Financial Statements for the Year Ended 30 June 2021

Abstract

[evdate 2021-06-30] ??2021?6?30????FOR THE YEAR ENDED 30 JUNE 2021 HKUST FINANCIAL STATEMENTS ???? 2020-2021 I I I I I \ I -- \ - \ \ I / / / ' ' ' ???? ????????????????????????????????????????1.. - 3 Treasurer?s Report ??????????????????????????????????????????.. 4 - 7 Independent Auditor?s Report ???????????????????????????????????.. 8 - 9 Consolidated Statement of Comprehensive Income ??????????????????????????????????????????..10 - 11 Consolidated Balance Sheet ??????????????????????????????????????????.. 12 Consolidated Statement of Changes in Fund Balances ??????????????????????????????????????????..13 - 14 Consolidated Statement of Cash Flows ???????????????????????????????????????????..15 - 60 Notes to the Consolidated Financial Statements 1. ????General Information 2. ????Basis of Preparation 3. ???????Income and Expenditure by Segment 3.1 ???????Government Subventions and Grants 3.2 ????????Interest and Net Investment Income 3.3 ?????????Auxiliary Services and Other Income 3.4 3.5 ??Expenditure 4. ???????Remuneration of Higher Paid Staff 5. ??Tax 6. ????????Property, Plant and Equipment 7. ????Intangible Assets 8. ??Leases 9. ????Financial Assets 10. ???????Interest in an Associate 11. ?????????Accounts Receivable and Prepayments 12. ???????Cash and Cash Equivalents 13. ?????????Accounts Payable and Accruals 14. ???????Provision for Staff Benefits 15. ????Deferred Income 16. ??????Deferred Capital Funds 17. ????????????????UGC Funds, Restricted Funds and Other Funds 18. ???? 19. ??????Financial Risk Management 20. ??Commitments 21. ????????????????University Council and Council Committees ??????????????Members? Interests in Contracts of Significance and Related Party Transactions 22. ???? 23. ????Other Agreements 24. ?????????Critical Accounting Estimates and Judgements 25. ??????Principal Accounting Policies 26. ????????????????Possible Impact of New Standards, Amendments and ??????????Interpretations Published that are Not Yet Effective Pledged Donations Subsidiaries ?? CONTENTS ??????? ????Disaggregation of Revenue 1 ??OVERVIEW ???????CONSOLIDATED INCOME AND EXPENDITURE ????SEGMENT RESULTS ??????????????????? ??????? Commentaries on operating segments, analysed by UGCFunded Activities and non-UGC Funded Activities, are as follows: ???????UGC-Funded Activities ??????????????????? ??????????2019/20?????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ?????????????????? Consolidated expenditure decreased modestly by $23 million to $4,959 million ($4,982 million in 2019/20), which was mainly attributable to lower salary costs and other operating expenses of $55 million, as partly offset by an increase in depreciation charge of $32 million. Due to the outbreak of COVID-19, many of the on-campus activities and recruitments activities were postponed which led to the decrease in operating costs. ???? TREASURER?S REPORT The financial year 2020/21 recorded a surplus of $2,003 million ($1,410 million in 2019/20). The higher surplus for 2020/21 was mainly attributable to an extraordinarily favourable investment return due to high market valuations, stimulated by the persistent quantitative easing in response to the COVID-19 pandemic. The surplus was partly offset by lower donation and lower matching grant income following the completion of the Eighth Matching Grant Scheme. 2020/21???????????????? ??????????????2019/20?? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??? Consolidated income increased by $566 million to $6,955 million in 2020/21 ($6,389 million in 2019/20), contributed primarily by a growth in net investment income of $1,725 million, against a reduction in donation and matching grant income of $1,202 million and a reduction in tuition fee income of $183 million compared to the previous year. 2020/21???????????????? 2019/20????????????2020/21? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ???????????????? The University has committed to prioritising investments aligned with environment, social and corporate governance (ESG) values without compromising on return or diversification. About 50% of the University?s investment managers are signatories to the United Nations? Principles for Responsible Investment and have integrated ESG into their investment strategies. ??????????????????? ??????????????(ESG) ?? ??????????????????? ?????????????ESG ???? ???? ??????????????????? ???2019/20????????????? ?????????????????? ??????????????????? ??????2019/20?????????? ????? UGC-Funded Activities showed a surplus of $876 million for the year ($536 million for 2019/20), which primarily came from the favourable investment return as allocated. The University's UGC reserves continued to rise, and stood at $4,003 million ($3,127 million in 2019/20). ?????????????????? Donations Activities Non-UGC Reserves CAPITAL EXPENDITURE Following the planned completion of the Shaw Auditorium scheduled for opening in November 2021, still a number of construction projects are underway to enhance the University ? s facilities and infrastructure to cater for accommodation and amenity needs of students as well as for academic and research activities. The largest construction project is the New 1551-bed Student Hostel, which is expected to be completed by 2023. Besides, two research buildings are underway and are targeted to be completed in 2025 and 2026 respectively. ?????2021?11?????????? ??????????????????? ??????????????????? ?????????????????1551 ??????????????????? ??????2023??????????? ???????????????2025?? 2026???? ????????Non-UGC Funded Activities Self-Financing Continuing Professional Education Programs, Research and Other Activities ??????????????????? ????????2019/20???????? ??????????????????? ??????????????????? ????????????2019/20???? ??????????????????? ??????????????????? ??????2019/20?????????? ??????????????????? ??????????????????? ?????2019/20?????????? ??? Self-financing CPEP activities contributed a surplus of $196 million ($298 million for 2019/20), against lower student enrolment and lower tuition income. Non-UGC funded research activities contributed a surplus of $33 million ($42 million for 2019/20), mainly arising from completed commercial research projects and government subsidies. Other activities contributed a surplus of $406 million (loss of $53 million for 2019/20) which was mainly due to an increase in allocated net investment income. In aggregate, the overall surplus of these operating segments amounted to $635 million ($287 million for 2019/20). ?????? ??????????????????? (2019/20???????????????? ??????????????????? ?2019/20??????????????? ?2020/21??????????????? ?????2019/20??????????? Donations totalling $139 million were recognized as income for 2020/21 ($741 million for 2019/20). Overall the segment showed a surplus of $492 million ($587 million for 2019/20) as contributed by the investment return. The University has successfully secured $420 million new pledges in 2020/21 ($240 million in 2019/20). ???????? Non-UGC reserve balances reached $8,177 million at the end of 2020/21 ($7,022 million for 2019/20). The growth in the reserve balance was mainly contributed by the afore-stated allocated investment returns, donation, self-financing and other activities. ??????????2020/21?????? ????????2019/20???????? ??????????????????? ??????????????????? ???? 2 ???? ??????? CAPITAL EXPENDITURE (CONT?D) OUTLOOK ???Patrick K.C. YEUNG ????Treasurer of the University 2021?10?19?19 October 2021 The prolonged coronavirus pandemic has presented unprecedented difficulties and challenges to the operations of the University in multiple dimensions. With the dedicated efforts of the management team and responsive Council directions and support, the University has coped well and overcome difficulties one by one. In the coming new semester, the University will continue exercising flexibility in learning and teaching activities, providing quarantine service for affected faculties and students, and administering access control at campus entrances. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ???????????? HKUST(GZ) is progressing well and the first semester in Guangzhou campus is expected to start in September 2022. The Guangzhou campus will be operated under the ? Unified HKUST, Complementary Campuses ? framework. Under this framework, it is expected that academic breakthroughs will be achieved through the collaboration between the two campuses. The financial position of the University is very healthy with total accumulated funds of over $12 billion at the end of the year. However, given the challenges and uncertainties ahead, not least the expected tapering of the quantitative easing which could materially affect the valuation of the University ? s investment portfolio, the University will remain cautious in managing and deploying its resources to support its missions, and to ensure long-term financial sustainability. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ???????? ??????????????????? ???????2022?9????????? ?????????????????? ??????????????????? ???????????? To make the University a global leader in sustainability education, the University will pursue the four focus areas, namely, operations, education, community and demonstration as set out in the new '2028 Sustainability Challenge' announced in HKUST?s Strategic Plan 2021- 28. The University is ambitious in transforming the campus into a zero-carbon, zero-waste, and net-positive environmental impact living laboratory for learning, experimenting and showcasing new ideas and approaches. ??????????????????? ??????????????2021-2028? ??????2028??????????? ??????????????????? ??????????????????? ??????????????????? ????????????? ?????2021?6?30????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ????????? Accordingly, as at 30 June 2021, total commitments for approved construction projects and other capital items amounted to $4,678 million; $3,346 million of which will come from existing University?s Funds, $998 million will be funded by deferred income on hand, $227 million from pledged donations and $107 million from approved but yet to be received UGC grants. 3 ?? ? ??????????To : ??Opinion ????????What we have audited ? ?2021?6?30?????????? ? the consolidated balance sheet as at 30 June 2021; ? ???????????????? ? ? ???????????????? ? ? ?????????????????? ? ????????????????????? ?????Our opinion ?????Basis for Opinion ???????????????????? ???????????????????? ???????????????????? ??????????????? ???????????????????? ??????????????? ??????? INDEPENDENT AUDITOR?S REPORT The consolidated financial statements of The Hong Kong University of Science and Technology (the ?University?) and its subsidiaries (the ?Group? ) set out on pages 8 to 60, which comprise: the consolidated statement of comprehensive income for the year then ended; The Council of The Hong Kong University of Science and Technology the consolidated statement of changes in fund balances for the year then ended; ???????????????????? ?????????????????8 ?60 ??????????? ? the consolidated statement of cash flows for the year then ended; and the notes to the consolidated financial statements, which include 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 30 June 2021, 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?). ???????????????????? ???????????????????? ?????????2021?6?30????? ???????????????????? ??????? 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 4 ???Independence ???? Other Information In preparing the consolidated financial statements, the Council is 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 Council either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Responsibilities of the Council and the Audit Committee of the University for the Consolidated Financial Statements ???????????????????? ???? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ??????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ??????????????? The Council of the University is 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 for such internal control as the Council determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ????????? ???????????????????? ???????????????????? ???? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ?????? ???????????????????? ???????????????????? ?????????????? 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. The Council of the University is responsible for the other information. The other information comprises the information included in the treasurer ? s report, but does not include the consolidated financial statements and our auditor?s report thereon. 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. 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. 5 ????????????????????? ????????????????? ? ? ? ? ? ? ???????????????????? ???????????????????? ???? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ??????????? ?????????????????? ?????????????????? ?????????? ?????????????????? ??????????????? ???????????????????? ???????????????????? ??????