interest income from a deposit placed for a life insurance policy Finance costs Premium charges on a life insurance policy Unallocated corporate expenses Loss before taxation	Household products HK$’000 164,036 – 164,036 – 164,036 5,000	PVC pipes and fittings HK$’000 635,451 – 635,451 – 635,451 (32,860)	Property investments HK$’000 – – – 4,335 4,335 (16,816)	Food waste recycling HK$’000 – 5,987 5,987 – 5,987 (8,657)	Consolidated HK$’000 799,487 5,987
					805,474 4,335
					809,809
					(53,333) 112 1,164 (21,849) (1,572) (26,676)
					(102,154)

The accounting policies of the operating segments are the same as the Group’s accounting policies described in note 3. Segment profit (loss) represents the profit earned (loss incurred) by each segment without allocation of bank interest income, interest income from a deposit placed for a life insurance policy, finance costs, premium charges on a life insurance policy and unallocated corporate expenses including directors’ remuneration paid or payable by the Company and certain administrative expenses for corporate use. This is the measure reported to the chief operating decision makers for the purposes of resource allocation and performance assessment.

72

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. TURNOVER AND SEGMENT INFORMATION – continued

Segment turnover and results – continued

Performance obligations for contracts with customers

(a) manufacture and distribution of household products

The Group sells household products to customers. Revenue is recognised when control of the goods has transferred, being when the goods have been delivered to customers. When the customer initially place sales order and consideration received by the Group is recognised as a contract liability until the goods have been delivered to the customer. The normal credit term is up to 60 days upon delivery.

(b) manufacture and distribution of PVC pipes and fittings

The Group sells PVC pipes and fittings to customers. Revenue is recognised when control of the goods has transferred, being when the goods have been deliver to customers. When the customer initially place sales order and consideration received by the Group is recognised as a contract liability until the goods have been delivered to the customer. The normal credit term is up to 180 days upon delivery.

Retention receivables, prior to expiration of defect liability period, are classified as contract assets, which is usually one year from the date of the delivery. The relevant amount of contract asset is reclassified to trade receivables when the defect liability period expires. The defect liability period serves as an assurance that the products supplied comply with agreed-upon specifications and such assurance cannot be purchased separately.

(c) food waste recycling business

The Group provides food waste collection and recycling services to customers. Such services are recognised as a performance obligation satisfied over time as the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs. Revenue is recognised for these services based on the stage of completion of the contract using output method.

All contracts for periods of one year or less. As permitted under HKFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

World Houseware (Holdings) Limited ◆ Annual Report 2020 73

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. TURNOVER AND SEGMENT INFORMATION – continued

Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by operating and reportable segment:

Household products PVC pipes and fittings Property investments Food waste recycling HK$’000 HK$’000 HK$’000 HK$’000 At 31 December 2020 Assets Segment assets 254,827 640,338 1,777,625 2,038 Unallocated assets Consolidated total assets Liabilities Segment liabilities 50,106 252,611 369,557 3,921 Unallocated liabilities Consolidated total liabilities At 31 December 2019 Assets Segment assets 237,845 660,433 1,554,992 14,267 Unallocated assets Consolidated total assets Liabilities Segment liabilities 40,265 181,751 330,998 7,513 Unallocated liabilities Consolidated total liabilities	Consolidated HK$’000 2,674,828 235,768
	2,910,596
	676,195 380,204
	1,056,399
	2,467,537 159,409
	2,626,946
	560,527 377,391
	937,918

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. TURNOVER AND SEGMENT INFORMATION – continued

Segment assets and liabilities – continued

For the purposes of monitoring segment performances and allocating resources among segments:

• all assets are allocated to operating segments other than deposit and prepayments for a life insurance policy, taxation recoverable, pledged bank deposits, bank balances and cash as well as certain leasehold land and buildings where such buildings are provided to group directors as residential accommodation (see note 12(i)).

• all liabilities are allocated to operating segments other than amounts due to directors, taxation payable, secured bank borrowings, certain lease liabilities and accruals of administrative expenses in head office.

Other segment information

For the year ended 31 December 2020

		PVC		Food
	Household	pipes and	Property	waste	Segment
	products	fittings	investments	recycling	total	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Amounts included in the measure of
segment profit (loss) or segment assets:
Addition to property, plant and equipment	8,972	25,905	–	–	34,877	–	34,877
Depreciation of property,
plant and equipment	4,966	28,646	–	7,029	40,641	1,940	42,581
Depreciation of right-of-use assets	816	1,319	–	1,922	4,057	–	4,057
Impairment loss recognised on
trade receivables	–	26,018	–	335	26,353	–	26,353
Impairment loss reversed on
other receivables	–	(173)	–	–	(173)	–	(173)
Net foreign exchange loss	14,913	7,430	–	300	22,643	–	22,643
Loss (gain) on disposal/write-off
of property, plant and equipment	2,756	169	–	(1,389)	1,536	–	1,536
Loss on disposal of right-of-use assets	151	–	–	–	151	–	151
Loss arising from changes in
fair value of investment properties	–	–	1,825	–	1,825	–	1,825
Gain arising from changes in
fair value of long-term other assets	–	–	(207,210)	–	(207,210)	–	(207,210)

75

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. TURNOVER AND SEGMENT INFORMATION – continued

Other segment information – continued

For the year ended 31 December 2019

		PVC		Food
	Household	pipes and	Property	waste	Segment
	products	fittings	investments	recycling	total	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Amounts included in the measure of
segment profit (loss) or segment
assets:
Addition to property, plant and equipment	9,474	20,308	–	–	29,782	–	29,782
Depreciation of property,
plant and equipment	9,227	28,602	–	–	37,829	1,940	39,769
Depreciation of right-of-use assets	668	1,346	–	2,762	4,776	–	4,776
Impairment loss recognised on
trade receivables	–	12,870	–	–	12,870	–	12,870
Impairment loss recognised on
other receivables	–	1,199	–	–	1,199	–	1,199
Allowance for inventories, net	–	–	–	1,049	1,049	–	1,049
Net foreign exchange gain	(3,813)	(1,337)	–	–	(5,150)	–	(5,150)
Loss on disposal of property,
plant and equipment	533	462	–	–	995	–	995
Gain arising from changes in
fair value of investment properties	–	–	(1,170)	–	(1,170)	–	(1,170)
Loss arising from changes in
fair value of long-term other assets	–	–	22,322	–	22,322	–	22,322
Loss on modification of lease	–	–	–	64	64	–	64

Geographical information

More than 90% of the sales of the Group’s household products were made to customers in the United States of America.

More than 90% of the sales of the Group’s PVC pipes and fittings made to customers in the PRC.

More than 90% of the Group’s non-current assets are located in the PRC. Accordingly, no non-current assets by geographical location is presented.

76

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

5. TURNOVER AND SEGMENT INFORMATION – continued

Information about major customers

During the years ended 31 December 2020 and 31 December 2019, no customer contributed more than 10% of the Group’s external revenue.

6. OTHER INCOME

OTHER INCOME
Bank interest income Courier and transportation income Imputed interest income from compensation income receivable from Redevelopment Project (note 19) Interest income from a deposit placed for a life insurance policy Government grants (Note) COVID-19 related rent concessions Others	2020 HK$’000 73 2,035 4,063 1,180 10,646 1,380 2,235 21,612	2019 HK$’000 112 1,694 5,414 1,164 8,422 – 1,599
		18,405

Note: The amounts mainly represent the incentives granted by the relevant PRC government authorities to the Group for recognition of establishment of environmental friendly manufacturing factories by enhancing energy efficiency during the manufacturing process.

During the current year, the Group recognised government grants of HK$2,104,000 in respect of COVID-19related subsidies, of which HK$1,944,000 relates to Employment Support Scheme provided by the Hong Kong government.

77

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

7. OTHER GAINS AND LOSSES

	2020		2019
	HK$’000		HK$’000
Net foreign exchange (loss) gain	(22,643)		5,150
(Loss) gain arising from changes in
fair value of investment properties	(1,825)		1,170
Loss on disposal/write-off of property, plant and equipment	(1,536)		(995)
Loss on disposal of right-of-use assets	(151)		–
Loss on modification of lease	–		(64)
	(26,155)		5,261
IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET OF REVERSAL
	2020		2019
	HK$’000		HK$’000
Impairment losses recognised (reversed) on:
Trade receivables	26,353		12,870
Other receivables	(173)		1,199
	26,180		14,069

8. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET OF REVERSAL

Details of impairment assessment are set out in note 36.

78

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

9. FINANCE COSTS Interest on: – secured bank borrowings – lease liabilities Interest/imputed interest on: – amounts due to directors – Deposits Received from Redevelopment Project (note 19) Less: amount capitalised in the cost of qualifying assets 10. TAXATION CHARGE (CREDIT) PRC Enterprise Income Tax (“EIT”) – charge for the year – overprovision in prior years – withholding tax on profits of a non-resident in the PRC Deferred taxation charge (credit) (note 29) – charge (credit) for the year – withholding tax on profits of a non-resident in the PRC Total	2020 HK$’000 8,669 104 4,168 6,529 19,470 – 19,470 2020 HK$’000 6,343 (2,566) 1,058 4,835 18,734 4,232 22,966 27,801	2019 HK$’000 11,595 367 3,553 6,473
		21,988 (139)
		21,849
		2019 HK$’000 5,213 (2,345) –
		2,868
		(11,495) 2,755
		(8,740)
		(5,872)

79

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

10. TAXATION CHARGE (CREDIT) – continued

Under the Law of the PRC on EIT (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both years.

