09:17 XTEAM SOFTWARE<08178> - Quarterly Results Announcement (2) In 2005, the Group has adopted all HKFRSs pertinent to its operations. The applicable HKFRSs are set out below and the 2004 unaudited financial statements have been restated in accordance with the relevant requirements. HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after Balance Sheet Date HKAS 12 Income Taxes HKAS 14 Segment Reporting HKAS 16 Property, Plant and Equipment HKAS 17 Leases HKAS 18 Revenue HKAS 19 Employee Benefits HKAS 21 The Effects of Changes in Foreign Exchange Rates HKAS 24 Related Party Disclosures HKAS 27 Consolidated and Separate Financial Statements HKAS 32 Financial Instruments: Disclosure and Presentation HKAS 33 Earnings Per Share HKAS 36 Impairment of Assets HKAS 37 Provisions, Contingent Liabilities and Contingent Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Management HKFRS 2 Share-based Payments HKFRS 3 Business Combinations The accounting policies which have material impacts on the Group are set out below: HKFRS 2 requires an expense to be recognized where the Group buys goods or services in exchange for shares or rights over shares, or in exchange for other assets equivalent in value to a given number of shares or rights over shares. HKFRS 2 requires the expensing of employees' and directors' share options and other share-based incentives by using an option-pricing model. The Group has taken advantage of the transitional provisions of HKFRS2 in respect of equity-settled awards and has applied HKDRS2 only to share options granted after 7th November, 2002 that had not vested on or before 31st December, 2003. The adoption of HKFRS 3, HKAS 36 and HKAS 38, which was also early adopted in the audited financial statements for the nine months ended 31st December, 2004, has resulted in a change in the accounting policy for goodwill. Prior to this, goodwill was: - amortised on a straight-line basis over a period of not exceeding 20 years; and - assessed for impairment at each balance sheet date. In accordance with the provisions of HKFRS3: - the Group ceased amortization of goodwill from 1st April, 2003; - accumulated amortization as at 31st March, 2003 has been eliminated with corresponding decrease in the cost of goodwill; - from the year ended 31st March, 2004 onwards, goodwill is tested annually for impairment, as well as when there are indications of impairment. The adoption of other new HKFRSs does not result in substantial changes to the Group's accounting policies except certain presentation and disclosure of the financial statements would be affected on the 2005 half-year and annual reports. 2. Turnover Turnover represents the invoiced value of goods sold and services rendered, net of value added tax and business tax in the PRC, and after allowances for goods returned and trade discounts. 3. Taxation (i)No provision for Hong Kong profits tax has been made as no income was earned or derived from Hong Kong during the period. (ii)No provision for profits tax has been provided in respect of the Cayman Islands or the British Virgin Islands as there were no assessable tax for the period in those jurisdictions. The tax expenses during the period represents tax charges on the assessable profits of certain subsidiaries operating in the PRC calculated at the applicable rates. (iii)Certain of the subsidiaries in the PRC enjoy tax exemptions. (iv)No deferred tax asset has been recognized due to the unpredictability of future profit streams. 4. Earnings/(loss) per share The basic earnings per share is calculated based on the Group's profit attributable to shareholders of HK$1,102,000 (2004: loss of approximately HK$23,789,000 (restated)) and on the weighted average of 3,758,471,752 (2004: 693,007,938) ordinary shares in issue during the period.