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? Auditor?s Responsibilities for the Audit of the Consolidated Financial Statements As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism 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 Council. The Audit Committee is responsible for overseeing the Group?s financial reporting process. 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. We report our opinion solely to you, as a body, in accordance with The Hong Kong University of Science and Technology Ordinance 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. 6 ? ? ? ? ? ? ???????????PricewaterhouseCoopers ?????Certified Public Accountants ???2021?10?19?Hong Kong, 19 October 2021 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 the Audit Committee of the University 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. 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. ???????????????????? ???????????????????? ???????????????????? ???? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? Conclude on the appropriateness of the Council ? s 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. 7 2021 2020 ???????? Notes $million $million ?? Income ???????3.1 2,988 3,386 Government Subventions and Grants ??????????1,253 1,436 Tuition, Programs and Other Fees ????????3.2 1,827 102 Interest and Net Investment Income ????139 741 Donations and Benefactions ?????????3.3 462 459 Auxiliary Services and Other Income ?????????16 / 25.13 286 265 Transfers from Deferred Capital Funds 6,955 6,389 ??3.5 Expenditure ???????? Teaching, Learning and Research ?????3,094 3,074 Teaching and Research ???124 125 Library ??????134 137 Central Computing Facilities ??????101 106 Other Academic Services 3,453 3,442 ???? Institutional Support ???????446 442 Management and General ???????749 769 Premises and Related Expenses ?????????285 297 Student and General Education Services ????26 32 Other Activities 1,506 1,540 4,959 4,982 ???????1,996 1,407 Surplus from operation for the year ??????? ??2021?6?30???? CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 8 2021 2020 ???????? Notes $million $million ???????????10 8 6 Share of Result of an Associate ???????2,004 1,413 Surplus for the year before tax ??5 (1) (3) Tax ???????2,003 1,410 Surplus for the year after tax ????????? Other comprehensive income for the year ??????????????? ???????25.17(b) 23 (9) Exchange differences arising from translation 23 (9) ?????????????? Item that will not be reclassified to income and expenditure: 5 7 28 (2) ????????2,031 1,408 Total comprehensive income for the year ???? Transfers to: ?????876 536 UGC Funds ?????249 138 Restricted Funds ????906 734 Other Funds 2,031 1,408 ?????????? Item that may be reclassified subsequently to income and expenditure: CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONT?D) FOR THE YEAR ENDED 30 JUNE 2021 Unrealised gain on equity securities at fair value through other comprehensive income ??2021?6?30???? ??????????????????????? ??? 9 2021 2020 ???????? Notes $million $million ????? Non-Current Assets ????????6 6,499 5,900 Property, Plant and Equipment ????7 15 17 Intangible Assets ?????8 33 13 Right-of-use Assets ???????????? 9 38 78 Financial Assets at Amortised Cost ???????????????????? 9 491 484 Financial Assets at Fair Value through Other Comprehensive Income ???????????????9 9,521 7,536 Financial Assets at Fair Value through Income and Expenditure ???????10 98 84 Interest in an Associate ??????????????1 2 Bank Deposits with Original Maturity over Three Months 16,696 14,114 ???? Current Assets ????????????9 39 64 Financial Assets at Amortised Cost ??1 1 Inventories ?????????11 352 614 Accounts Receivable and Prepayments ??????????????2,685 1,269 Bank Deposits with Original Maturity over Three Months ???????12 1,386 2,350 Cash and Cash Equivalents 4,463 4,298 ???? Current Liabilities ?????????13 1,047 1,014 Accounts Payable and Accruals ????8 14 9 Lease Liabilities ???????14 233 229 Provision for Staff Benefits ????15 2,620 1,633 Deferred Income ????1 2 Tax Payable 3,915 2,887 ??????548 1,411 Net Current Assets ?????????17,244 15,525 Total Assets Less Current Liabilities ??????? CONSOLIDATED BALANCE SHEET 2021?6?30? AS AT 30 JUNE 2021 10 2021 2020 ???????? Notes $million $million ????? Non-Current Liabilities ????8 20 4 Lease Liabilities ???????14 34 37 Provision for Staff Benefits ????15 386 908 Deferred Income ??????16 4,624 4,427 Deferred Capital Funds 5,064 5,376 ????12,180 10,149 NET ASSETS ?????17 4,003 3,127 UGC Funds ?????17 1,976 1,721 Restricted Funds ????17 6,201 5,301 Other Funds ????12,180 10,149 TOTAL FUNDS ????2021?10?19???????? Approved by the Council on 19 October 2021 ????? ?????? Patrick K.C. YEUNG Wei SHYY Treasurer of the University President ??? ??????? Ting Chuen PONG Vice-President for Administration and Business 2021?6?30? CONSOLIDATED BALANCE SHEET (CONT?D) AS AT 30 JUNE 2021 ?????????? 11 ????? ????????????? UGC Funds Other Funds Total Funds ???????????? $million $million $million $million ??? 17? ??? 17? ??? 17? (Note 17) (Note 17) (Note 17) 2019?7?1????2,591 1,248 4,902 8,741 Balance as at 1 July 2019 ?????? / ?????? Total comprehensive income / (loss) for the year ??????? 536 138 736 1,410 Surplus for the year after tax ?????? / ???? Other comprehensive income / (loss) ??????????????????????????0 0 7 7 ???????0 0 (9) (9) Exchange differences arising from translation 536 138 734 1,408 ????0 335 (335) 0 Inter-fund transfer 2020?6?30??2020?7?1????3,127 1,721 5,301 10,149 Balance as at 30 June 2020 and 1 July 2020 ?????? / ?????? Total comprehensive income / (loss) for the year ???????876 249 878 2,003 Surplus for the year after tax ?????? Other comprehensive income ??????????????????????????0 0 5 5 ???????0 0 23 23 Exchange differences arising from translation 876 249 906 2,031 ????0 6 (6) 0 Inter-fund transfer 2021?6?30????4,003 1,976 6,201 12,180 Balance as at 30 June 2021 Unrealised gain on equity securities at fair value through other comprehensive income Restricted Funds ??????? CONSOLIDATED STATEMENT OF CHANGES IN FUND BALANCES FOR THE YEAR ENDED 30 JUNE 2021 ??2021?6?30???? Unrealised gain on equity securities at fair value through other comprehensive income 12 2021 2020 ?????? $million $million ????????? Cash Flows from Operating Activities ???????2,004 1,413 Surplus for the year before tax ??: Adjustments for: ?????364 332 Depreciation and amortisation ?????????0 1 Finance cost of lease liabilities ?????????????????2 1 Amortisation of discount on financial assets at amortised cost ?????????????2 0 Loss on disposal of Property, Plant and Equipment ????????(1,827) (102) Interest and net investment income ???????????(8) (6) Share of results of an associate ?????????(286) (265) Transfers from deferred capital funds ?????????????????(??) 251 1,374 Operating cash flow before movements in working capital (Note) ????????????????? 255 (197) Decrease / (Increase) in accounts receivable and prepayments ????????????? ???? 57 (185) Increase / (Decrease) in accounts payable and accruals ???????552 868 Increase in deferred income ??????????1 45 Increase in provision for staff benefits ?????????1,116 1,905 Cash Generated from Operating Activities ?????????(2) (1) China corporate income tax paid ???????0 (1) Hong Kong profits tax paid ?????????1,114 1,903 Net Cash Generated from Operating Activities ?? : Note : ??????? ??2021?6?30???? CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021 2021??????????????????????????????????2020???????????????? ??????????? Operating cash flow before movements in working capital included donation income of $139 million in 2021 (2020: included $741 million donation and $600 million Matching Grant). 13 2021 2020 ?????? $million $million ????????? Cash Flows from Investing Activities ??????????(967) (834) Payment for purchase of property, plant and equipment ??????(5) (10) Payment for purchase of intangible assets ???????????????????/?? (1,407) 890 (Increase) / Decrease in bank deposits with original maturity over three months ??????????????0 (38) Purchase of financial assets at amortised cost ??????????????????????(9) 0 Purchase of financial assets at fair value through other comprehensive income ?????????????????(1,503) (2,778) Purchase of financial assets at fair value through income and expenditure ?????????????1 0 Proceeds from disposal of Property, Plant & Equipment ????????????????????63 1 Proceeds from redemption of financial assets at amortised cost ?????????????????????????7 0 ????????????????????1,323 1,868 ???????????35 63 Interest and investment income received ?????????(2,462) (838) Net Cash Used in Investing Activities ????????? Cash Flows from Financing Activities ????????????????????????????381 644 Subventions and grants and donations received for purchase of property, plant and equipment and intangible assets ??????(12) (14) Payment of lease liabilities ?????????369 630 Net Cash Generated from Financing Activities ?????????(??) / ?? (979) 1,695 Net (Decrease)/ Increase in Cash and Cash Equivalents ??????????2,350 656 Cash and Cash Equivalents at the Beginning of the Year ???????15 (1) Effect of Foreign Exchange Rate Changes ??????????1,386 2,350 Cash and Cash Equivalents at the End of the Year Proceeds from sale of financial assets at fair value through income and expenditure Proceeds from sale of financial assets at fair value through other comprehensive income 14 CONSOLIDATED STATEMENT OF CASH FLOWS (CONT?D) FOR THE YEAR ENDED 30 JUNE 2021 ?????????? ??2021?6?30???? 15 1. ????1. GENERAL INFORMATION 2. ????2. BASIS OF PREPARATION ? ? ? ? ????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ??? 24???? The preparation of consolidated financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group? s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 24. Financial statements for the University have been prepared separately. ???????????????????? ?????????????????? The consolidated financial statements have been prepared on a going concern basis under the historical cost convention, except for the following assets which are stated at fair value: ???????????????financial assets at fair value through income and expenditure ?????????????????? ?? financial assets at fair value through other comprehensive income ???????? NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Hong Kong University of Science and Technology is incorporated under The Hong Kong University of Science and Technology Ordinance (Chapter 1141, Laws of Hong Kong) as a technological university dedicated to the advancement of learning and scholarship, with special emphasis on research, postgraduate education, and close collaboration with business and industry. The principal activities and other particulars of the University?s subsidiaries are set out in Note 22. The University?s registered address and principal place of operation is Clear Water Bay, Hong Kong. ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????????? ?????????? 22 ?? These consolidated financial statements are presented in Hong Kong dollars (? HKD ? ), which is the Group? s presentation currency. These consolidated financial statements were approved for issue by the Council on 19 October 2021. ??????????????????? ?? The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (?HKFRS?) issued by the Hong Kong Institute of Certified Public Accountants ( ? HKICPA ? ), Cost Allocation Guidelines for UGC funded and non-UGC funded Activities (?the Guidelines?), and the Statement of Recommended Practice (?SORP?) for institutions funded by the University Grants Committee ( ?UGC? ) in Hong Kong. ???????????????????? ???????????????????? ???????????????????? ???????????????????? ???????????????? ???????????????????? ????????????2021?10?19?? ??????????? 3. ??????? INCOME AND EXPENDITURE BY SEGMENT (a) ??????????? Consolidated Segment Income and Expenditure (By function) ???????? ?????????????? ???????? ?????? Net Total Net Total ?????????????? ???????????????????????????????????????? ???? Sub-total Sub-total ???????????????????????????????????????????????? $million $million $million $million $million $million $million $million $million $million $million $million $million $million $million $million ??? ??? (Note) (Note) ?? Income ?????????? 3.1? 2,746 0 96 0 146 242 0 2,988 3,234 0 82 0 70 152 0 3,386 Government subventions and grants (Note 3.1) ??????????701 552 0 0 0 552 0 1,253 675 761 0 0 0 761 0 1,436 Tuition, programs and other fees ??????????? 3.2? 748 1 0 579 499 1,079 0 1,827 40 0 0 18 44 62 0 102 Interest and net investment income (Note 3.2) ????0 0 0 139 0 139 0 139 0 0 0 741 0 741 0 741 Donations and benefactions ???????????? 3.3? 152 17 125 37 264 443 (133) 462 126 18 128 16 292 454 (121) 459 Auxiliary services and other income (Note 3.3) ?????????216 0 6 64 0 70 0 286 213 0 3 49 0 52 0 265 Transfers from deferred capital funds 4,563 570 227 819 909 2,525 (133) 6,955 4,288 779 213 824 406 2,222 (121) 6,389 ????? 