PRC withholding income tax of 10% shall be levied on the income earned in the PRC by a foreign subsidiary.

The taxation charge (credit) for the year can be reconciled to the profit (loss) before taxation per the consolidated statement of profit or loss and other comprehensive income as follows:

Profit (loss) before taxation Taxation charge (credit) at the domestic income tax rate of 25% Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised as deferred tax asset Withholding tax on profits of a non-resident in the PRC Income tax on concessionary rate (Note) Utilisation of tax losses previously not recognised as deferred tax asset Overprovision in prior years Taxation charge (credit) for the year	2020 HK$’000 96,785 24,196 29,533 (30,899) 8,807 5,290 (2,295) (4,265) (2,566) 27,801	2019 HK$’000 (102,154)
		(25,539) 25,882 (10,619) 9,934 2,755 (2,971) (2,969) (2,345)
		(5,872)

Note: A subsidiary which is recognised as High and New-tech Enterprise has been granted tax concessions by the local tax bureau and is entitled to PRC EIT at concessionary rate of 15% (2019: 15%) for the year ended 31 December 2020.

80

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

11. PROFIT (LOSS) FOR THE YEAR

Profit (loss) for the year has been arrived at after charging: Directors’ emoluments (note 12) Other staff’s salaries and wages Other staff’s retirement benefit scheme contributions Share-based payments Total staff costs Depreciation of property, plant and equipment Depreciation of right-of-use assets Total depreciation Allowance for inventories, net Auditors’ remuneration Cost of inventories recognised as an expense Premium charges on a life insurance policy and after crediting: Gross rental income from investment properties Less: direct operating expenses that generated rental income	2020 HK$’000 25,990 73,789 1,713 1,192 102,684 42,581 4,057 46,638 – 2,705 649,867 1,595 3,310 (238) 3,072	2019 HK$’000 17,162 76,433 3,962 –
		97,557
		39,769 4,776
		44,545
		1,049 2,983 687,865 1,572 4,335 (483)
		3,852

81

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

12. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS

• (i) Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and the CO, is as follows:

2020 Executive directors: Lee Tat Hing Fung Mei Po Lee Chun Sing Lee Kwok Sing Stanley Non-executive director: Cheung Tze Man Edward Independent non-executive directors: Tsui Chi Him Steve Hui Chi Kuen Thomas Ho Tak Kay Shang Sze Ming	Fees HK$’000 – – – – 198 198 198 198 198 990	Salaries and other benefits Share-based payment HK$’000 HK$’000 6,584 1,568 3,430 1,568 3,430 1,046 2,250 230 – – – – – – – – – – 15,694 4,412	Bonus Retirement benefit scheme contributions HK$’000 HK$’000 (Note) 4,840 – – 18 – 18 – 18 – – – – – – – – – – 4,840 54	Total emoluments HK$’000 12,992 5,016 4,494 2,498 198 198 198 198 198
				25,990

82

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

12. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS – continued

• (i) Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and the CO, is as follows: – continued

2019 Executive directors: Lee Tat Hing Fung Mei Po Lee Chun Sing Lee Kwok Sing Stanley Lee Pak Tung (Resigned on 29 November 2019) Non-executive director: Cheung Tze Man Edward Independent non-executive directors: Tsui Chi Him Steve Hui Chi Kuen Thomas Ho Tak Kay Shang Sze Ming	Fees HK$’000 – – – – – 198 198 198 198 198 990	Salaries and other benefits HK$’000 6,606 3,430 3,430 2,250 402 – – – – – 16,118	Retirement benefit scheme contributions HK$’000 – 18 18 18 – – – – – – 54	Total emoluments HK$’000 6,606 3,448 3,448 2,268 402 198 198 198 198 198
				17,162

Note: The bonus is calculated at 5% of the Group’s consolidated profit before taxation.

The executive directors’ emoluments shown above were mainly for their services in connection with the management of the affairs of the Company and the Group. The non-executive directors’ emoluments shown above were mainly for their services as directors of the Company or its subsidiaries. The independent non-executive directors’ emoluments shown above were mainly for their services as directors of the Company.

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

83

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

12. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS – continued

(i) Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and the CO, is as follows: – continued

Ms. Fung Mei Po is also the Chief Executive of the Company and her emoluments disclosed above include those for services rendered by her as the Chief Executive.

In addition to the amount disclosed above, during the year, the Group also provided one of its leasehold properties in Hong Kong as residential accommodation for Mr. Lee Tat Hing and Ms. Fung Mei Po. The estimated monetary value of such accommodation, using the ratable value as an approximation, amounted to HK$1,685,000 (2019: HK$1,645,000) for the year.

(ii) Information regarding employees’ emoluments

Of the five individuals with the highest emoluments in the Group, four (2019: four) were directors including the Chief Executive of the Company whose emoluments are included in the disclosures in (i) above. The emoluments of the remaining one (2019: one) individual is as follows:

Salaries and other benefits Retirement benefit scheme contributions Share-based payment	2020 HK$’000 2,250 18 230 2,498	2019 HK$’000 2,250 18 –
		2,268

The emoluments was within the following bands:

		Number of employees
		2020	2019
HK$2,000,001	to HK$2,500,000	1	1

No emoluments were paid by the Group to the directors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors or Chief Executive has waived or agreed to waive any emoluments during both years

84

World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

13. DIVIDENDS

No final dividend was paid or proposed during both years ended 31 December 2020 and 31 December 2019, nor has dividend been proposed since the end of both reporting periods.

14. EARNINGS (LOSS) PER SHARE

The calculation of the basic and diluted earnings (loss) per share attributable to the owners of the Company is based on the following data:

Profit (loss) for the purposes of calculating basic and diluted earnings (loss) per share Weighted average number of ordinary shares for the purpose of basic earnings (loss) per share Effect of dilutive potential ordinary shares on share options Weighted average number of ordinary shares for the purpose of diluted earnings (loss) per share	2020 HK$’000 68,984 Number of 2020 764,317,421 1,617,915 765,935,336	2019 HK$’000 (96,282)
		shares 2019 764,317,421 –
		764,317,421

The diluted loss per share for the year ended 31 December 2019 has not taken into account the effect of outstanding share options as their exercise would result in a decrease in loss per share.

85

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

15. INVESTMENT PROPERTIES

2020 HK$’000 FAIR VALUE At 1 January 37,560 Change in fair value recognised in profit or loss (1,825) At 31 December 35,735 The carrying amounts of investment properties shown above comprises: 2020 HK$’000 Properties situated in Hong Kong 23,000 Properties situated in the PRC 12,735 35,735	2019 HK$’000 36,390 1,170
	37,560
	2019 HK$’000 24,500 13,060
	37,560

All of the Group’s property interests held under operating leases to earn rentals and/or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties.

86

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

15. INVESTMENT PROPERTIES – continued

The fair values of the Group’s investment properties situated in Hong Kong and the PRC as at 31 December 2020 and 2019 have been arrived at on the basis of a valuation carried out on the respective dates by Asset Appraisal Limited (2019: Knight Frank Petty Limited), independent qualified professional valuers not connected to the Group. The fair value of investment properties situated in Hong Kong was determined based on direct comparison method making reference to comparable sales transactions as available in the relevant markets and the fair value of investment properties situated in the PRC was determined based on income capitalisation method by dividing the potential rental income of the property to be valued by the appropriate capitalisation rate.

In determining the fair value of the relevant properties, the financial controller and certain directors of the Company determine the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of an asset, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation. The financial controller works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model. The financial controller reports the findings to the board of directors of the Company regularly to explain the cause of fluctuations in the fair value of the assets.

In estimating the fair value of the properties, the highest and best use of the properties is their current use.

The following table gives information about how the fair values of these investment properties are determined (in particular, the valuation techniques and inputs used), as well as the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable.

