09:38 PANVA GAS HOLD<08132> - Quarterly Results Announcement (2) a. Statement of compliance The Hong Kong Institute of Certified Public Accountants ("HKICPA", formerly the Hong Kong Society of Accountants) has undertaken to converge by 1 January 2005 all Hong Kong Financial Reporting standards ("HKFRS") with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board. As a result, the HKICPA has aligned HKFRS with the requirements of IFRS in all material respects as at 31 December 2004. The accounts have been prepared in accordance with HKFRS issued by the HKICPA, requirements of the Hong Kong Companies Ordinance and applicable disclosure requirements of the Rules Governing the Listing of Securities on the Growth Enterprises market of The Stock Exchange of Hong Kong Limited ("GEM Listing Rules"). b. Basis of preparation The accounts have been prepared under the historical cost convention, as modified by the revaluation of leasehold buildings, available-for-sale financial assets and financial assets and financial liabilities at fair value through profit or loss. The preparation of financial statements in conformity with HKFR requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated accounts. Adoption of HKFRS For the financial year commencing 1 January 2005, the Group has adopted all HKFRS in issue pertinent to its operations. The applicable HKFRS are set out below and the 2004 figures 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 11 Construction Contracts 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 23 Borrowing Costs HKAS 24 Related Party Disclosures HKAS 27 Consolidated and Separate Financial Statement HKAS 28 Investments in Associates HKAS 32 Financial Instruments: Disclosure and Presentation HKAS 33 Earnings per Share HKAS 34 Interim financial reporting HKAS 36 Impairment of Assets HKAS 37 Provisions, contingent Liabilities and Contingent Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKFRS 2 Share-based Payments HKFRS 3 Business Combinations The adoption of HKAS 1, 2, 7,8,10,11,12,14,16,18,19,21,23,24,27 ,28,33,34 and 37 did not result in substantial changes to the Group's accounting policies. In summary: i. HKAS 1 affects certain presentation in the consolidated balance sheet , consolidated profit and loss account and consolidated statement of changes in equity. ii. HKAS 2, 8, 16, 21 and 28 affect certain disclosure of the accounts. iii. HKAS 7, 10, 11, 12, 14, 18, 19, 23, 27, 33, 34 and 37 do not have any impact as the Group!|s accounting policies already comply with the standards. iv. HKAS 24 affects the identification of related parties and the disclosure of related party transactions. The adoption of HKAS 17 has resulted in a change in accounting policy relating to leasehold land. Leasehold land and buildings were previously carried at valuation less accumulated depreciation. In accordance with the provisions of HKAS 17, a lease of land and building should be split into a lease of land and a lease of building in proportion to the relative fair values of the leasehold interests in the land element and the building element of the lease at the inception of the lease. The lease premium for land is stated at cost and amortised over the period of the lease whereas the leasehold building is stated at valuation less accumulated depreciation. The adoption of HKFRS 2 has resulted in change in accounting policy for employee share options. Prior to this, the provision of share options to employees did not result in a charge to the profit and loss account. The adoption of HKFRS 3, HKAS 36 and HKAS 38 has resulted in a change in the accounting policy for goodwill. Prior to this, goodwill was: i. amortised on a straight-line basis over a period of not exceeding 20 years; and ii. assessed for the impairment at each balance sheet date.