3.5? Expenditure (Note 3.5) ???????? Teaching, Learning and Research ?????2,417 287 193 185 123 788 (111) 3,094 2,407 385 168 105 97 755 (88) 3,074 Teaching and research ???103 19 0 2 0 21 0 124 102 21 0 2 0 23 0 125 Library ??????122 11 0 1 0 12 0 134 124 12 0 0 1 13 0 137 Central computing facilities ??????89 1 0 2 9 12 0 101 93 1 0 3 10 14 (1) 106 Other academic services ???? Institutional Support ???????266 20 0 26 156 202 (22) 446 274 21 1 37 140 199 (31) 442 Management and general ???????581 27 1 80 60 168 0 749 615 30 2 58 64 154 0 769 Premises and related expenses ?????????109 9 0 31 136 176 0 285 137 11 0 32 118 161 (1) 297 Student and general education services ????0 0 0 0 26 26 0 26 0 0 0 0 32 32 0 32 Other activities 3,687 374 194 327 510 1,405 (133) 4,959 3,752 481 171 237 462 1,351 (121) 4,982 ???????876 196 33 492 399 1,120 0 1,996 536 298 42 587 (56) 871 0 1,407 Surplus from operation for the year ???????????0 0 0 0 8 8 0 8 0 0 0 0 6 6 0 6 Share of result of an associate ??0 0 0 0 (1) (1) 0 (1) 0 0 0 0 (3) (3) 0 (3) Tax ????? / ???? 876 196 33 492 406 1,127 0 2,003 536 298 42 587 (53) 874 0 1,410 Surplus / (Deficit) for the year ????? /???????? Surplus / (Deficit) for the year transferred to: ?????876 0 0 0 0 0 0 876 536 0 0 0 0 0 0 536 UGC Funds ?????0 0 0 249 0 249 0 249 0 0 0 138 0 138 0 138 Restricted Funds ????0 196 33 243 406 878 0 878 0 298 42 449 (53) 736 0 736 Other Funds 876 196 33 492 406 1,127 0 2,003 536 298 42 587 (53) 874 0 1,410 Inter-segment Transaction Elimination 2020 Research Activities ???????? Non-UGC Funded Activities Other Activities Self-financing CPEP Activities Donation Activities 2021 ???????? Non-UGC Funded Activities Self-financing CPEP Activities Research Activities Donation Activities Other Activities UGC-Funded Activities UGC-Funded Activities Inter-segment Transaction Elimination 16 3. ?????????? INCOME AND EXPENDITURE BY SEGMENT (CONT?D) (b) ????????????? Consolidated Segment Expenditure (By accounting nature) ???????? ?????????????? ???????? ?????? Net Total Net Total ?????????????? ???????????????????????????????????????? ???? Sub-total Sub-total ???????????????????????????????????????????????? $million $million $million $million $million $million $million $million $million $million $million $million $million $million $million $million ??? ??? (Note) (Note) ????? 3.5? Expenditure (Note 3.5) ?????2,311 256 57 42 171 526 (5) 2,832 2,345 273 66 40 137 516 (5) 2,856 Salaries and benefits ??????1,168 101 126 198 298 723 (128) 1,763 1,203 194 96 135 282 707 (116) 1,794 Other operating expenses ?????208 17 11 87 41 156 0 364 204 14 9 62 43 128 0 332 Depreciation and amortisation ???3,687 374 194 327 510 1,405 (133) 4,959 3,752 481 171 237 462 1,351 (121) 4,982 Total Expenditure ?? ??????????????????? Note: Inter-segment transactions mainly included internal rental transactions. ??? ? ????????????????????????????????????????8?????????????? Remarks: Disclosures regarding segment reporting are included as a requirement of the Statement of Recommended Practice for the UGC-Funded Institutions and are not designed to fully comply with the requirements of HKFRS 8 ?Operating Segments?. ? ??????????????????????????????? Cost Allocation Guidelines for UGC-funded and non-UGC-funded activities (?the Guidelines?) ????????????????????????????? The Group follows the Guidelines issued by the UGC to allocate their costs, which is summarised as follows: ? ????????????????????????????????????? There should be no hidden subsidy to avoid dilution of UGC-funded resources and unfair competition with the private sector; ? ???????????????????????? All direct costs which can be separately attributable to specific activities should be fully taken up and borne by such activities; ? ??????????????????(?????????????)???????????????????????????????????????????? All indirect costs, such as centrally provided facilities, administrative and support services, which cannot be separately attributable to specific activities, are allocated as shared costs to UGC and non-UGC segments based on cost allocation methodologies set out in the Guidelines. Inter-segment Transaction Elimination Self-financing CPEP Activities Other Activities 2021 ???????? Non-UGC Funded Activities Research Activities Donation Activities Other Activities 2020 Donation Activities Research Activities Self-financing CPEP Activities ???????? Non-UGC Funded Activities Inter-segment Transaction Elimination UGC-Funded Activities UGC-Funded Activities 17 3.1 ??????? GOVERNMENT SUBVENTIONS AND GRANTS 2021 2020 ?????? $million $million ????????????????? 15? 2,291 2,217 ?????????? 15? 215 194 UGC earmarked grants (Note 15) ????????????? 15? 405 294 Earmarked grants from government agencies (Note 15) ??????????????? 26 633 Matching grants and other government subsidies (Note) ????????? 15? 5 0 Research matching grants (Note 15) ???????46 48 Rates and government rent refunds 2,988 3,386 ?? : ????????????????????2020??????? Note : No matching grants arised from UGC funded activities during the year (2020: $600 million). 3.2 ???????? INTEREST AND NET INVESTMENT INCOME 2021 2020 ?????? $million $million ????21 64 Interest income ????????????????????????? 1,805 33 Change in fair value of financial assets at fair value through income and expenditure (Note) ?????????????????????????1 5 1,827 102 ?? : ????????????????????? 3.3 ????????? AUXILIARY SERVICES AND OTHER INCOME 2021 2020 ?????? $million $million ????105 117 Research contracts ????88 122 Student hostels ????44 31 Rental income ????????46 46 Rental contribution from staff ?????????????? 63 47 Services fees, workshop income and other sponsorships ??????? 15? 83 66 Project sponsorships (Note 15) ????33 30 Miscellaneous 462 459 UGC recurrent block grant (Note 15) Investment income on financial assets at fair value through other comprehensive income Note : Amounts included realised / unrealised gain or loss and fund management fee. 18 3.4 ???? DISAGGREGATION OF REVENUE ?????????????????????? ???????????? $million $million $million $million ???????0 0 2,988 2,988 Government subventions and grants ??????????0 1,253 0 1,253 Tuition, programs and other fees ????????0 0 1,827 1,827 Interest and net investment income ????0 0 139 139 Donations and benefactions ?????????71 300 91 462 Auxiliary services and other income ?????????0 0 286 286 Transfers from deferred capital funds 71 1,553 5,331 6,955 ?????????????????????? ???????????? $million $million $million $million ???????0 0 3,386 3,386 Government subventions and grants ??????????0 1,436 0 1,436 Tuition, programs and other fees ????????0 0 102 102 Interest and net investment income ????0 0 741 741 Donations and benefactions ?????????64 320 75 459 Auxiliary services and other income ?????????0 0 265 265 Transfers from deferred capital funds 64 1,756 4,569 6,389 2020 ?????? Revenue from contracts with customers recognised at a point in time recognised over time Revenue from other sources Total 2021 ?????? Revenue from contracts with customers recognised at a point in time recognised over time Revenue from other sources Total 19 3.5 ?? EXPENDITURE ??????????? ?????Depreciation and ?? Amortisation Total ???????????? $million $million $million $million ?? / Year 2021 ???????? Teaching, Learning and Research ?????2,066 906 122 3,094 Teaching and research ???65 58 1 124 Library ??????87 36 11 134 Central computing facilities ??????80 20 1 101 Other academic services ??2,298 1,020 135 3,453 Sub-total ???? Institutional Support ???????274 166 6 446 Management and general ???????165 364 220 749 Premises and related expenses ?????????93 189 3 285 Student and general education services ????2 24 0 26 Other activities ??534 743 229 1,506 Sub-total ???2,832 1,763 364 4,959 Total Expenditure ?? / Year 2020 ???????? Teaching, Learning and Research ?????2,057 906 111 3,074 Teaching and research ???68 56 1 125 Library ??????95 32 10 137 Central computing facilities ??????84 21 1 106 Other academic services ??2,304 1,015 123 3,442 Sub-total ???? Institutional Support ???????275 162 5 442 Management and general ???????174 397 198 769 Premises and related expenses ?????????101 190 6 297 Student and general education services ????2 30 0 32 Other activities ??552 779 209 1,540 Sub-total ???2,856 1,794 332 4,982 Total Expenditure ???????????????????????????????????2020??????????? Included in salaries and benefits are the Group? s contributions towards defined contribution retirement benefits schemes totalling $198 million (2020: $201 million) . Other Operating Expenses Salaries and Benefits 20 4. ??????? REMUNERATION OF HIGHER PAID STAFF 2021 2020 ???? Annual Equivalent Remuneration HK$ 1,800,001 - 1,950,000 58 62 HK$ 1,950,001 - 2,100,000 60 46 HK$ 2,100,001 - 2,250,000 63 68 HK$ 2,250,001 - 2,400,000 32 43 HK$ 2,400,001 - 2,550,000 26 33 HK$ 2,550,001 - 2,700,000 27 29 HK$ 2,700,001 - 2,850,000 17 15 HK$ 2,850,001 - 3,000,000 15 20 HK$ 3,000,001 - 3,150,000 11 11 HK$ 3,150,001 - 3,300,000 8 8 HK$ 3,300,001 - 3,450,000 5 12 HK$ 3,450,001 - 3,600,000 4 3 HK$ 3,600,001 - 3,750,000 5 7 HK$ 3,750,001 - 3,900,000 6 12 HK$ 3,900,001 - 4,050,000 4 0 HK$ 4,050,001 - 4,200,000 5 5 HK$ 4,200,001 - 4,350,000 2 4 HK$ 4,350,001 - 4,500,000 3 1 HK$ 4,500,001 - 4,650,000 2 3 HK$ 4,650,001 - 4,800,000 0 2 HK$ 4,800,001 - 4,950,000 0 1 HK$ 5,100,001 - 5,250,000 1 0 HK$ 8,250,001 - 8,400,000 1 0 HK$ 8,400,001 - 8,550,000 0 1 Number of Employees ???? Remuneration includes salary, gratuity, contribution to retirement schemes, consultancy fees paid by the Group, housing and other benefits. For staff who are provided with quarters, their housing benefits are calculated by reference to the rateable values assessed by the Rating and Valuation Department of the Government of The Hong Kong Special Administrative Region. ??????????????????????????????????????????? ?????????????????????????????????????????? 21 5. ?? TAX ?????????????? Income tax in the consolidated statement of comprehensive income represents: 2021 2020 ?????? $million $million ?????0 1 Hong Kong profits tax ???????1 2 China corporate income tax 1 3 ????????????????????????????????????? 2021 2020 ?????? $million $million ???????1,996 1,407 Surplus from operation for the year ??? 16.5%?2020?16.5%??????329 232 Tax calculated at a tax rate of 16.5% (2020: 16.5%) ???????????(1,110) (1,017) Tax effect of non-taxable income ???????????782 788 Tax effect of non-deductible expenses ??1 3 Tax charge Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The PRC subsidiaries of the Group have not recognised deferred income tax assets of approximately $19.6 million (2020: $23.6 million) in respect of cumulative losses amounting to approximately $76.6 million (2020: $96.0 million). The tax losses for the PRC subsidiaries will expire on various dates up to 2025. ????????????????????????????????????????????????? ???????????????????2020???????????????????????????? ??2020??????????????????????????2025??????? ???????????????????????????????16.5%?2020??16.5%???????? ????????????????????????????????? ????????????? 88 ????????????????????? The tax on the surplus from operation for the year differs from the theoretical amount that would arise using the tax rate applicable to the surplus of the Group as follows: No tax is provided for operations of the University that meet the exemption criteria under Section 88 of the Inland Revenue Ordinance. Hong Kong subsidiaries of the Group are subject to Hong Kong profits tax. The provision for Hong Kong profits tax is calculated at 16.5% (2020: 16.5%) of the estimated assessable profits of these subsidiaries for the year. Tax for the PRC subsidiaries of the Group is charged at the appropriate prevailing rates of tax in the PRC. 22 6. ???????? PROPERTY, PLANT AND EQUIPMENT ????????? ???? Buildings Total ??????????????? $million $million $million $million $million ?? COST 2019?7?1????6,519 333 901 2,234 9,987 Balance as at 1 July 2019 ??0 594 23 263 880 Additions ??23 (180) 157 0 0 Transfers ??0 0 0 (89) (89) Disposals ????