World Houseware (Holdings) Limited ◆ Annual Report 2020 87

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

15. INVESTMENT PROPERTIES – continued

						Relationship of
	Fair value	Fair value	Fair			unobservable
	as at	as at	value	Valuation technique(s)	Significant	inputs to
Investment properties	31.12.2020	31.12.2019	hierarchy	and key input(s)	unobservable input(s)	the fair value
	HK$’000	HK$’000
Residential properties in	23,000	24,500	Level 2	Direct comparison method	N/A	N/A
Hong Kong				based on market observable
				transactions of similar
				properties and adjust to reflect
				the conditions and locations of
				the subject properties.
Commercial properties in	12,735	13,060	Level 3	Income capitalisation method
the PRC
				The key inputs are:	Capitalisation rate, taking	The higher the
					into account of the	capitalisation
				(1) Capitalisation rate;	capitalisation of rental	rate, the lower
				(2) Monthly rent; and	income potential, nature	the fair value.
				(3) Level adjustment.	of the property, prevailing
					market condition which
					range from 4.13% to
					7.3% (2019: 6.0%
					to 6.5%).
					Monthly rent, using direct	The higher the
					market comparables and	monthly rent,
					taking into account age,	the higher the
					location and individual	fair value.
					factors such as road
					frontage, size of property
					and layout/design which
					range from RMB110/
					sq.m. to RMB170/sq.m.
					(2019: RMB114/sq.m. to
					RMB190/sq.m.).
					Level adjustment on	The higher
					individual floor of the	the level
					property concluding with	adjustment, the
					a proportion of 0.3% to	lower the fair
					0.9% (2019: 5% to 65%)	value.
					on a base level.

There were no transfers into or out of Level 2 or Level 3 during both years.

88

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT

COST At 1 January 2019 Currency realignment Additions Disposals/write-off Reclassification At 31 December 2019 Currency realignment Additions Disposals/write-off Reclassification Transfer from right-of-use assets At 31 December 2020 DEPRECIATION AND IMPAIRMENT At 1 January 2019 Currency realignment Provided for the year Eliminated on disposal/write-off At 31 December 2019 Currency realignment Provided for the year Eliminated on disposal/write-off Impairment loss recognised in profit or loss Transfer from right-of-use assets At 31 December 2020 CARRYING VALUES At 31 December 2020 At 31 December 2019	Leasehold land and buildings HK$’000 558,970 (9,647) 3,407 – 502 553,232 23,495 3,525 (93,266) 31,613 – 518,599 346,617 (5,364) 18,838 – 360,091 8,248 21,069 (93,133) – – 296,275 222,324 193,141	Furniture, fixtures and equipment Leasehold improvements HK$’000 HK$’000 40,093 73,173 (496) (1,426) 193 491 (552) – 744 4,820 39,982 77,058 1,550 4,743 2,026 375 (123) – 1,742 7,492 – – 45,177 89,668 29,116 57,097 (304) (1,158) 3,516 3,897 (481) – 31,847 59,836 1,120 3,902 2,917 4,331 (122) – – – – – 35,762 68,069 9,415 21,599 8,135 17,222	Motor vehicles HK$’000 23,368 (289) – (725) 440 22,794 584 – (4,518) 1,700 2,522 23,082 19,935 (229) 754 (615) 19,845 418 721 (4,165) – 2,050 18,869 4,213 2,949	Plant and machinery HK$’000 534,611 (8,715) 4,263 (5,750) 10,170 534,579 25,158 4,931 (32,353) 19,074 – 551,389 410,367 (5,802) 12,764 (4,983) 412,346 14,474 13,543 (29,876) 34,634 – 445,121 106,268 122,233	Construction in progress HK$’000 39,635 (838) 21,428 – (16,676) 43,549 2,889 24,020 – (61,621) – 8,837 – – – – – – – – – – – 8,837 43,549	Total HK$’000 1,269,850 (21,411) 29,782 (7,027) –
						1,271,194 58,419 34,877 (130,260) – 2,522
						1,236,752
						863,132 (12,857) 39,769 (6,079)
						883,965 28,162 42,581 (127,296) 34,634 2,050
						864,096
						372,656
						387,229

89

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT – continued

The cost of leasehold land and buildings is depreciated over the shorter of the term of the lease or twenty-five to fifty years on a straight line basis.

The other items of property, plant and equipment, other than construction in progress, are depreciated on a reducing balance basis, at the following rates per annum:

Furniture, fixtures and equipment 18 – 20% Leasehold improvements Over shorter of the term of leases or 20% Motor vehicles 20% Plant and machinery 9 – 20%

The construction in progress comprise properties located in the PRC under medium-term lease.

During the year ended 31 December 2019, the Group has capitalised interest expenses on secured bank borrowings amounting to HK$139,000 and such amounts are included in the construction in progress.

Impairment assessment

As affected by COVID-19, the Group had stopped its manufacturing activities in PRC from February 2020 to mid of March 2020 due to mandatory government quarantine measures in an effort to contain the spread of the pandemic. The segment of the business of PVC pipes and fittings manufacture and distribution had recorded a loss.

During the year ended 31 December 2020, the management performed an impairment assessment on certain property, plant and equipment and right-of-use assets relating to the PVC pipes and fittings segment (the “CGU”) with aggregate carrying amount of HK$215,810,000 (2019: HK$240,715,000) as the management concluded there was indication for impairment due to the outbreak of COVID-19 during the year.

The recoverable amount of CGU has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by the management of the Group covering the following 5 years with a pre-tax discount rate of 16% as at 31 December 2020. The annual growth rate used is 2.5% to 3.5%, which is based on the industry growth forecasts and does not exceed the long-term average growth rate for the relevant industry. The cash flows beyond the five-year period are extrapolated using 2.5% growth rate which do not exceed the average growth rate for the relevant markets. Other key assumptions for the value in use calculations relate to the estimation of cash inflows/outflows which include expected changes in selling prices and direct costs, such estimation is based on the unit’s past performance and management’s expectations for the market development.

Based on the result of the assessment, management of the Group determined that the recoverable amount of the CGU is lower than the carrying amount. The impairment amount has been allocated to each category of property, plant and equipment and right-of-use assets such that the carrying amount of each category of asset is not reduced below the highest of its fair value less cost of disposal, its value in use and zero. Based on the value in use calculation and the allocation, an impairment of HK$34,634,000 (2019: nil) has been recognised against the carrying amount of plant and machinery in property, plant and equipment as the fair value less cost of disposal of other categories of property, plant and equipment and right-of-use assets are above their carrying amounts.

90

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

17. RIGHT-OF-USE ASSETS

COST At 1 January 2019 Currency realignment Lease modification At 1 January 2020 Currency realignment Disposal Transfer to property, plant and equipment At 31 December 2020 DEPRECIATION At 1 January 2019 Currency realignment Provided for the year At 1 January 2020 Currency realignment Provided for the year Eliminated on disposal Transfer to property, plant and equipment At 31 December 2020 CARRYING VALUES At 31 December 2020 At 31 December 2019 Expense relating to short-term leases Total cash outflow for leases	Leasehold lands HK$’000 101,059 (2,141) – 98,918 6,587 – – 105,505 40,718 (898) 2,013 41,833 2,923 1,973 – – 46,729 58,776 57,085	Leasehold land and buildings HK$’000 9,099 – (4,591) 4,508 – – – 4,508 – – 2,174 2,174 – 1,867 – – 4,041 467 2,334	Motor vehicles HK$’000 4,322 – – 4,322 – (1,800) (2,522) – 2,143 – 589 2,732 – 217 (899) (2,050) – – 1,590 2020 HK$’000 112 2,193	Total HK$’000 114,480 (2,141) (4,591)
				107,748 6,587 (1,800) (2,522)
				110,013
				42,861 (898) 4,776
				46,739 2,923 4,057 (899) (2,050)
				50,770
				59,243
				61,009
				2019 HK$’000 205 4,642

91

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

17. RIGHT-OF-USE ASSETS – continued

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which the contract is enforceable.

In addition, the Group owns several leasehold land and buildings. The Group is the registered owner of these property interests, including the underlying leasehold lands. Lump sum payments were made upfront to acquire these property interests.

18. DEPOSIT AND PREPAYMENTS FOR A LIFE INSURANCE POLICY

During the year ended 31 December 2014, a subsidiary of the Company entered into a life insurance policy (the “Policy”) with a bank to insure a director of the Company, Ms. Fung Mei Po. Under the Policy, the beneficiary and policy holder is a subsidiary of the Company and the total insured sum is USD20,000,000 (equivalent to HK$155,000,000). At inception of the Policy, the Group paid a gross premium of approximately USD6,785,000 (equivalent to HK$52,587,000). The bank will pay the Group a guaranteed interest rate of 4.2% per annum for the first year and a variable return per annum afterwards (with minimum guaranteed interest rate of 2.0% per annum) during the effective period of the Policy. The Group can terminate the Policy at any time and can receive cash back at the date of termination based on the account value of the Policy (“Account Value”), which is determined by the gross premium paid plus accumulated guaranteed interest earned and minus any charges made in accordance with the terms and conditions of the policy. If termination is made between the first policy year to the end of surrender period stated in the Policy, there is a specified amount of surrender charge deducted from Account Value. The directors of the Company consider that the subsidiary of the Company may terminate the Policy at the end of the tenth policy year in 2024 and accordingly, there will be a specified surrender charge of USD749,000 (equivalent to HK$5,805,000) in accordance with the Policy.

The Policy exposes the insurer to significant insurance risk. The gross premium paid at inception of the Policy consists of a deposit placed element and a prepayment for life insurance element. These two elements are recognised on the consolidated statement of financial position at the aggregate of the amount of gross premium paid plus interest earned, and after deducting the annual cost of insurance, other applicable charges as well as the amortisation of the expected surrender charge at the end of the tenth policy year.