(4) 0 0 (1) (5) Exchange translation difference 2020?6?30??7?1????6,538 747 1,081 2,407 10,773 Balance as at 30 June and 1 July 2020 ??1 694 10 228 933 Additions ??238 (547) 309 0 0 Transfers ??0 0 0 (81) (81) Disposals ????9 1 0 3 13 Exchange translation difference 2021?6?30????6,786 895 1,400 2,557 11,638 Balance as at 30 June 2021 ???? ACCUMULATED DEPRECIATION 2019?7?1????2,533 0 152 1,964 4,649 Balance as at 1 July 2019 ????????130 0 53 130 313 Charge for the year ??0 0 0 (89) (89) Disposals 2020?6?30??7?1????2,663 0 205 2,005 4,873 Balance as at 30 June and 1 July 2020 ????????136 0 64 144 344 Charge for the year ??0 0 0 (78) (78) Disposals 2021?6?30????2,799 0 269 2,071 5,139 Balance as at 30 June 2021 ???? NET BOOK VALUE 2021?6?30????3,987 895 1,131 486 6,499 Balance as at 30 June 2021 2020?6?30????3,875 747 876 402 5,900 Balance as at 30 June 2020 ??????? ??????? Building improvements, major equipment and services systems Construction in progress Fixtures and equipment 23 6. ??????????? PROPERTY, PLANT AND EQUIPMENT (CONT?D) ?????????????????????????? ??????????????20? Building improvements, major equipment and services systems 20 years ????????????????????? Fixtures and equipment Shorter of the projects lives or 4-10 years The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum: ??????????????????????????????????????????????? ????????2047?6?30????????????50?????? The University campus is situated on approximately 60 hectares of land in Sai Kung under lease from the Government of The Hong Kong Special Administrative Region (?HKSAR?) at a nominal rent for 58 years through 30 June 2047. The campus buildings are depreciated on a straight-line basis at 50 years. ??????????????????????????????????????????????? ???????????????????????????????2057?6?28??????????? ???????? A piece of land situated at Shenzhen of approximately 7,437 square metres was granted at a nominal amount to HKUST R&D Corporation (Shenzhen) Limited, a subsidiary of the Group, by the Shenzhen Municipal Government for the construction of an Industry-Education-Research base for 50 years through 28 June 2057. The respective building is depreciated over the remaining lease term. ??????????????????????????????????????????????? ?????????2062?12?20??? A piece of land situated in Tseung Kwan O of approximately 3,490 square metres was granted to the University by the Government of the HKSAR at a nominal rent for the construction of a student hostel for a lease of 50 years up to 20 December 2062. 24 7. ???? INTANGIBLE ASSETS ???? Computer software ??? $million ?? COST 2019?7?1????113 Balance as at 1 July 2019 ??10 Additions 2020?6?30??7?1????123 Balance as at 30 June and 1 July 2020 ??5 Additions ??(5) Disposals 2021?6?30????123 Balance as at 30 June 2021 ?? AMORTISATION 2019?7?1????100 Balance as at 1 July 2019 ????????6 Amortisation charge for the year 2020?6?30??7?1????106 Balance as at 30 June and 1 July 2020 ????????7 Amortisation charge for the year ??(5) Disposals 2021?6?30????108 Balance as at 30 June 2021 ???? NET BOOK VALUE 2021?6?30????15 Balance as at 30 June 2021 2020?6?30????17 Balance as at 30 June 2020 ???????????? 25%????? Computer software is amortised on a straight-line basis at 25% per annum. 25 8. ?? Leases 2021 2020 ?????? $million $million ????? Right-of-use assets ??33 13 Buildings ???? Lease liabilities ??????14 9 Current lease liabilities ???????20 4 Non-current lease liabilities 34 13 ????????????????? The lease liabilities are mainly denominated in Hong Kong dollars or Renminbi. ?????????????????? Amounts related to leases recognised in the consolidated statement of comprehensive income ??13 13 Depreciation ????0 1 Finance cost ?????????3 3 Expenses relating to short-term leases 16 17 ??????????????????? The Group?s leasing activities as lessees and how these are accounted for ??????????? Reconciliation of liabilities arising from financing activities 2021 2020 ?????? $million $million 7?1????13 20 Balance as at 1 July ??33 6 Addition ???????0 1 Non-cash finance cost ??????(12) (14) Payment of lease liabilities 6?30????34 13 Balance as at 30 June ?____________??????????????????????????????????????????????????????? ?????????????????????????????????? The Group leases various buildings. Rental contracts are typically made for fixed periods of 1 to 3 years with no defined extension options. Lease terms are negotiated on an individual basis and contain a range of different terms and conditions. The lease agreements do not impose any covenants. Leased assets will not be used as security for borrowing purposes. 26 9. ???? FINANCIAL ASSETS 2021 2020 ?????? $million $million ?????????? Bond securities, at amortised cost ??77 78 Listed ???0 64 Unlisted 77 142 ??????39 64 Maturing within one year ??????38 78 Maturing after one year 77 142 ??????????? Presentation in the consolidated balance sheet ????????????77 142 Financial Assets at Amortised Cost ???? Equity securities ??????????21 18 Listed equity securities, at market value ??????????????? a? 470 466 Unlisted equity securities, at fair value (Note a) 491 484 ??????????? Presentation in the consolidated balance sheet ????????????????????491 484 Financial Assets at Fair Value through Other Comprehensive Income ?????????????????? b? Financial assets at fair value through income and expenditure (Note b) ??????627 849 Listed equity funds ???????3,266 1,957 Unlisted equity funds ????????863 852 Listed fixed income funds ?????????1,915 1,696 Unlisted fixed income funds ???????685 455 Unlisted real assets funds ???????1,540 1,392 Unlisted hedge funds ???????600 323 Unlisted private investments ???????21 10 Listed convertible bonds ??????????? a? 4 2 Unlisted convertible notes (Note a) 9,521 7,536 ???????????????? Financial assets are mainly denominated in Hong Kong dollars and United States dollars. 27 ?? : Notes : (a) (b) ????????????????????? The fair value was determined by reference to bid prices quoted in active markets or by fund managers. ??????????????????????????????????????????????????????? The fair value was determined by reference to the recent transaction price, and financial models based on discounted cash flow analysis, earning multiples and net equity method with reference to market valuations for similar entities. 10. ??????? INTEREST IN AN ASSOCIATE 2021 2020 ?????? $million $million ?????98 84 Share of net assets ???? ??Proportion of ???????????Nominal Value of ??????Form of Place of Issued Capital ?????? Name of Business Incorporation Held by Class of ???? Associate Structure and Operation the Group Shares Held Principal Activity ????????????????????33% ???? 2021 2020 ?????? $million $million ????????????????? The summarised financial information in respect of the associate is set out below: ???316 269 Total assets ???(19) (15) Total liabilities ????297 254 Net assets ?????????????98 84 Group?s share of net assets of the associate ???53 45 Turnover ?????23 19 Profit for the year ????????????8 6 Group?s share of results of the associate for the year ?????????? Reconciliation to share of net assets: ?7?1?254 250 As at 1 July ?????23 19 Profit for the year ????(4) (4) Funds distributed ????24 (11) Exchange translation difference ?6?30?297 254 As at 30 June ???? % 33% 33% Group?s share in % ?????????????98 84 Group?s share of net assets of the associate ????????????????? ????????????????? ??????? PKU-HKUST Shenzhen-Hong Kong Institution Institutional Organization Capital Contribution To engage in technology commercialization, incubation of startup companies, provision of research and technology management services, training of senior management and administrative executives. People?s Republic of China 28 11. ????????? ACCOUNTS RECEIVABLE AND PREPAYMENTS 2021 2020 ?????? $million $million ???????56 127 Prepayments and deposits ????296 487 Accounts receivable 352 614 ? ???????????????? Accounts receivable are payable on demand. ? ? ? ? ???????????????????????? ??????????????9?????????????????????????? The Group applies the HKFRS 9 simplified approach to measure loss allowance using a lifetime expected loss allowance of accounts receivables. The accounts receivable and prepayments and deposits are mainly denominated in Hong Kong dollars and United States dollars. ??????????????????????????????????????????? ?????????????????????????????????????????? ????2021?6?30????????????????????????????????? ?????????? To measure the expected credit losses, account receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are estimated based on the corresponding historical credit losses experienced, adjusted with the expected change between current and forward looking information on macroeconomic factors, if material. As at 30 June 2021, no loss allowance is required on these accounts receivable as the expected credit losses are immaterial. The Group does not hold any collateral over these balances. ??????????????????????????????????????????? ?? The majority of accounts receivable are with no fixed terms of payment and are expected to be recoverable within one year. Prepayments are expected to be recognised as expenses within one year. 29 12. ??????? CASH AND CASH EQUIVALENTS 2021 2020 ?????? $million $million ????????????????836 1,774 Bank deposits with original maturity within three months ???????550 576 Cash at banks and in hand 1,386 2,350 ???????????????? Cash and cash equivalents are denominated in the following currencies: Hong Kong Dollars ??406 1,031 United States Dollars ??660 836 Renminbi ???274 442 Euro ??32 21 Pounds Sterling ??11 19 Others ??3 1 1,386 2,350 13. ????????? ACCOUNTS PAYABLE AND ACCRUALS 2021 2020 ?????? $million $million ???????? 534 431 Contract liabilities (Note) ???????????? 23a? 513 583 Accounts payable and accruals (Note 23a) 1,047 1,014 ?????????????????? The accounts payable and accruals are mainly denominated in Hong Kong dollars. ?? : Note : ??????????????????????????????????????? ????????????????????387 432 Revenue recognised that was included in the contract liability balance at the beginning of the years The contract liability for receipt in advance, deferred revenue and customer?s deposits is recognised as revenue in the period when the performance obligations are fulfilled. 30 14. ??????? PROVISION FOR STAFF BENEFITS 2021 2020 ?????? $million $million ????121 128 Gratuities ???????146 138 Leave pay and others 267 266 ???? Payable: ???233 229 Within 1 year ???34 37 After 1 year 267 266 31 15. ???? DEFERRED INCOME ?????? ??????? ???? ???/ ?????? ???????? ???? Donation Total ?????????????????? $million $million $million $million $million $million 2019?7?1????0 1,391 143 48 54 1,636 Balance as at 1 July 2019 ?? / ?????2,472 407 622 168 694 4,363 Amount received / receivable (?) (Note) ???????????? 3.1 / 3.3 / 18? (2,217) (194) (294) (66) (77) (2,848) ??????????? 16? (255) (76) (6) (9) (260) (606) Transfer to deferred capital funds (Note 16) ???????0 0 (4) 0 0 (4) Exchange differences arising from retranslation 2020?6?30??7?1????0 1,528 461 141 411 2,541 Balance as at 30 June and 1 July 2020 ?? / ?????2,491 525 548 119 365 4,048 Amount received / receivable (?) (Note) ???????????? 3.1 / 3.3 / 18? (2,291) (220) (405) (83) (117) (3,116) ??????????? 16? (200) (170) (37) (18) (57) (482) Transfer to deferred capital funds (Note 16) ???????0 0 15 0 0 15 Exchange differences arising from retranslation 2021?6?30????0 1,663 582 159 602 3,006 Balance as at 30 June 2021 ???? To be recognised 2020?6?30???? Balance as at 30 June 2020 ???0 929 302 141 261 1,633 In one year ???0 599 159 0 150 908 After one year 0 1,528 461 141 411 2,541 2021?6?30???? Balance as at 30 June 2021 ???0 1,653 356 159 452 2,620 In one year ???0 10 226 0 150 386 After one year 0 ?? ??????????? 18?? Note: The amounts were from pledged donations (Note 18). Project Sponsorships Credited to consolidated statement of comprehensive income (Notes 3.1 / 3.3 / 18) Credited to consolidated statement of comprehensive income (Notes 3.1 / 3.3 / 18) Earmarked Grants from Government Agencies UGC Earmarked Grants/ Research Matching Grants UGC Block Grant 32 1,663 582 159 602 3,006 16. ?????? DEFERRED CAPITAL FUNDS ??? $million 2019?7?1????4,086 Balance as at 1 July 2019 ??????????????????????????????? 15? 606 ?????????????????????(265) 2020?6?30??7?1????4,427 Balance as at 30 June and 1 July 2020 ??????????????????????????????? 15? 482 ????????????????????? (286) ????1 Exchange translation difference 2021?6?30????4,624 Balance as at 30 June 2021 Amounts equivalent to additions to property, plant and equipment and computer software transferred from deferred income (Note 15) Amounts equivalent to additions to property, plant and equipment and computer software transferred from deferred income (Note 15) Amounts equivalent to depreciation and amortisation charges transferred to consolidated statement of comprehensive income Amounts equivalent to depreciation and amortisation charges transferred to consolidated statement of comprehensive income 33 17. ???????????????? UGC FUNDS, RESTRICTED FUNDS AND OTHER FUNDS ?????????????? ????????????????? ???????????????????? Endowments Others Sub-total Endowments Sub-total Others Sub-total Total ????????????????????????????????????????????? $million $million $million $million $million $million $million $million $million $million $million $million $million $million $million 2019?7?1????1,281 147 460 703 2,591 1,135 107 6 1,248 601 459 1,259 2,583 4,902 8,741 Balance as at 1 July 2019 ??????? /???? 29 (35) 5 537 536 188 (50) 0 138 449 0 0 287 736 1,410 Surplus / (Deficit) for the year after tax ??????????????????????????0 0 0 0 0 0 0 0 0 0 7 0 0 7 7 ???????0 0 0 0 0 0 0 0 0 0 0 (5) (4) (9) (9) Exchange difference arising from translation ??? /???????0 0 0 0 0 0 1 (1) 0 (228) 0 230 (2) 0 0 Transfer from / (to) capital funds ????(51) 51 (4) 4 0 31 304 0 335 (335) 0 0 0 (335) 0 Inter-fund transfer 2020?6?30??7?1????1,259 163 461 1,244 3,127 1,354 362 5 1,721 487 466 1,484 2,864 5,301 10,149 Balance as at 30 June and 1 July 2020 ??????? /???? 