The directors of the Company consider that the expected life of the Policy remains unchanged from the date of initial recognition and the financial impact of the option to terminate the Policy was not significant.

As at 31 December 2020, deposit and prepayments for the life insurance policy amounts to HK$50,129,000 (2019: HK$50,545,000) in aggregate, of which HK$48,490,000 (2019: HK$48,937,000) and HK$1,640,000 (2019: HK$1,608,000), are classified as non-current assets and current assets, respectively.

92

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

19. REDEVELOPMENT PROJECT

At 31 December 2018 Loss arising from changes in fair value of long-term other assets Imputed interest income from compensation income receivable from Redevelopment Project (note 6) Compensation received from Redevelopment Project Exchange realignment/difference At 31 December 2019 Gain arising from changes in fair value of long-term other assets Imputed interest income from compensation income receivable from Redevelopment Project (note 6) Compensation received from Redevelopment Project Exchange realignment/difference At 31 December 2020	Fair value of compensated properties HK$’000 1,470,566 (22,322) – – (8,393) 1,439,851 207,210 – – 34,952 1,682,013	Present value of compensation income receivable HK$’000 99,893 – 5,414 (25,514) (2,212) 77,581 – 4,063 (25,457) 3,690 59,877	Total HK$’000 1,570,459 (22,322) 5,414 (25,514) (10,605)
			1,517,432 207,210 4,063 (25,457) 38,642
			1,741,890

Included in compensation income receivable is the following amount denominated in currency other than the functional currency of the relevant group company:

RMB

2020	2019
HK$’000	HK$’000
34,909	39,693

World Houseware (Holdings) Limited ◆ Annual Report 2020 93

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

19. REDEVELOPMENT PROJECT – continued

On 11 August 2011, one of the subsidiaries of the Company, Welidy Limited (“Welidy”), has entered into a conditional provisional removal remedy agreement (“Provisional Agreement”) with an independent third party property developer (the “Developer”) in relation to the redevelopment of a piece of land owned by the Group (the “Land”) and this Land constituted part of a redevelopment project (“Redevelopment Project”) proposed by the Developer. The factory building built on the Land is owned by another subsidiary of the Company, namely 世界塑膠餐墊（寶安）有限公司 World Plastic Mat (Baoan) Company Limited (“World (Baoan)”).

Under the Provisional Agreement, the Group agreed to surrender the Land, in the future, to the Developer for certain residential or commercial properties (the “Compensated Properties”) to be built under the Redevelopment Project (the “Transaction”).

Upon signing the Provisional Agreement, an interest-free refundable deposit amounting to RMB30,000,000 (equivalent to approximately HK$33,370,000 (2019: HK$33,445,000)) was received by the Group, which is refundable on the date of receipt of all the Compensated Properties (the “Compensated Properties Receipt Date”) or acknowledgement from PRC government authorities on the termination of Redevelopment Project, whichever is earlier. The Group also prepaid HK$21,500,000 for legal and consultancy services to be provided by a PRC lawyer in respect of the Redevelopment Project and the amount is recognised as long-term prepayment in the consolidated statement of financial position (“Prepayment”). As at 31 December 2020, the carrying amount of the Prepayment amounted to HK$10,750,000 (2019: HK$10,750,000).

On 16 August 2017, Welidy and World (Baoan) further entered into a supplementary agreement to the Provisional Agreement (the “Supplementary Agreement”) with a fellow subsidiary of the Developer (the “Ultimate Developer”). In the Supplementary Agreement, the consideration for the Transaction have been finalised which includes the details of the Compensated Properties to be received upon completion of Redevelopment Project and unconditional and non-refundable monthly compensation income (“Compensation income”) to be received by the Group from the Ultimate Developer up to the Compensated Properties Receipt Date. Upon signing the Supplementary Agreement, further refundable deposits amounting to RMB80,000,000 (equivalent to approximately HK$95,923,000), in which RMB30,000,000 is interest-free and RMB50,000,000 is interest bearing at 6%, were received by the Group, together with the deposit received in 2011 as mentioned above, hereinafter referred to as the “Deposits Received”.

The Transaction with the Ultimate Developer was completed on 8 August 2018.

94

World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

19. REDEVELOPMENT PROJECT – continued

As at 31 December 2020, the principal amount of the Deposits Received amounting to RMB110,000,000 (equivalent to approximately HK$130,797,000) (2019: RMB110,000,000 (equivalent to approximately HK$122,631,000)) with carrying amount of HK$118,186,000 (2019: HK$107,608,000). The Deposits Received is measured at amortised cost using the effective interest rate at 6% per annum.

As the fair value of the Compensated Properties changes from time to time, the carrying amount recognised by the Group would be subject to remeasurement at fair value at each subsequent reporting date prior to obtaining control of the Compensated Properties. The fair values of the Compensated Properties at the end of the reporting period have been arrived at on the basis of a valuation carried out by the Valuer not connected with the Group, in accordance with the HKIS Valuation Standards issued by Hong Kong Institute of Surveyors.

As at 31 December 2020 and 2019, the fair value of Compensated Properties was determined based on direct comparison method making reference to market observable transactions of similar properties and adjust to reflect the conditions and locations of the subject properties. Market unit rate, which mainly taking into account of the time, location, frontage and size are considered as significant unobservable input. The market unit rate of the Compensated Properties used in the valuation was referenced to similar commercial properties, which ranged from RMB22,500 to RMB50,000 (2019: RMB22,500 to RMB50,000) and similar residential properties, which was RMB42,000 (2019: RMB36,000). A significant increase in the market unit rate used would result in a significant increase in the fair value of the Compensated Properties, and vice versa. Other key inputs and significant assumptions which involve judgements, included discount rate and time to completion. The discount rate used in the valuation was referenced to the applicable market yield of similar properties. The fair value measurements of Compensated Properties are categorised as Level 3 of the fair value hierarchy. There were no transfers into or out of Level 2 or Level 3 during both years.

20. INVENTORIES

INVENTORIES
Raw materials and consumables Work in progress Finished goods	2020 HK$’000 88,516 24,017 44,741 157,274	2019 HK$’000 67,199 21,114 71,337
		159,650

95

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

21. TRADE AND OTHER RECEIVABLES

The following is an aging analysis of the Group’s trade receivables presented based on the invoice date, which approximated the respective revenue recognition dates, net of allowance for credit losses and breakdown of other receivables and prepayments at the end of the reporting period:

0 – 30 days 31 – 60 days 61 – 90 days 91 – 180 days Over 180 days Trade receivables, net of allowance for credit losses Prepayments for raw materials, deposits and other receivables Deposit and prepayments for a life insurance policy (note 18) Total trade and other receivables	2020 HK$’000 124,239 65,584 40,741 57,042 30,861 318,467 11,443 1,640 331,550	2019 HK$’000 131,286 49,711 34,333 38,771 51,965
		306,066 21,272 1,608
		328,946

The Group allows credit period ranging from 30 days to 180 days, depending on the products sold, to its trade customers. Trade and other receivables are unsecured and interest-free.

The Group’s trade receivables which are denominated in currencies other than the functional currencies of the relevant group companies are set out below:

	2020	2019
	HK$’000	HK$’000
USD	24,770	22,584
HK$	–	284

As at 31 December 2020, included in the Group’s trade receivables balance are debtors with aggregate carrying amount of HK$59,102,000 (2019: HK$90,158,000) which are past due as at the reporting date. Out of the past due balances, HK$42,966,000 (2019: HK$83,646,000) has been past due 90 days or more and is not considered as in default based on the good repayment records for those customers and continuous business with the Group. The Group does not hold any collateral over these balances.

Details of impairment assessment of trade and other receivables are set out in note 36.

96

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

22. CONTRACT ASSETS

	2020	2019
	HK$’000	HK$’000
PVC pipes and fittings	9,507	9,405

As at 1 January 2019, contract assets amounted to HK$9,023,000.

The Group typically agrees to a retention period of one year from the date of the delivery of PVC and fitting products, for 10% of the contract value. This amount is included in contract assets until the end of the retention period.

Details of impairment assessment of contract assets for the year ended 31 December 2020 are set out in note 36.

23. PLEDGED BANK DEPOSITS AND BANK BALANCES AND CASH

Pledged bank deposits represent deposits pledged to banks to secure bills payable and short-term secured bank borrowings granted to the Group and are therefore classified as current assets. The pledged bank deposits carry interest at market rates which range from 0.25% to 1.75% (2019: 0.25% to 1.75%) per annum. The pledged deposits will be released upon the settlement of relevant borrowings.

Bank balances and cash comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less, which carry interest at market rates. Bank balances carry interest at market rates which range from 0.01% to 1.35% (2019: 0.01% to 1.35%) per annum.

The Group’s pledged bank deposits and bank balances and cash which are denominated in currencies other than the functional currencies of the relevant group companies are set out below:

	2020	2019
	HK$’000	HK$’000
USD	8,277	6,986
HK$	1,118	74
RMB	14	12

World Houseware (Holdings) Limited ◆ Annual Report 2020 97

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

24. TRADE AND OTHER PAYABLES

The following is an aged analysis of the Group’s trade and bills payables presented based on the invoice date and other payables at the end of the reporting period:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days Total trade and bills payables Other payables Total trade and other payables	2020 HK$’000 128,425 26,009 15,363 76,410 246,207 57,303 303,510	2019 HK$’000 106,404 15,471 14,783 34,562
		171,220 44,886
		216,106

The following is an analysis of the Group’s other payables at the end of the reporting period:

Accrued expenses Deposits received Payable on acquisition of property, plant and equipment Interest payables Value-added tax payables Wages and bonus payable Property tax and other tax payables Others	2020 HK$’000 17,844 7,732 6,922 11,445 1,810 4,929 952 5,669 57,303	2019 HK$’000 14,974 4,588 4,105 7,911 929 5,452 1,077 5,850
		44,886

The average credit period on purchases of goods is 90 days.

Included in trade and other payables are the following amounts denominated in currencies other than the functional currencies of the relevant group companies:

	2020	2019
	HK$’000	HK$’000
USD	55,547	17,077

98

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

25. CONTRACT LIABILITIES

Household products PVC pipes and fittings	2020 HK$’000 343 9,597 9,940	2019 HK$’000 565 15,468
		16,033

As at 1 January 2019, contract liabilities amounted to HK$19,438,000.

The contract liabilities are expected to be settled within the Group’s normal operation cycle and therefore are classified as current liabilities.

26. AMOUNTS DUE TO DIRECTORS

At 31 December 2020, the amounts due to directors, who are also the controlling shareholders of the Group, in aggregate of HK$168,070,000 (2019: HK$151,112,000) are unsecured.

Repayable within one year: – interest bearing ranged from 2.9% to 4.35% per annum (2019: nil) – interest-free Repayable over one year: – interest bearing ranged from 2.9% to 4.35% (2019: 2.9% to 4.35%) per annum – interest-free (Note)	2020 HK$’000 8,732 21,760 30,492 68,798 68,780 137,578 168,070	2019 HK$’000 – 21,760
		21,760
		67,237 62,115
		129,352
		151,112

Note: Included in this amount is a carrying amount of HK$63,940,000 (2019: HK$62,115,000) with principal amount outstanding as at 31 December 2020 of HK$70,252,000 (2019: HK$70,252,000). During the year ended 31 December 2019, the principal amount has been adjusted by HK$9,910,000 as the deemed contribution arising from future cash flow estimates on amount due to a director. At the end of the reporting period, the Group calculates the estimated future cash flows at effective interest rate of 2.9% (2019: 2.9%).

99

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

27. LEASE LIABILITIES

Lease liabilities payable: Within one year Within a period of more than one year but not more than two years Within a period of more than two years but not more than five years Less: Amount due for settlement with 12 months shown under current liabilities Amount due for settlement after 12 months shown under non-current liabilities	2020 HK$’000 613 – – 613 (613) –	2019 HK$’000 2,732 1,010 228
		3,970 (2,732)
		1,238

The weighted average incremental borrowing rates applied to lease liabilities is 4.1% (2019: 4.1%).

Restrictions or covenants on leases

Lease liabilities of HK$613,000 (2019: HK$3,970,000) are recognised with related right-of-use assets of HK$467,000 (2019: HK$3,924,000). The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. The related leased assets may not be used as security for borrowing purposes. As at 31 December 2020, the lease liabilities are secured by rental deposits with carrying values of HK$1,080,000 (2019: HK$1,080,000).

100

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

28. SECURED BANK BORROWINGS

Variable rate bank loans Variable rate trust receipts and import loans The carrying amounts of the above secured bank borrowings are repayable*: Within one year Within a period of more than one year but not exceeding two years Within a period of more than two years but not exceeding five years Within a period of more than five years The carrying amounts of secured bank borrowings due within one year (excluding those loans with repayment on demand clause) shown under current liabilities The carrying amount of secured bank borrowing that contains a repayment on demand clause (shown under current liabilities) but repayable Within one year After one year Amount shown under current liabilities	2020 HK$’000 186,637 10,473 197,110 188,048 1,622 5,108 2,332 197,110 99,792 88,256 9,062 97,318 197,110	2019 HK$’000 190,454 24,430
		214,884
		184,675 21,914 4,986 3,309
		214,884
		92,531
		92,144 30,209
		122,353
		214,884

• The amounts due are based on the scheduled repayment dates set out in the loan agreements.

101

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

28. SECURED BANK BORROWINGS – continued

The bank loans of the Group, which were borrowed by subsidiaries, that are denominated in currencies other than the functional currency of the relevant group companies are set out below:

	2020	2019
	HK$’000	HK$’000
USD	31,015	47,474

The ranges of interest rates which is repriced every three months, on the Group’s borrowings are as follows:

	2020	2019
Variable rate bank loans,	Interest rate:	Interest rate:
trust receipts, import loans	Ranging from Hong Kong	Ranging from
and bank overdrafts	Inter Bank Offered Rate	HIBOR + 1.85% to 2.5%,
	(“HIBOR”) + 1.75% to 2.5%,	Prime rate and Central
	Prime rate and Central	Bank base interest rate of
	Bank base interest rate of	the PRC multiplied by
	the PRC multiplied by	100% to 145%
	135% to 180%

The ranges of effective interest rates (which are also equal to contracted interest rates) on the Group’s borrowings are as follows:

	2020	2019
Effective interest rates:
Variable rate secured bank borrowings	2.1% to 6.25%	1.75% to 9.64%
	per annum	per annum

102

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

29. DEFERRED TAXATION

The followings are the major deferred taxation assets (liabilities) recognised and movements thereon during the current and prior years:

At 1 January 2019 Currency realignment Credit (charge) to profit or loss At 31 December 2019 Currency realignment Credit (charge) to profit or loss Withholding tax paid At 31 December 2020	Accelerated tax depreciation HK$’000 (5,526) 11 203 (5,312) (35) 1,431 – (3,916)	Fair value changes in investment properties HK$’000 (2,072) – 32 (2,040) – 81 – (1,959)	Tax losses Withholding tax on profits of a non-resident in the PRC EIT liabilities arising from Redevelopment Project HK$’000 HK$’000 HK$’000 6,256 (107,399) (125,357) (84) 49 2,485 1,673 (2,755) 9,587 7,845 (110,105) (113,285) 275 (292) (8,962) 322 (4,232) (20,568) – 2,223 – 8,442 (112,406) (142,815)	Others HK$’000 (4) – – (4) – – – (4)	Total HK$’000 (234,102) 2,461 8,740
					(222,901) (9,014) (22,966) 2,223
					(252,658)

The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax assets Deferred tax liabilities	2020 HK$’000 8,442 (261,100) (252,658)	2019 HK$’000 7,845 (230,746)
		(222,901)

At the end of the reporting period, the Group had unused tax losses of approximately HK$392,901,000 (2019: HK$371,037,000) available to offset against future assessable profits. A deferred taxation asset of HK$8,442,000 (2019: HK$7,845,000) has been recognised in respect of HK$42,096,000 (2019: HK$39,046,000) of such losses. No deferred taxation asset has been recognised in respect of the remaining tax losses of HK$350,805,000 (2019: HK$331,991,000) due to the unpredictability of future profit streams. For the year ended 31 December 2020, approximately HK$4,109,000 (2019: HK$11,251,000) of tax loss have expired. Included in unrecognised tax losses are losses of HK$93,791,000 (2019: HK$76,406,000) that will expire in 5 years (2019: 5 years). Other losses may be carried forward indefinitely. The Group had no other significant unprovided deferred taxation at the end of the reporting period.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

29. DEFERRED TAXATION – continued

Under the EIT Law, withholding tax is imposed on dividends declared in respect of profits earned by the PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to retained profits of the PRC subsidiary amounting to HK$354,558,000 (2019: HK$295,816,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

30. SHARE CAPITAL

SHARE CAPITAL
Ordinary shares of HK$0.1 each Authorised: At 1 January 2019, 31 December 2019 and 31 December 2020 Issued and fully paid: At 1 January 2019, 31 December 2019 and 2020	Number of shares 1,500,000,000 764,317,421	HK$’000 150,000
		76,432

There were no changes in the authorised share capital in both years.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

31. SHARE-BASED PAYMENT TRANSACTIONS

The Company’s share option scheme (the “Share Option Scheme”), was adopted at an extraordinary general meeting of the Company held on 10 June 2011 for the primary purpose of providing incentives to directors and eligible employees, and will expire on 9 June 2021. Under the Share Option Scheme, the Board of Directors of the Company may grant options to eligible employees, including directors of the Company and its subsidiaries, to subscribe for shares in the Company.

At 31 December 2020, the number of shares in respect of which options had been granted and remained outstanding under the Share Option Scheme was 70,300,000 (2019: 43,500,000), representing 9.2% (2019: 5.7%) of the shares of the Company in issue at that date. The total number of shares in respect of which options may be granted under the Share Option Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders.