613 (43) 96 210 876 322 (73) 0 249 243 0 0 635 878 2,003 Surplus / (Deficit) for the year after tax ??????????????????????????0 0 0 0 0 0 0 0 0 0 5 0 0 5 5 ???????0 0 0 0 0 0 0 0 0 0 0 12 11 23 23 Exchange difference arising from translation 0 0 0 0 0 0 0 0 0 0 (7) 0 7 0 0 ??? /???????0 0 0 0 0 (3) (1) 4 0 (399) 0 385 14 0 0 Transfer from / (to) capital funds ????(70) 70 0 0 0 99 (93) 0 6 (2) 0 0 (4) (6) 0 Inter-fund transfer 2021?6?30????1,802 190 557 1,454 4,003 1,772 195 9 1,976 329 464 1,881 3,527 6,201 12,180 Balance as at 30 June 2021 ??? Notes: (a) ???????????????????????????????????????????????????????????????????????? 20%??????????????????????????????????????????????2019-22????????2021-22? (b) ?????????????????????????????? Research Projects and Others represent UGC Block Grant set aside for individual research projects. (c) ??????????????????????????????????????????????? Matching Grants represent unspent funds from UGC?s Matching Grant Schemes. According to the rules and regulations promulgated by the UGC, these funds have to be used for activities within UGC ambit. (d) ???????????????????????????????????????????? Endowments represent the funds which the University would, according to the wishes of the donors, keep the principal intact and only use income generated from the fund to support designated activities of the University. (e) ???????????????????????????????????? Designated Donations represent funds earmarked for specific activities, programs or projects of the University, other than for construction of buildings. (f) ???????????????????????????????????????????????????????? Capital Funds represent the net book value of property, plant and equipment as well as computer software which are acquired with recognised but unspent Government grants or donations or other income retained in the fund balances. (g) ????????????????? Unspecified Donations represent general donations without donor-specified purposes. (h) ???????????????????????????????????????????????????????????? Financial Assets at Fair Value through Other Comprehensive Income (?FVOCI?) Revaluation Reserve represents the fair value gain or loss of financial assets at FVOCI. (i) ?????????????? Other Funds represent funds generated from self-financing activities. General and Development Reserve Fund (?GDRF?) represents the unspent UGC Block Grants. The balance of the GDRF at the end of a funding period (usually a triennium) that can be carried over to the next funding period is limited to a maximum of 20% of the University?s approved Block Grants for that funding period. Should the balance of the GDRF at the end of the funding period exceed the ceiling allowed, the excess amount is refundable to the UGC. The last year of 2019-22 triennium will be 2021-22. ????????? ????????? ?????? ????Financial Assets at FVOCI Revaluation Reserve General and Development Reserve Research Projects and Others Matching Grants Designated Donations Capital Funds Unspecified Donations Unrealised gain on equity securities at fair value through other comprehensive income Unrealised gain on equity securities at fair value through other comprehensive income Transfer of realised gain on equity securities at fair value through other comprehensive income ????????????????????????? ???? Other Funds Capital Funds UGC Funds Restricted Funds ?????????? 34 ???????? ?????????? ?? Total ????????? $million $million $million ?2019?7?1???????466 1,333 1,799 Outstanding amount as at 1 July 2019 ???????184 56 240 New pledges ??????????????????????? a? 0 (664) (664) ????????????????????? 15? (346) (348) (694) Amounts received during the year credited to deferred income (Note 15) ?????????(346) (1,012) (1,358) Total amount received during the year ?????????(150) 150 0 Reclassification of pledges ?????????0 0 0 Excess pledges not utilised ?2020?6?30??7?1???????154 527 681 Outstanding amount as at 30 June and 1 July 2020 ???????0 420 420 New pledges ??????????????????????? a? 0 (22) (22) ????????????????????? 15? (28) (337) (365) Amounts received during the year credited to deferred income (Note 15) ?????????(28) (359) (387) Total amount received during the year ?????????0 0 0 Excess pledges not utilised ?2021?6?30???????126 588 714 Outstanding amount as at 30 June 2021 Donations for Other Activities Donations for Capital Projects Amount received during the year recognised in consolidated statement of comprehensive income (Note a) Amount received during the year recognised in consolidated statement of comprehensive income (Note a) 18. ???? PLEDGED DONATIONS ???a?? Note (a): 2021 2020 ?????????? Donation Income $million $million ???????????????????????? 22 664 117 77 ???????????????????? 8 ?? 139 741 Total donation income recognised in consolidated statement of comprehensive income during the year (Page 8) Amount of pledged donations received during the year and recognised directly in consolidated statement of comprehensive income Amount of pledged donations initially credited to deferred income and subsequently recognised in consolidated statement of comprehensive income during the year (Note 15) ????????????????????????????????? 15? 35 19. ?????? FINANCIAL RISK MANAGEMENT 19.1 ?????? CATEGORIES OF FINANCIAL INSTRUMENTS 2021 2020 ?????? $million $million ???? Financial assets ???????????? Financial assets at amortised cost ???????300 492 Accounts receivable and deposits ??????????????2,686 1,271 Bank deposits with original maturity over three months ???????1,386 2,350 Cash and cash equivalents ??????????77 142 Bond securities at amortised cost ????????????????????491 484 Financial assets at fair value through other comprehensive income ???????????????9,521 7,536 Financial assets at fair value through income and expenditure 14,461 12,275 ???? Financial liabilities ?????????????? Other financial liabilities at amortised cost ????34 13 Lease liabilities ?????????397 491 Accounts payable and accruals 431 504 36 37 19. ????????? 19. FINANCIAL RISK MANAGEMENT (CONT?D) 19.2 ?????????19.2 (a) ????(a) Market risk (i) ????(i) Foreign currency risk RISKS ARISING FROM FINANCIAL INSTRUMENTS ????????????????????? ????????????????????? ????????????????????? ????????????????????? ????????????????????? ????????????????????? ????????????? The Group? s activities expose it to a variety of financial risks: market risk (including foreign currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group?s overall risk management focuses on controlling the impact arising from unpredictability of financial markets and seeks to minimise potential adverse effects on the Group?s financial performance by engaging external professional advisors. The Administration assumes the day-to-day risk management responsibility and monitors regularly the risk exposures of the Group. ??????????????????? ??????????????????? ??????????????????? ???? The Group is exposed to foreign currency risks primarily arising from its United States dollars (?USD ? ) denominated investments that are managed by investment managers. As HKD is pegged to the USD, the Group considers the risk from movements in exchange rates between the HKD and USD to be insignificant. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ?? Since currency movements tend to have a much smaller impact on portfolio performance in the long run, no hedging for non-USD currency exposure will be arranged under normal circumstances. Such currency exposure management policy is subject to periodic review and hedging may be arranged when situation warrants. ?2021?6?30???????????? ??????????????????? ?????22.8%?2020??22.4%??73.2% ?2020??72.5%??3.1%?2020??4.5%? ?0.9%?2020??0.6%?? As at 30 June 2021, the percentages of financial assets denominated in HKD, USD, RMB and other currencies to total financial assets were 22.8% (2020: 22.4%), 73.2% (2020: 72.5%), 3.1% (2020: 4.5%) and 0.9% (2020: 0.6%), respectively. ??????????????????? ????????? The Group does not have material financial liabilities denominated in foreign currency and considers the related foreign exchange risk immaterial. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ?? Market risk represents the risk that the value of financial assets will decrease as a result of movements in market variables such as foreign currency exchange rates, interest rates and stock prices. The Group is exposed to market risk mainly through the investment funds it holds. The Group? s investments comprise equities, debt securities, real assets investment funds, hedged funds, private investments and fixed deposits. The investment strategy of the Group is to invest prudently in order to preserve capital and achieve optimal risk diversification while generating a stable return over the long term and the required liquidity. The Group employs external advisors and investment managers to manage a portion of its investments, and delegates to the Finance Office of the University to manage fixed deposits and some of the fixed income instruments. 19. ????????? 19. FINANCIAL RISK MANAGEMENT (CONT?D) 19.2 ???????????? 19.2 (a) ??????? (a) Market risk (Cont?d) (ii) ????(ii) Interest rate risk (iii) ????(iii) Price risk (b) ????(b) Credit risk RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONT?D) The Group has no significant concentration of credit risk, with exposure spread over a number of counterparties. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????2021?6?30??? ???????/???????????? 2020???????????? The Group is exposed to interest rate risk in relation to its fixed deposits and bond securities. As the fixed deposits usually mature within three to twelve months, the risk exposure is considered not material. If bank deposit interest rates had been 50 basis points higher / lower, with all other variables held constant, the Group?s surplus for the year ended 30 June 2021 would increase / decrease by approximately $17.6 million (2020: $15.2 million). ??????????????????? ??????????????????? ??????????????????? ??????2021?6?30??????? ???5%??????????????? ???????2021?6?30?????? ????/???????????2020?? ????????? The Group is mainly exposed to securities price risk from its investments managed by investment managers. Securities price risk is managed by diversification of investments in different markets, sectors and assets types. At 30 June 2021, if the prices of the respective investments had been 5% higher / lower, with all other variables held constant, the Group?s surplus for the year ended 30 June 2021 would increase / decrease by approximately $500.5 million (2020: $401.0 million). ??????????????????? ??????????????????? ??????????????????? ?????????????????? ?? The Group? s principal financial assets are cash and cash equivalents, bank deposits, accounts receivable, financial assets at amortised cost, financial assets at fair value through other comprehensive income and financial assets at fair value through income and expenditure. ??????????????????? ??????????????????? ??????????????????? ???? The Group?s credit risk is primarily attributable to its accounts receivable. The amounts represented in the consolidated balance sheet are net of loss allowance, estimated by the Group?s management based on past experience and their assessment of the current economy. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ?????? Cash and cash equivalents and bank deposits are placed with counterparties with credit-ratings of investment grade or above assigned by international credit-ratings agencies. Financial assets at amortised cost, financial assets at fair value through other comprehensive income and financial assets at fair value through income and expenditure are rated investment grade or above. ??????????????????? ????????? 38 19. ????????? 19. FINANCIAL RISK MANAGEMENT (CONT?D) 19.2 ???????????? 19.2 (b) ??????? (b) Credit risk (Cont?d) (c) ??????(c) Liquidity risk 19.3 ???? CAPITAL MANAGEMENT ???????????????????????????????????? The Group ? s funds consist of UGC funds, restricted funds and other funds, which are set up for various designated purposes as described in Note 17. It is the Group?s objective to maintain sufficient funds to support the Group?s current and future operating expenditure requirements. The Group?s overall strategy remains unchanged from prior years. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. ??????????????????? ??????????????????? ??????????????????? ???????????? Most of the Group?s liabilities are due within twelve months from the respective balance sheet date. To manage the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents to fulfill the normal liquidity needs. ????????????????????????????????????????????????17???? ???????????????????????????????????????????? RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONT?D) ??????????????????? ??????????????????? ??????????????????? The Group?s maximum exposure to credit risk in the event of the counterparties ? failure to perform their obligations as at balance sheet date in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. ?2021?6?30???????????? ??? 