Options granted must be taken up within 1 month of the date of grant, upon payment of HK$1 from each grantee upon acceptance of offer. Options may be exercised immediately from the date of grant of the share options to the 10th anniversary of the date of grant. The exercise price is determined by the directors of the Company, and will not be less than the highest of (i) the closing price of the Company’s shares on the date of grant, (ii) the average closing price of the shares for the five business days immediately preceding the date of grant; and (iii) the nominal value of the Company’s share.

105

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

31. SHARE-BASED PAYMENT TRANSACTIONS – continued

The following tables disclose the movements of the Company’s share options in both years:

Type of participants Date of grant Vesting period Exercisable period Exercise price per share HK$ 2011 share options Independent non-executive directors 24.10.2011 Nil 24.10.2011 – 23.10.2021 0.237 Employees 24.10.2011 Nil 24.10.2011 – 23.10.2021 0.237 2012 share options Executive directors 12.11.2012 Nil 12.11.2012 – 11.11.2022 0.309 Independent non-executive directors 12.11.2012 Nil 12.11.2012 – 11.11.2022 0.309 Employees 12.11.2012 Nil 12.11.2012 – 11.11.2022 0.309 2015 share options Executive directors 01.09.2015 Nil 01.09.2015 – 31.08.2025 0.580 Non-executive director 01.09.2015 Nil 01.09.2015 – 31.08.2025 0.580 Independent non-executive directors 01.09.2015 Nil 01.09.2015 – 31.08.2025 0.580 Employees 01.09.2015 Nil 01.09.2015 – 31.08.2025 0.580 2020 share options Executive directors 22.12.2020 Nil 22.12.2020 – 21.12.2030 0.357 Employees 22.12.2020 Nil 22.12.2020 – 21.12.2030 0.357 Exercisable at the end of the year Weighted average exercise price	Outstanding at 1.1.2019 600,000 2,000,000 2,600,000 13,000,000 600,000 6,000,000 19,600,000 13,000,000 500,000 1,200,000 9,100,000 23,800,000 – – – 46,000,000 46,000,000 0.445	Lapsed during the year – – – (2,000,000) – – (2,000,000) (500,000) – – – (500,000) – – – (2,500,000) 0.363	Outstanding at 31.12.2019 600,000 2,000,000 2,600,000 11,000,000 600,000 6,000,000 17,600,000 12,500,000 500,000 1,200,000 9,100,000 23,300,000 – – – 43,500,000 43,500,000 0.450	Granted during the year – – – – – – – – – – – – 21,100,000 5,700,000 26,800,000 26,800,000 0.357	Outstanding at 31.12.2020 600,000 2,000,000
					2,600,000
					11,000,000 600,000 6,000,000
					17,600,000
					12,500,000 500,000 1,200,000 9,100,000
					23,300,000
					21,100,000 5,700,000
					26,800,000
					70,300,000
					70,300,000
					0.414

106

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

31. SHARE-BASED PAYMENT TRANSACTIONS – continued

These fair values were calculated using the Binomial option pricing model. The inputs into the model were as follows:

	2020
Weighted average share price	HK$0.357
Exercise price	HK$0.357
Expected volatility	63.13%
Expected life	10 years
Risk-free rate	0.524%
Expected dividend yield	0%

Expected volatility was determined by using the historical volatility of the Company’s share price over the previous 10 years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group recognised the total expense of HK$5,604,000 for the year ended 31 December 2020 in relation to share options granted by the Company.

32. RETIREMENT BENEFIT SCHEMES

The Group operates the MPF Scheme for all qualifying Hong Kong employees. The assets of the scheme are held separately from those of the Group, in funds under the control of trustees. Mandatory benefits are provided under the MPF Scheme. The Group contributes the lower of 5% of the relevant payroll costs and HK$1,500 per employee to the MPF Scheme.

Employees of subsidiaries in the PRC are members of the state managed retirement benefit schemes operated by the PRC government. The subsidiaries are required to contribute a certain percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the required contributions.

The total contribution to the retirement benefit schemes charged to the consolidated statement of profit or loss and other comprehensive income is HK$1,767,000 (2019: HK$4,016,000).

107

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

33. CAPITAL COMMITMENTS Capital expenditure contracted for but not provided in the consolidated financial statements in respect of: – plant and equipment – buildings 34. OPERATING LEASES The Group as lessor Undiscounted lease payments receivable on leases are as follows: Within one year In the second year In the third year In the fourth year In the fifth year After five years	2020 HK$’000 4,594 3,426 8,020 2020 HK$’000 6,820 5,168 3,852 3,226 66 – 19,132	2019 HK$’000 6,329 4,152
		10,481
		2019 HK$’000 6,542 5,748 5,260 4,253 4,271 60
		26,134

The properties held have committed tenants for periods of up to five years (2019: six years).

108

World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

35. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of net debts, which includes amounts due to directors, lease liabilities and secured bank borrowings, disclosed in respective notes, pledged bank deposits, cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure on a regular basis. As part of this review, the directors consider the cost of capital and the risks associates with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through the payment of dividends, new share issues and the issue of new debts.

36. FINANCIAL INSTRUMENTS

Categories of financial instruments

	2020	2019
	HK$’000	HK$’000
Financial assets
Amortised cost	508,770	432,959
Financial liabilities
Amortised cost	642,647	557,252

Financial risk management objectives and policies

The Group’s major financial instruments include compensation income receivables included in longterm other assets, trade and other receivables, pledged bank deposits, bank balances and cash, trade and other payables, amounts due to directors and secured bank borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

109

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Market risk

Currency risk

Several subsidiaries of the Company have foreign currency sales and purchases, which expose the Group to foreign currency risk. Approximately 21% (2019: 20%) and 61% (2019: 71%) of the Group’s sales and purchases, respectively, are denominated in currencies other than the functional currencies of the group entities making the sale and the purchase.

Several subsidiaries of the Company have foreign currency bank balances, trade and other receivables, trade and other payables and secured bank borrowings that are denominated in currencies other than the functional currencies of the relevant group entities which expose the Group to foreign currency risk. The Group currently does not have a foreign currency hedging policy but the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at 31 December 2020 and 2019 are as follows:

USD (HK$ as functional currency) USD (RMB as functional currency) HK$ RMB	Assets 2020 2019 HK$’000 HK$’000 33,022 29,508 25 62 1,118 358 34,923 39,705 69,088 69,633	Liabilities 2020 2019 HK$’000 HK$’000 31,787 49,021 54,775 15,530 – – – – 86,562 64,551	Liabilities 2020 2019 HK$’000 HK$’000 31,787 49,021 54,775 15,530 – – – – 86,562 64,551
			64,551

In addition, the Group is also exposed to foreign currency risk arising from intra-group loans/trading transactions denominated in HK$ involving PRC entities whose functional currency is RMB. The foreign currency denominated net monetary assets in relation to these intra-group balances amounted to approximately HK$340,108,000 (2019: HK$329,755,000). The Group has not formulated a policy to hedge the foreign currency risk.

110

World Houseware (Holdings) Limited ◆ Annual Report 2020

For the year ended 31 December 2020

Notes to the Consolidated Financial Statements

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Market risk – continued

Currency risk – continued

The Group is mainly exposed to fluctuation in exchange rate of RMB against HK$ and USD. Exposures on balances which are denominated in USD in group companies with HK$ as functional currency, are not considered significant as HK$ is pegged to USD. The following table details the Group’s sensitivity to a reasonably possible change of 5% in exchange rate of RMB (functional currency of the relevant group companies) against HK$ and USD while all other variables are held constant. The sensitivity analysis includes outstanding foreign currency denominated monetary items including external loans in USD as well as intra-group loans/trading transactions denomination in HK$ involving the PRC entities whose functional currency is RMB. A positive number below indicates an increase in profit (2019: a decrease in loss) for the year where RMB weakens against HK$ and USD. For a 5% strengthening of RMB against HK$ and USD, there would be an equal and opposite impact on the loss for the year and the balances below would be negative.

	2020	2019
	HK$’000	HK$’000
RMB against HK$	12,796	12,379
RMB against USD	(2,053)	(580)

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year.

Interest rate risk

The Group’s cash flow interest rate risk relates primarily to variable rate secured bank borrowings (see note 28). In relation to these variable rate secured bank borrowings, the Group currently does not have policy on cash flow hedges of interest rate risk. However, the management monitors interest rate exposure and will consider hedging significant interest rate risk should the need arise.

111

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Market risk – continued

Interest rate risk – continued

The Group’s sensitivity to cash flow interest rate risk has been determined based on the exposure to interest rates for the variable rate secured bank borrowings at the end of the reporting period. A 100 basis points (2019: 100 basis points) increase or decrease in interest rates is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 100 basis points (2019: 100 basis points) higher and all other variable held constant, the potential effect on profit (loss) for the year is as follows:

	2020	2019
	HK$’000	HK$’000
Decrease in profit for the year
(2019: increase in loss for the year)	1,561	1,716

For decreasing interest rate of 100 basis points, there would be an equal and opposite impact on the profit (loss) for the year.

A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (“IBORs”) with alternative nearly risk-free rates. As listed in note 28, several of the Group’s HIBOR bank loans may be subject to the interest rate benchmark reform. The Group is closely monitoring the transition to new benchmark interest rates.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent interest rate risk as the year end exposure does not reflect the exposure during the year.

Credit risk and impairment assessment

The Group’s credit risk is primarily attributable to trade and other receivables, contract assets, pledged bank deposits and bank balances. The Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge the obligations by counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position at the end of each reporting period. As at 31 December 2020, the Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits and credit approvals. Before accepting any new customer, the Group uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed every year. Other monitoring procedures are in place to ensure that follow-up action is taken to recover overdue debts. In addition, the Group performs impairment assessment under ECL model on debtors with significant outstanding balances or credit-impaired individually and based on internal credit rating for the remaining balance. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

112

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

At 31 December 2020, the Group’s concentration of credit risk by geographical locations is mainly in PRC, which accounted for 91% (2019: 87%) of the total trade receivables and contract assets.

At 31 December 2020, the Group has concentration of credit risk on trade receivables and contract assets as 6.7% (2019: 12.6%) of the total trade receivables and contract assets was due from the Group’s largest debtor within the PVC pipes and fittings segment.

Trade receivables arising from contracts with customers and contract assets

The Group applies the simplified approach to provide for ECL prescribed by HKFRS 9, which permits the use of the lifetime expected loss provision for trade receivables and contract assets.

Debtors with significant outstanding balances or credit-impaired with gross carrying amounts of HK$166,631,000 (2019: HK$176,220,000) and HK$100,829,000 (2019: HK$124,590,000) respectively with loss allowances of HK$263,000 (2019: HK$244,000) and HK$100,829,000 (2019: HK$124,590,000) respectively were assessed individually.

As part of the Group’s credit risk management, the Group applies internal credit rating for its customers. The Group’s internal credit risk rating comprises the following categories:

Low: The customer has a low risk of default and does not have any past-due amounts Medium: The customer regularly repays on time but sometimes settles after due date High: The customer frequently repays after due dates but usually settles after due date

World Houseware (Holdings) Limited ◆ Annual Report 2020 113

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Trade receivables arising from contracts with customers and contract assets – continued

The following table provides information about the exposure to credit risk for trade receivables and contract assets which are assessed based on internal credit rating as at 31 December 2020 and 2019 within lifetime ECL (not credit-impaired).

As at 31 December 2020 Internal credit rating Low Medium High As at 31 December 2019 Internal credit rating Low Medium High	Gross carrying amount Average loss rate HK$’000 % 48,449 0.25 99,692 4.32 19,939 10.26 168,080 Gross carrying amount Average loss rate HK$’000 % 72,348 0.25 47,132 2.91 23,223 7.13 142,703	Loss allowance HK$’000 123 4,305 2,046 6,474 Loss allowance HK$’000 181 1,371 1,656 3,208	Net carrying amount HK$’000 48,326 95,387 17,893 161,606 Net carrying amount HK$’000 72,167 45,761 21,567 139,495

114

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Trade receivables arising from contracts with customers and contract assets – continued

The estimated loss rates are estimated based on historical observed default rates over the expected life of the debtors and are adjusted for forward-looking information that is available without undue cost or effort. Such forward-looking information is used by the management of the Group to assess both the current as well as the forecast direction of conditions at the reporting date. The grouping is regularly reviewed by the management of the Group to ensure relevant information about specific debtors is updated.

Other receivables

In determining the ECL for other receivables, the management of the Group has taken into account the historical default experience and forward-looking information. Lifetime ECL is recognised for other receivables which are identified as credit-impaired financial assets with an aggregate gross carrying amount of HK$1,017,000 (2019: HK$1,178,000) and loss allowances of HK$1,017,000 (2019: HK$1,178,000). For the other receivables which are not credit-impaired with an aggregate gross carrying amount of HK$4,315,000 (2019: HK$3,563,000), 12m ECL is insignificant because the Group has considered the consistently low historical default rate in connection with payments, and concluded that credit risk inherent in these outstanding other receivables is insignificant.

115

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Reconciliation of loss allowance

The following table shows the movement in lifetime ECL that has been recognised for trade receivables and contract assets under the simplified approach.

As at 1 January 2019 under HKFRS 9 Changes due to financial instruments recognised as at 1 January 2019: – Transfer to credit-impaired – Impairment losses recognised – Impairment losses reversed Currency realignment As at 31 December 2019 Changes due to financial instruments recognised as at 1 January 2020: – Transfer to credit-impaired – Impairment losses recognised – Impairment losses reversed – Write-off New financial assets Currency realignment As at 31 December 2020	Lifetime ECL (not credit- impaired) HK$’000 2,834 (909) 1,949 (350) (72) 3,452 (885) 3,594 (1,587) – 1,736 427 6,737	Lifetime ECL (credit- impaired) HK$’000 115,065 909 30,995 (19,724) (2,655) 124,590 885 40,966 (18,356) (53,480) – 6,224 100,829	Total HK$’000 117,899 – 32,944 (20,074) (2,727) 128,042 – 44,560 (19,943) (53,480) 1,736 6,651 107,566

The Group writes off a trade receivable and contract assets when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier.

116

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Credit risk and impairment assessment – continued

Reconciliation of loss allowance – continued

The following tables show reconciliation of loss allowances that has been recognised for other receivables:

1 January 2019 Impairment losses recognised Currency realignment 31 December 2019 and 1 January 2020 Impairment losses reversed Currency realignment As at 31 December 2020	Lifetime ECL (credit- impaired) HK$’000 – 1,199 (21) 1,178 (173) 12 1,017

The 12m ECL arose from other receivables is insignificant.

Other financial assets subject to ECL

For the compensation income receivable included in long-term other assets, no impairment allowance was made since the directors of the Company consider the probability of default is minimal after assessing the counter-party’s financial background and creditability.

The management of the Group considers the pledge bank deposits, short-term bank deposits and bank balances that are deposited with the financial institutions with good credit rating to be low credit risk financial assets. The management of the Group considers the bank balances are short-term in nature and the probability of default is negligible on the basis of high-credit-rating issuers, and accordingly, loss allowance was considered as insignificant.

117

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of secured bank borrowings and ensures compliance with loan covenants.

The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Specifically, bank loans with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other financial liabilities are based on the agreed repayment dates.

The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

Liquidity and interest risk tables

Weighted average effective interest rate per annum % Financial liabilities As at 31 December 2020 Trade and other payables – Amounts due to directors 3.29 Secured bank borrowings – variable rate 4.06 Leases liabilities 4.10 As at 31 December 2019 Trade and other payables – Amounts due to directors 3.20 Secured bank borrowings – variable rate 5.45 Leases liabilities 4.29	On demand or less than 1 month HK$’000 159,685 30,492 108,054 613 298,844 126,440 21,760 132,466 388 281,054	1 – 3 months HK$’000 41,372 – 10,801 – 52,173 30,254 – 10,146 163 40,563	3 months to 1 year HK$’000 76,410 – 81,948 – 158,358 34,562 – 74,688 2,283 111,533	1 – 5 years Total undiscounted cash flows HK$’000 HK$’000 – 277,467 143,889 174,381 – 200,803 – 613 143,889 653,264 – 191,256 137,489 159,249 – 217,300 1,261 4,095 138,750 571,900	Total Carrying amounts HK$’000 277,467 168,070 197,110 613
					643,260
					191,256 151,112 214,884 3,970
					561,222

118

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

36. FINANCIAL INSTRUMENTS – continued

Financial risk management objectives and policies – continued

Liquidity risk – continued

Bank loans with a repayment on demand clause are included in the “on demand or less than 1 month” time band in the above maturity analysis. At 31 December 2020, the aggregate undiscounted principal amounts of these bank loans amounted to HK$97,318,000 (2019: HK$122,353,000). Taking into account the Group’s financial position, the directors do not believe that it is probable that the banks will exercise their discretionary rights to demand immediate repayment. The directors believe that such bank loans will be repaid from two to nine years (2019: two to ten years) after the end of the reporting period in accordance with the scheduled repayment dates set out in the loan agreements. At that time, the aggregate principal and interest cash outflows will amount to HK$101,731,000 (2019: HK$126,953,000).

For the purpose of managing liquidity risk, the management reviews the expected cash flow information of the Group’s variable rate bank loans based on the scheduled repayment dates set out in the loan agreement as set out in the table below:

Weighted average interest rate per annum % Variable rate bank loans As at 31 December 2020 4.06 As at 31 December 2019 4.01	Less than 1 month HK$’000 31,276 33,469	1 – 3 months HK$’000 23,838 40,092	3 months to 1 year HK$’000 36,065 19,697	1 to 5 years HK$’000 7,837 29,413	Over 5 years Total undiscounted cash flows HK$’000 HK$’000 2,715 101,731 4,282 126,953	Total carrying amounts HK$’000 97,318
						122,353

The amounts included above for variable interest rate instruments for non-derivative financial liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

Fair value of financial instruments

The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values.