9 ???????????? The Group assessed that there is no significant loss allowance in accordance with HKFRS 9 as at 30 June 2021. 39 19. ????????? FINANCIAL RISK MANAGEMENT (CONT?D) 19.4 ????? FAIR VALUE ESTIMATION (a) ???????????? Financial assets carried at fair value ????????????????????????????????????????????? ? ????????????????????? Quoted prices in active markets for identical assets or liabilities (Level 1) ? ???????????????????????????????????????? ? ????????????????????????? Inputs for the asset or liability that are not based on observable market data (Level 3) ?????????????? Level 1 Level 2 Level 3 Total ???????????? $million $million $million $million ?2021?6?30? As at 30 June 2021 ??????????????? Financial Assets at Fair Value through Income and Expenditure - ??????627 0 0 627 Listed equity funds - ???????2,453 813 0 3,266 Unlisted equity funds - ????????863 0 0 863 Listed fixed income funds - ?????????1,033 487 395 1,915 Unlisted fixed income funds - ???????0 617 68 685 Unlisted real assets funds - ???????0 1,540 0 1,540 Unlisted hedge funds - ???????0 0 600 600 Unlisted private investments - ???????21 0 0 21 Listed convertible bonds - ????????0 0 4 4 Unlisted convertible notes 4,997 3,457 1,067 9,521 ???????????????????? Financial Assets at Fair Value through Other Comprehensive Income - ??????21 0 0 21 Listed equity securities - ???????0 0 470 470 Unlisted equity securities 21 0 470 491 5,018 3,457 1,537 10,012 The tables below provide an analysis of the Group ? s financial instruments that are measured at fair value in the consolidated balance sheet, grouped by level of the following fair value measurement: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (Level 2) 40 19. ????????? FINANCIAL RISK MANAGEMENT (CONT?D) 19.4 ???????? FAIR VALUE ESTIMATION (CONT?D) (a) ??????????????? Financial assets carried at fair value (Cont?d) ?????????????? Level 1 Level 2 Level 3 Total ???????????? $million $million $million $million ?2020?6?30? As at 30 June 2020 ??????????????? Financial Assets at Fair Value through Income and Expenditure - ??????849 0 0 849 Listed equity funds - ???????1,558 399 0 1,957 Unlisted equity funds - ????????852 0 0 852 Listed fixed income funds - ?????????994 416 286 1,696 Unlisted fixed income funds - ???????0 427 28 455 Unlisted real assets funds - ???????0 1,392 0 1,392 Unlisted hedge funds - ???????0 0 323 323 Unlisted private investments - ???????10 0 0 10 Listed convertible bonds - ????????0 0 2 2 Unlisted convertible notes 4,263 2,634 639 7,536 ???????????????????? Financial Assets at Fair Value through Other Comprehensive Income - ??????18 0 0 18 Listed equity securities - ???????0 0 466 466 Unlisted equity securities 18 0 466 484 4,281 2,634 1,105 8,020 ??????????????????????????????????? ????????????? ??????????????????????????????? ????????????????????????????????????? The fair value of the financial instruments under Level 2 is determined by reference to the prices at the reporting date provided by the investment managers and have been translated using the exchange rates at the end of the reporting period where appropriate. ?????????????????????????????????????????????????????????????? ????? The fair value of the financial instruments under Level 3 is determined by reference to the recent transaction price, and financial models based on discounted cash flow analysis, earnings multiple and net equity method with reference to market valuations for similar entities. During the year, there was no transfer of the financial investments between Level 1 and Level 2 fair value hierarchy classifications. Level 3 financial instruments include investments in unlisted companies by the Group and its investment managers. 41 19. ????????? FINANCIAL RISK MANAGEMENT (CONT?D) 19.4 ???????? FAIR VALUE ESTIMATION (CONT?D) (a) ??????????????? Financial assets carried at fair value (Cont?d) ???????????????????????? The movements of the Level 3 financial instruments measured at fair value during the year are as follows: 2021 2020 ?????? $million $million 7?1????1,105 880 Balance as at 1 July ??185 218 Acquisitions ??(7) 0 Disposals ????????????????254 7 Net gains recognised in consolidated statement of comprehensive income 6?30????1,537 1,105 Balance as at 30 June ???????????????????????2 12 ??????????????????????????????252 (5) (b) ????????????? Financial assets carried at other than fair value ???? Carrying ???????????????? amount Fair value Level 1 Level 2 Level 3 ??????????????? $million $million $million $million $million ?2021?6?30? At 30 June 2021 ????????????77 79 79 0 0 Financial assets at amortised cost ?2020?6?30? At 30 June 2020 ????????????142 145 80 65 0 Financial assets at amortised cost ???????????????????????????????????????????????????? Fair value measurements The fair value of the securities under Level 2 is determined by reference to the prices at the reporting date provided by a well-known financial market data provider and have been translated using the exchange rates at the end of the reporting period where appropriate. Net gains for the year included in consolidated statement of comprehensive income, under other comprehensive income Net (losses) / gains for the year included in consolidated statement of comprehensive income, under interest and net investment income ??????? 42 20. ?? COMMITMENTS 2021 2020 ?????? $million $million (a) ???? Capital Commitments (i) ????????????????????????????????? ???1,912 1,075 Contracted for ?????????1,825 3,203 Authorised but not contracted for 3,737 4,278 (ii) ????????????????????????????? ???941 763 Contracted for ???4,678 5,041 Total commitments ????????????? Funding support for the above outstanding capital commitments: 2021 2020 ?????? $million $million ??????????? ? ??????????????????622 596 Amounts recognised as income and retained in UGC Funds ? ???????????????????2,724 2,994 Other amounts representing restricted funds or other funds to be allocated ????????????6?30????998 1,057 Amounts received and reflected as deferred income as at 30 June ???????????????107 112 Amounts in respect of UGC grants approved but not yet received ????????227 282 Amounts pledged by donors 4,678 5,041 2021 2020 ?????? $million $million (b) ??????? Operating Lease Commitments (i) ???????????? Operating leases commitments as lessors ?6?30???????????????????????????? ???0 1 In one year As at 30 June, the Group had future aggregate minimum lease income under non-cancellable operating leases as follows: Amounts to be financed by the Group?s resources Outstanding capital commitments in respect of property, plant and equipment not provided for in the financial statements were as follows: Outstanding capital commitments in respect of financial assets not provided for in the financial statements were as follows: 43 21. ?????????????????????????????? 21.1 ???? CONTRACTS OF SIGNIFICANCE 21.2 ????? RELATED PARTY TRANSACTIONS ?????????????????????? During the year, the Group entered into the following material related parties transactions: (a) ???????????? Compensation of key management personnel (Note) ?????? 4 ? ????????????????????? 2021 2020 ?????? $million $million ???????????56 56 Salaries and other short-term employee benefits ?????6 5 Post employment benefits 62 61 ?? Note: (b) UNIVERSITY COUNCIL AND COUNCIL COMMITTEES MEMBERS ? INTERESTS IN CONTRACTS OF SIGNIFICANCE AND RELATED PARTY TRANSACTIONS Below is the compensation of the key management personnel who have also been included in Note 4 - Remuneration of Higher Paid Staff: No remunerations, fees or other emoluments were paid to or receivable by any Council members or Council Committees members (other than those executive members and elected staff members) in respect of their services to the Group during the year (2020: Nil). ??????????????????????????????????????????????????? ??????? ?????????????????????????????????????????????????????? ???????????????????????2020????? Key management personnel represent senior management of the University whose primary responsibilities include the review and approval of major administrative policies affecting the University?s operations, and long-term plans and strategies for the development of the University. No contract of significance to which the University or any of its subsidiaries was a party and in which a Council member or a Council Committee member was materially interested, whether directly or indirectly, subsisted at the end of the year or at any time during the year. ????????????????????????????????????????????????????????? ?????? 44 45 22. ???? SUBSIDIARIES ?2021?6?30???????????? At 30 June 2021, the University?s subsidiaries were as follows: ???? / ?? Place / Country of Incorporation ???????? Direct Indirect ??100% - ??? Hong Kong Dormant ????????????100% - ??? HKUST Properties Limited Hong Kong Dormant ??????????????100% - Hong Kong ???????- 100% HKUST R and D Corporation (Guangzhou) Limited ???????- 100% ???????- 100% ???????100% - The HKUST Shenzhen Research Institute ???????100% - People?s Republic of China ??- 100% Biotechnology Research Corporation Limited (Note) ??? Note: ????2021?1???????? ??????????????????????? ??????????????????????? ??????????????????????? ?????? Station in Guangzhou (Nansha), to engage in technology innovation and development as well as entrepreneurship activities including startup incubation, and commercialisation of technologies developed in Clear Water Bay and Nansha campuses, as well as training of management and technology personnel. ??????????????????????? ???????? Station in Shenzhen, to facilitate the University?s education, training, research, technology development and entrepreneurship activities in the Mainland. ??????????????????????? ??????????? Station in Shenzhen Futian District, to facilitate the University? s education, training, research, technology development and entrepreneurship activities in the Mainland. ??? Inactive The company completed voluntary liquidation in January 2021. Hong Kong University of Science and Technology R and D Corporation Limited ????????????? ???????????????? HKUST College of Lifelong Learning Limited ?????????????? Hong Kong ??????????? People?s Republic of China ??????????????? ??????????????? Guangzhou HKUST Fok Ying Tung Research Institute HKUST Shenzhen ? Hong Kong Collaborative Innovation Research Institute People?s Republic of China People?s Republic of China HKUST R and D Corporation (Shenzhen) Limited ???? ???? Registered Capital Nominal Value Proportion of of Issued / To engage in technology commercialisation including industrial contracting, licensing, incubation of start-up companies, property management and research and technical services, especially in Hong Kong and the Pearl River Delta Area. ?????????????? People?s Republic of China ???? Subsidiary Held by the University Principal Activity ?????????????????????? ??????????????????????? ????????????? 23. ???? OTHER AGREEMENTS (a) ????????????????? Agreements related to establishing the Hong Kong University of Science and Technology (Guangzhou) (b) ??HKCeND, HKCRC ?ACCESS??? Agreements related to HKCeND, HKCRC, ACCESS ??????????????2020?????????????????????????????? During the year, the University recognised a total of $9.0 million (2020: nil) overhead income from these entities for providing administrative support to their operation. ?2018?12?21????????????????????????????????????????? ??????2019?9?19???????????????????????????????2020?1?10? ?????????????(?)?????????????????????????????????? ???????????????????????????????????????????????? ???????????????????????????????????????????????? ????????????????????????? ??????????????????????????????????HKCeND??????????? ????????HKCRC????????????????????ACCESS??? The University has set up three entities limited by guarantee, namely the Hong Kong Center for Neurodegenerative Diseases Limited (?HKCeND?), Hong Kong Center for Construction Robotics Limited (?HKCRC?) and AI Chip Center for Emerging Smart Systems Limited (?ACCESS?). ????????????????????????????????HKCeND?HKCRC?ACCESS???? ???????????????????????????????HKCeND?HKCRC?ACCESS????? ????????????????HKCeND?HKCRC?ACCESS?????????????????? HKCeND?HKCRC?ACCESS??????????????2020?4?15??2020?4?28??2020?8?27?? ?? Although the University is the sole member of these entities, the University has not consolidated the results of these entities under the terms of the agreements entered into with the external parties for providing funding and other support to the operation of HKCeND, HKCRC and ACCESS, the University is not exposed to, and does not have the rights or the power to affect variable returns from its involvement with HKCeND, HKCRC and ACCESS. The aforesaid agreements with the external parties for providing support to the operation of HKCeND, HKCRC and ACCESS were entered into on 15 April 2020, 28 April 2020 and 27 August 2020 respectively. On 21 December 2018, the University signed agreements with the Guangzhou Municipal Government and Guangzhou University (?GZU?) to establish Hong Kong University of Science and Technology (Guangzhou) (?HKUST (GZ)?). On 19 September 2019, the preparatory status of HKUST(GZ) was granted by Ministry of Education, for proceeding to formal establishment of HKUST(GZ) within 3 years ? time. On 10 January 2020, a legal entity for HKUST(GZ) was obtained, registered as a Public Institution in Guangzhou. The arrangement between the University and GZU is a joint operation, where both parties account for their own assets, liabilities, revenues and expenses relating to its interest in HKUST (GZ) as opposed to applying equity accounting. Under the terms of the agreements, the University will not hold any assets or incur any liabilities, revenues or expenses related to HKUST (GZ). Consequently, the arrangement with HKUST (GZ) has no impact on the financial results of the University. ????????????????????????????????????????2021?6?30??? ??????????????????????