119

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

37. MOVEMENT ON GROUP’S LIABILITIES ARISING FROM FINANCING ACTIVITIES

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.

At 1 January 2019 Financing cash flows (Note) Deemed contribution Lease modified Currency realignment Finance costs recognised At 31 December 2019 Financing cash flows (Note) COVID-19 related rent concessions Currency realignment Finance costs recognised At 31 December 2020	Interest payables HK$’000 4,800 (10,264) – – – 13,375 7,911 (7,478) – – 11,012 11,445	Amounts due to directors HK$’000 135,082 24,421 (9,910) – (254) 1,773 151,112 13,802 – 1,331 1,825 168,070	Secured bank borrowings HK$’000 235,301 (18,486) – – (1,931) – 214,884 (23,982) – 6,208 – 197,110	Lease liabilities HK$’000 12,567 (4,437) – (4,527) – 367 3,970 (2,081) (1,380) – 104 613	Total HK$’000 387,750 (8,766) (9,910) (4,527) (2,185) 15,515
					377,877 (19,739) (1,380) 7,539 12,941
					377,238

Note: The financing cash flows represented the bank loans raised, advance from directors, net change in bank overdrafts, trust receipts and import loans, repayments of bank loans and lease liabilities, repayments to directors and payment of finance costs.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

38. PLEDGE OF ASSETS

At the end of the reporting period, the Group’s secured borrowings and lease liabilities were secured by the following assets:

Investment properties Leasehold land and buildings Right-of-use assets Pledged bank deposits	2020 HK$’000 23,000 124,212 11,095 6,162 164,469	2019 HK$’000 24,500 121,936 10,713 6,158
		163,307

In addition, the Group also pledged the life insurance policy to a bank to secure general banking facilities granted to the Group (see note 18).

39. RELATED PARTY TRANSACTIONS

(a) Compensation of key management personnel:

The remuneration of directors and other members of key management during the year was as follows:

Short-term benefits Post-employment benefits	2020 HK$’000 28,993 27 29,020	2019 HK$’000 19,623 72
		19,695

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

39. RELATED PARTY TRANSACTIONS – continued

• (b) During the year ended 31 December 2020, Joy Tower Limited, a related party of the Group, provided its residential property to secure one of the Group’s banking facilities amounting to HK$81,350,000 (2019: HK$81,315,000). Approximately HK$43,613,000 (2019: HK$47,067,000) was utilised in respect of this banking facility as at 31 December 2020.

Mr. Lee Tat Hing and his spouse, Ms. Fung Mei Po, the directors and controlling shareholders of the Company, are directors and controlling shareholders of Joy Tower Limited.

• (c) During the year ended 31 December 2020, the Group paid interest expenses on the amount due to a director of the Company, Ms. Fung Mei Po, amounted to HK$1,584,000 (2019: HK$1,780,000).

40. NON-CASH TRANSACTION

During the year ended 31 December 2020, deposits paid for acquisition of property, plant and equipment amounting to HK$2,560,000 (2019: HK$3,425,000) was transferred to property, plant and equipment upon completion of installation of certain plant and machinery.

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

41. PRINCIPAL SUBSIDIARIES

The details of principal subsidiaries at 31 December 2020 and 2019 are as follows:

		Nominal
	Place of	value of issued
	incorporation/	ordinary share/		Percentage of equity
Name of subsidiary	registration	registered capital	interest		held by the Company			Principal activities
			Directly			Indirectly
			2020		2019	2020	2019
Action Land Limited	Hong Kong – limited	HK$6,000,000	–		–	100%	100%	Provision of
	liability company							transportation
								services
Greatflow Investments Limited	British Virgin Islands	USD1	–		–	100%	100%	Property holding
	(“BVI”) – limited
	liability company
Nam Sok Building Material & Plastic	PRC – wholly foreign	USD15,806,000	–		–	100%	100%	Manufacturing of PVC
Products (Changshu) Co., Ltd.*	owned enterprise							pipes and fittings
								and moulds
Nam Sok Building Material & Plastic	PRC – wholly foreign	HK$330,000,000	–		–	100%	100%	Manufacturing of
Products (Shenzhen) Co., Ltd.*	owned enterprise							PVC pipes
								and fittings
								and moulds
South China Plastic Building Material	Hong Kong – limited	HK$2	–		–	100%	100%	Trading in building
Manufacturing Limited	liability company							materials and
								supplies
South China Reborn	PRC –	USD11,910,000	–		–	100%	100%	Manufacturing
Resources (Zhongshan)	wholly foreign							of household
Company Limited*	owned enterprise							products and
								operating recycling
								and reborn resources
								related business
Welidy	Hong Kong – limited	HK$10,000	–		–	100%	100%	Property holding
	liability company
World Home Linen Manufacturing	Hong Kong –	HK$200	–		–	100%	100%	Property holding
Company Limited	limited liability	Deferred non–
	company	voting shares
		HK$10,000
		(Note a)
World Houseware (B.V.I.) Limited	BVI – limited liability	HK$50,000	100%	100%		–	–	Investment holding
	company
World Houseware Producing	Hong Kong – limited	HK$200	–		–	100%	100%	Trading in household
Company Limited	liability company	Deferred non-						products
		voting shares
		HK$160,500
		(Note b)

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World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

41. PRINCIPAL SUBSIDIARIES – continued

		Nominal
	Place of	value of issued
	incorporation/	ordinary share/	Percentage of equity
Name of subsidiary	registration	registered capital	interest	held by the Company			Principal activities
			Directly		Indirectly
			2020	2019	2020	2019
World (Baoan)*	PRC – wholly foreign	HK$360,000,000	–	–	100%	100%	Manufacturing of
	owned enterprise						household products
World Plastic-ware	Hong Kong –limited	HK$32,500,000	–	–	100%	100%	Investment holding
Manufacturing Limited	liability company
South China Reborn Resources	Hong Kong – limited	USD10,000	–	–	100%	100%	Operating recycling and
(Hong Kong) Company Limited	liability company						reborn resources
							related business

• The English name is translated for identification purpose only.

Notes:

• (a) None of the deferred non-voting shares are held by the Group.

• (b) The deferred non-voting shares are held by Welidy.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results or assets or liabilities of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

All the subsidiaries operate in their respective places of incorporation/registration except Welidy which holds properties in the PRC, Greatflow Investments Limited which holds properties in Hong Kong and World Houseware (B.V.I.) Limited which operates in Hong Kong.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the year.

124

World Houseware (Holdings) Limited ◆ Annual Report 2020

Notes to the Consolidated Financial Statements

For the year ended 31 December 2020

42. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Non-current assets Investments in subsidiaries Amounts due from subsidiaries Current assets Amounts due from a subsidiary Bank balances and cash Current liability Accrued expenses Net current assets Non-current liability Amount due to a director Net assets Capital and reserves Share capital Reserves (Note) Total equity	2020 HK$’000 57,188 200,000 257,188 150,028 136 150,164 6,737 143,427 68,779 331,836 76,432 255,404 331,836	2019 HK$’000 55,139 50,000
		105,139
		312,838 137
		312,975
		4,232
		308,743
		62,115
		351,767
		76,432 275,335
		351,767

Note:

At 1 January 2019 Loss and total comprehensive income for the year Deemed contribution arising from cash flow estimates on amount due to a director Release of lapsed of share options At 31 December 2019 Loss and total comprehensive income for the year Recognition of equity-settled share-based payments At 31 December 2020	Share premium HK$’000 343,659 – – – 343,659 – – 343,659	Special reserve HK$’000 8,917 – – – 8,917 – – 8,917	Capital reserve HK$’000 – – 9,910 – 9,910 – – 9,910	Share option reserve Accumulated losses HK$’000 HK$’000 9,957 (91,912) – (5,196) – – (452) 452 9,505 (96,656) – (25,535) 5,604 – 15,109 (122,191)	Total HK$’000 270,621 (5,196) 9,910 –
					275,335 (25,535) 5,604
					255,404

World Houseware (Holdings) Limited ◆ Annual Report 2020 125

Financial Summary

RESULTS

Turnover (Loss) profit before taxation Taxation (Loss) profit for the year ASSETS AND LIABILITIES Total assets Total liabilities Total equity	2016 HK$’000 855,195 (12,490) (14,060) (26,550) 2016 HK$’000 1,365,495 (630,541) 734,954	For the year ended 31 December 2017 2018 2019 HK$’000 HK$’000 HK$’000 914,020 926,232 809,809 (93,599) 1,405,033 (102,154) (19,967) (238,156) 5,872 (113,566) 1,166,877 (96,282) At 31 December 2017 2018 2019 HK$’000 HK$’000 HK$’000 1,403,430 2,763,414 2,626,946 (702,257) (960,111) (937,918) 701,173 1,803,303 1,689,028	2020 HK$’000 817,298 96,785 (27,801) 68,984 2020 HK$’000 2,910,596 (1,056,399) 1,854,197

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World Houseware (Holdings) Limited ◆ Annual Report 2020