(????????)????????????????? ????????????2020?????????????????????????????????? ????????????????????????????????????????????? The funding for the establishment of HKUST (GZ) is provided by Guangzhou Municipal Government. No financial commitment is required from the University to fund the HKUST (GZ). As at 30 June 2021, the amount of funds held on behalf of HKUST (GZ) through Guangzhou HKUST Fok Ying Tung Research Institute ('FYTRI'), a wholly owned subsidiary of the University, totalled RMB48.5 million (2020: RMB60.6 million) for fulfilment of the contractual obligation on HKUST (GZ) 's design fee for the campus. HK$58.3 million was recorded within ?Accounts Payable and Accruals? in the University consolidated balance sheet after translation into Hong Kong Dollars. During the year, FYTRI recharged HK$4.1 million (2020: nil) salary costs to HKUST (GZ) for providing administrative support for its operation and recognised HK$10.8 million (2020: nil) rental income for providing office space to HKUST (GZ). ?????????????????????????????????????????2020????? ??????????????????????????????????2020????????? 46 24. ?????????24. ??????????????????? ???? The fair values of financial instruments traded in active markets are based on quoted bid prices at the balance sheet date. The fair values of financial instruments that are not traded in an active market are determined using established valuation techniques. The Group uses its judgement to select valuation methods and pricing sources to make assumptions that are mainly based on market conditions existing at the end of each reporting period. ?????????????????????? ?????????????????????? ?????????????????????? ?????????????????????? ????????????? Depreciation of property, plant and equipment and amortisation of computer software ?????????????????????? ?????????????????????? ???????????????????? CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS In determining the carrying amounts of some assets and liabilities, the Group makes assumptions of the effects of uncertain future events on those assets and liabilities at the balance sheet date. These estimates involve assumptions about such items as risk adjustment to cash flows or discount rates used, future changes in salaries and future changes in prices affecting other costs. The Group?s estimates and assumptions are based on historical experience and expectations of future events and are reviewed periodically. In addition to assumptions and estimations of future events, judgements are also made during the process of applying the Group?s accounting policies. The Group determines the estimated useful lives for related depreciation charges for property, plant and equipment and amortisation of computer software. Management will revise the depreciation or amortisation charges where useful lives are different to previously estimated. ?????????????????????? ?????????????????????? ?????????????????????? ?????????????????????? ?????????????????????? ?????????????????????? ?????????????????????? ????? Valuation of investments 47 25. ??????25. PRINCIPAL ACCOUNTING POLICIES 25.1 ???? / ???????????25.1 Adoption of new / revised HKFRS 25.2 ????25.2 Basis of Consolidation ??????????????????? ??????????????????? ??????????? ??2021?6?30???????????? ????2020?1?1?????????? ??????????????????? ?????? ??????????????????? ??????????????????? ????????????????? For the year ended 30 June 2021, the Group has adopted all the new and revised standards and amendments to HKFRS that are effective for the accounting periods beginning on or after 1 January 2020 and relevant to the operations of the Group. The Group has assessed the impact of the adoption of these amendments and considered that there was no significant impact on the Group?s results and financial position nor any substantial changes to the Group ? s accounting policies and presentation of the financial statements. ??????????????????? ??????????????????? ??????????????? ????????????6?30???? ?????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??? The principal accounting policies applied in the preparation of the financial statements of the Group are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The consolidated financial statements include the financial statements of the University and entities controlled by the University made up to 30 June each year. A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. ??????????????????? ??? All significant intercompany transactions and balances within the group are eliminated on consolidation. 48 25. ????????? 25. 25.3 ?????????????25.3 A joint arrangement is an arrangement of which two or more parties have joint control and over which none of the participating parties has unilateral control. Investments in joint arrangements are classified either as joint ventures or joint operations, depending on the contractual rights and obligations each party has. Joint ventures arise where the participating parties have rights to the net assets of the arrangement. A joint venture partner accounts for an investment in such an arrangement using the equity method. The equity method records the initial investment at cost which is adjusted periodically to reflect the changes in value due to the share of the joint venture?s performance. Joint operations arise where the participating parties have specific rights and obligations under the arrangement to the assets and liabilities of an arrangement. Each participating party accounts for the assets, liabilities, revenues and expenses relating to its own rights and obligations to the joint operation in accordance with the HKFRSs applicable to the particular assets, liabilities, revenues and expenses. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ?????????????? ??????????????????? ??????????????????? ?????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ???????? An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. The results and assets and liabilities of an associate are incorporated in the consolidated financial statements using the equity method of accounting. Interest in an associate is carried in the consolidated balance sheet at cost as adjusted by post-acquisition changes in the Group?s share of the net assets of the associate, less any impairment loss. ??????????????????? ??????????????????? ??????????????????? ??????????????????? ??????????????????? ????? Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group?s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. PRINCIPAL ACCOUNTING POLICIES (CONT?D) Interest in an Associate and a Joint Arrangement 49 25. ????????? 25. 25.4 ????????25.4 Property, Plant and Equipment 25.5 ????25.5 Intangible Assets ????Computer software PRINCIPAL ACCOUNTING POLICIES (CONT?D) Amortisation of computer software is charged to the consolidated statement of comprehensive income on a straight-line basis over the assets? estimated useful lives. Amortisation is charged from the month when the asset is ready for use. ????????????????? ?? Computer software under development is not amortised until ready for use. 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. The gain or loss arising from derecognition of an asset, representing the difference between the sales proceeds and the carrying amount of that asset is recognised in the consolidated statement of comprehensive income. ?????????????????? ?????????????????? ?????????????? ?????????????????? ?????????????????? ?????????????????? Computer software costs are capitalised on the basis of the costs incurred to acquire and bring to use the specific software and are stated in the consolidated balance sheet at cost less accumulated amortisation. ?????????????????? ?????????????????? ?????????????????? ?????????????????? ????????????? ?????????????????? ?????????????????? ?????????????????? ????? Construction in progress is stated at cost less any identified impairment loss and is not depreciated until completion of construction. Cost of completed construction works is transferred to appropriate categories of property, plant and equipment. ?????????????????? ??????????????? Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and accumulated impairment losses. ?????????????????? ?????????????????? ?????????????????? ???????????? Depreciation of property, plant and equipment, other than construction in progress, is calculated using the straight-line method to allocate their costs, net of the residual values, if any, over the estimated useful lives. Depreciation is charged from the month when the asset is ready for use. 50 25. ????????? 25. 25.6 ????25.6 Financial Assets ????????????????? (a) (a) (b) ?????????????(b) those to be measured at amortised cost. PRINCIPAL ACCOUNTING POLICIES (CONT?D) Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through income and expenditure ( ?FVIE? ), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVIE are expensed in the consolidated statement of comprehensive income. ???????????????? ???????????????? ????? ???????????????? ??????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ?????? ???????????????? ???????????????? ??? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ????????????? ??Classification The Group classifies its financial assets in the following categories: those to be measured subsequently at fair value (either through other comprehensive income ( ? OCI ? ) or through income and expenditure), and ?????????????????? ?????????????????? ????????? The classification depends on the entity?s business model for managing the financial assets and the contractual terms of the cash flows. ??Measurement For assets measured at fair value, gains and losses will either be recorded in income and expenditure or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI. The Group reclassifies debt investments when and only when its business model for managing those assets changes. 51 25. ????????? 25. 25.6 ??????? 25.6 Financial Assets (Cont?d) (a) (a) (b) (b) (c) (c) PRINCIPAL ACCOUNTING POLICIES (CONT?D) Debt investments FVIE: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVIE. A gain or loss on a debt investment that is subsequently measured at FVIE is recognised and presented in the consolidated statement of comprehensive income within interest and investment income in the period in which it arises. Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt instrument that is subsequently measured at amortised cost is recognised in the consolidated statement of comprehensive income when the asset is derecognised or impaired. Interest income from these financial assets is included in interest and investment income using the effective interest rate method. FVOCI: Assets that are held for collection of contractual cash flows and for sale, where the assets? cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment losses, interest income using the effective interest rate method and foreign exchange gains and losses which are recognised in the consolidated statement of comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to the consolidated statement of comprehensive income and recognised in interest and investment income. Subsequent measurement of debt instruments depends on the Group?s business model for managing the asset and the contractual cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments: ?????????????????? ?????????????????? ?????????????????? ?????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ??????????????? ?? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????? ???? 52 25. ????????? 25. 25.6 ??????? 25.6 Financial Assets (Cont?d) 25.7 ????25.7 PRINCIPAL ACCOUNTING POLICIES (CONT?D) Equity instruments The Group subsequently measures all equity investments at fair value. Where the Group?s management has made an irrevocable election at initial recognition to present fair value gains and losses on equity investments in other comprehensive income, on derecognition of the investment, there is no subsequent reclassification of fair value gains and losses to income and expenditure and any balance within other comprehensive income for these equity investments is reclassified to other funds as a fund movement. Dividends from such investments continue to be recognised in the consolidated statement of comprehensive income when the Group?s right to receive payments is established. Accounts receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less allowances for expected credit losses. The Group measured the loss allowance for its accounts receivables at an amount equal to the lifetime expected credit losses. Appropriate allowance for estimated irrecoverable amounts are recognised in the consolidated statement of comprehensive income when there is objective evidence that the asset is impaired. ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?? ?????????????????? ?????????????????? ?????????????????? ????????????????? ?????????????????? ?????????????????? ?????? ?? ????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ???? Accounts receivable The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Changes in the fair value of financial assets at FVIE are recognised and presented in the consolidated statement of comprehensive income within interest and investment income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Impairment ???? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ????????????????? ????????????????? 53 25. ????????? 25. 25.8 ??25.8 Inventories 25.9 ???????25.9 Cash and cash equivalents 25.10 25.10 25.11 ??25.11 Provisions PRINCIPAL ACCOUNTING POLICIES (CONT?D) Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at management?s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Contract liabilities primarily relate to the advance consideration received from customers, where the Group has the unconditional right to considerations before the goods or services are delivered. They are released and revenues are recognised when the performance obligations are satisfied upon transferring of goods and services to customers. Accounts payable, accruals, deferred income and contract liabilities Accounts payable and accruals and deferred income are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Inventories held for resale in respect of selffinancing operations are valued at the lower of cost and net realisable value. Cost is calculated using the weighted average method. Cash and cash equivalents comprise cash on hand and deposits available on demand with an original maturity of 3 months or less. ?????????????????? ?????????????????? ?????????????????? ?????????????????? ??? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ???????? ?????????????????? ?????????????????? ????? ?????????????????? ?????????????????? ?????????????????? ? ?????????????????? ?????????????????? ???????? 54 25. ????????? 25. 25.12 ??25.12 Impairment 25.13 ??????25.13 Deferred Capital Funds 25.14 ????25.14 Recognition of Income (a) ???????(a) Government subventions and grants ???????????????? ???????????????? ???????????????? ??? ???????????????? ???????????? ???????????????? ???????????????? ???????????????? ??????????????? Grants earmarked for specific purposes are recognised as income to the extent of the related expenses are incurred during the reporting period. Subvention and grants spent on capital expenditure are initially recorded as deferred capital funds and recognised as income to match against the depreciation charges of the related asset items over their estimated useful lives. Government subventions and grants are recognised in the consolidated statement of comprehensive income when there is reasonable assurance that the Group will comply with the conditions attaching to them; and that the subventions and grants will be received. At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised in the consolidated statement of comprehensive income immediately. ?????????????????? ?????????????????? ?????????????????? ?????????????????? ????????????????? ?? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ???????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????? Deferred capital funds represent funds from subventions and grants or donations spent by the Group on the purchase of property, plant and equipment as well as intangible assets. These funds are recognised as income in the consolidated statement of comprehensive income to match against the depreciation charges of the related asset items over their estimated useful lives. PRINCIPAL ACCOUNTING POLICIES (CONT?D) Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such 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 in prior years. A reversal of an impairment loss is recognised as income immediately. 55 25. ????????? 25. 25.14 ??????? 25.14 Recognition of Income (Cont?d) (b) ??(b) Donations (c) ??????????(c) Tuition, programmes and other fees (d) ????(d) Interest income (e) ??????(e) Research contract income (f) ?????(f) Licensing income ???????????????? ???????????????? ???????????????? ???????????????? ??????? ???????????????? ???????????????? ???????????????? ???????????????? ??????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ??????????? Tuition, programmes and other fees are recognised over time when the services are rendered and the Group ? s performance provides the benefits received and consumed simultaneously by the students. Tuition, programmes and other fees recognised on an accrual basis and unearned fees are included in contract liabilities. Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable, which is the rate that exactly discount the estimated future cash receipts through the expected life of the financial asset to that asset?s net carrying amount. Income from contract research is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. The progress towards complete satisfaction of the performance obligation is measured based on the Group?s efforts or inputs to the satisfaction of the performance obligation, by reference to the expenses incurred up to the end of reporting period as a percentage of total estimated costs for each contract. Licensing income is recognised on a straight line basis over the contract period when a customer is granted with a right to access the patents as it exists throughout the licence period. Alternatively, licensing income is recognised at a single point in time upon delivery of the patents when a customer is provided with a right to use the patents as it exists at the point in time at which the licence is granted. ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ?? Donations without conditions in cash or cash equivalents or other investment instruments are recognised as income when received or receivable. Outstanding pledges are not recognised as income unless a legal obligation on the donor can be established by the Group. Donations received with a specific purpose are recognised as income to the extent of the related expenditure incurred during the reporting period. PRINCIPAL ACCOUNTING POLICIES (CONT?D) ???????????????? ?????????? 56 25. ????????? 25. 25.15 ??25.15 Leases Lease payments are allocated between principal and lease interest expense. The lease interest expense is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. ?????????????????? ???????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?? ?????????????????? ??????????????? Lease liabilities are classified as non-current liabilities unless payments are payable within 12 months from the balance sheet date. Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability. Right-of-use assets are depreciated over the lease terms on a straight-line basis. Payments associated with short-term leases with lease terms of 12 months or less and leases of low-value assets are expensed on a straight-line basis in the statement of comprehensive income. Lease income from operating leases where the University is a lessor is recognised in income on a straight-line basis over the lease term. PRINCIPAL ACCOUNTING POLICIES (CONT?D) ?????????????????? ??????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ????????????? ?????????????????? ?????????????????? ?????????????????? ???????????? Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities are measured at the net present value of the remaining fixed lease payments. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liabilities. The lease payments are discounted using the University?s incremental borrowing rate at lease commencement date. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the University. 57 25. ????????? 25. 25.16 ??????25.16 Retirement Benefits Costs 25.17 ??25.17 Foreign Currencies (a) (a) (b) (b) ? ? ? ? Income and expenditure for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at exchange rates at the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity. ?????????????????? ?????????????????? ??? Payments to defined contribution retirement benefit plans are recognised in the consolidated statement of comprehensive income when employees have rendered service entitling them to the contribution. ?????????????????? ?????????????????? ?????????????????? ?????????????????? ???? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ????? ???????????????? ???????????????? ???????????????? ??????????? Items included in the financial statements of each of the Group?s entities are measured using the currency of the primary economic environment in which the entity operates (?the functional currency ? ). The consolidated financial statements are presented in Hong Kong dollars, which is the Group?s presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income. The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet. ???????????????? ???????????????? ??? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???????????????? ???? PRINCIPAL ACCOUNTING POLICIES (CONT?D) 58 25. ????????? 25. 25.18 25.18 ?????????2018?7?1???? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ?????????????????? ??? In compiling the segment reporting for compliance with the Cost Allocation Guidelines for UGC-funded and non-UGC-funded Activities ( ? the Guidelines ? ) effective from 1 July 2018, costs associated with UGC activities, non-UGC activities or shared activities are identified. Costs directly attributable to UGC or non-UGC activities are not subject to cost allocation. Shared costs are allocated to UGC and non-UGC segments using appropriate cost drivers including teaching credits of UGC and non-UGC programmes, the number of student Full Time Equivalents ( ? FTE ? ), floor area, etc.. Costs funded by donations are regarded as direct costs and reported under the Non-UGC Segment. ?????????????????? ??????? Cost Allocation for UGC-funded and non-UGC funded activities for segment reporting PRINCIPAL ACCOUNTING POLICIES (CONT?D) 59 26. ?????????????????????????? 2018-2020????????????? ???????????2 Annual improvements to HKFRS 2018-2020 Improvements to HKFRSs2 ??????? 1 ????? ???????????3 Amendment to HKAS 1 Classification of liabilities as current or non-current 3 ??????? 16 ????? ????????????????????2 Amendment to HKAS 16 ??????? 37 ????? ????????????2 Amendment to HKAS 37 ?????? - ????2 Interest Rate Benchmark Reform - Phase 22 ????????? 17 ?????1 HKFRS 17 Insurance Contracts1 ??????????????????????4 1 ?2021?1?1?????????????? Effective for accounting periods beginning on or after 1 January 2021. 2 ?2022?1?1?????????????? Effective for accounting periods beginning on or after 1 January 2022. 3 ?2023?1?1?????????????? Effective for accounting periods beginning on or after 1 January 2023. 4 ??????? Effective date to be determined. ???????????????????????????????????????????????????? ???????? Management is currently assessing the impact of the above new standards, amendments and interpretations on the Group?s financial statements. From the initial assessment, it is considered that there will be no significant impact to the accounting policies or presentation of the financial statements. ????????? 10 ????????? 28 ? ???? POSSIBLE IMPACT OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS PUBLISHED THAT ARE NOT YET EFFECTIVE The Group has not early adopted the following new standards, amendments, and interpretations which have been issued and are relevant to its operations but are not yet effective, in these financial statements: Amendments to HKFRS 10 and HKAS 28 Sale and Contribution of Assets between an Investor and its Associate or Joint Venture4 ??????????????????????????????????????????????? ?? Property, Plant and Equipment: Proceeds before Intended Use2 Amendments to HKAS 39, HKFRS 4, HKFRS 7, HKFRS 9 and HKFRS 16 ??????? 39 ??????????? 4 ??????????? 7 ?????????? ? 9 ???????????16????? Onerous Contracts - Costs of Fulfilling a Contract2 60 MTPC-R117019 ~ ffi: ; ff ~ ~ 7' ~ Q111 1 UNIVERSITY OF SCIENCE --l.o=J THE HONG KONG ~ AND TECHNOLOGY_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________