| – | | significant financial difficulty of the entity; a breach of contract, such as a default or delinquency in interest or principal payments; it becoming probable that the entity will enter bankruptcy or other financial reorganization; significant changes in the technological, market, economic or legal environment that have an adverse effect on the entity; and decline in the fair value of an investment in an equity instrument below its cost. If any such evidence exists, the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2(j)(ii). The impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount in accordance with note 2(j)(ii). | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | – | (j) | a breachImpairment of contract, such as a default or delinquency in interest or principal payments;non-financial assets (Continued)
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| | – | (ii) | it becoming probable that the entity will enter bankruptcy or other financial reorganization;
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| – | | significant changes in the technological, market, economic or legal environment that have an adverse effect on the entity; and
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| – | | a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
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2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (i) | Impairment of assets (Continued) |
| (i) | Impairment of investments accounted for using the equity method,available-for-sale financial assets and receivables (Continued) |
If any such evidence exists, any impairment loss is determined and recognized as follows:
| – | | For investment accounted for using the equity method (see note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2(i)(ii). The impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount in accordance with note 2(i)(ii).
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| – | | For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for such equity securities are not reversed.
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| – | | For debt instruments classified asavailable-for-sale financial assets, if any impairment evidence exists, the cumulative loss (measured as the difference between the acquisition cost (net of any principal repayment and amortization) and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) is reclassified from equity and recognized in profit or loss. If, in a subsequent period, the fair value of a debt instrument classified asavailable-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss. For equity instruments classified asavailable-for-sale financial assets, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any impairment evidence exists, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) is reclassified from equity and recognized in profit or loss. Impairment losses recognized in profit or loss on equity instruments are not reversed through profit or loss.
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2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (i) | Impairment of assets (Continued) |
| (i) | Impairment of investments accounted for using the equity method,available-for-sale financial assets and receivables (Continued) |
| – | | For trade and other current receivables carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years.
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Impairment losses are written off against the corresponding assets directly, except for impairment losses recognized in respect of debtors included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss.
2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (i) | Impairment of assets (Continued) |
| (ii) | Impairment of other assets |
Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill and other intangible assets with indefinite useful lives, an impairment loss previously recognized no longer exists or may have decreased: | – | | property, plant and equipment;
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property, plant and equipment; | – | | construction in progress;
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| – | | prepaid interests in leasehold land classified as being held under an operating lease;
|
construction in progress; | – | | investments in subsidiaries;
|
investments in subsidiaries; | – | | other intangible assets.
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other intangible assets with definite life. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill and other intangible assets that have indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment. | – | | Calculation of recoverable amount Calculation of recoverable amount
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The recoverable amount of an asset is the higher of its fair value less costs of disposal and value in use.use (“VIU”). In assessing value in use,VIU, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit). | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (i) | Impairment of assets (Continued) |
| | (ii)(j) | Impairment ofnon-financial assets (Continued) |
| (ii) | Impairment of other assets (Continued) |
Recognition of impairment losses | – | | Recognition of impairment losses
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An impairment loss is recognized in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal, or value in use,VIU, if determinable. | – | | Reversals of impairment losses
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Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognized. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | (j)(k) | Construction in progress |
Construction in progress is stated at cost less impairment losses (see note 2(i)). Cost comprises direct costs of construction as well as interest expense and exchange differences capitalized during the periods of construction and installation. Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for in respect of construction in progress until it is completed and ready for its intended use.
Inventories 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Inventories are carried at the lower of cost and net realizable value. Cost represents purchase cost of goods calculated using the weighted average cost method. Net realizable value is determined by reference to the sales proceeds of items sold in the ordinary course of business or to management’s estimates based on prevailing market conditions. When inventories are sold, the carrying amount of those inventories is recognized as cost of products sold. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs. No reversal of any write-down of inventories occurred during the years presented. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | (l) | Accounts receivableInvestments and other receivables financial assets |
Accounts receivableRecognition and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest method less allowance for impairment loss (see note 2(i)), except where the effect of discounting would be immaterial.derecognition
| (m) | Available-for-sale financial assets |
Available-for-sale financial assets arenon-derivatives that are either designated in this category or not classified in any of the other categories. They are included innon-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.
Regular way purchases and sales ofavailable-for-sale financial assets are recognized on the trade-date, (thethe date on which the Group commits to purchase or sell the asset). The investments are initially recognized at fair value plus transaction costs and are subsequently carried at fair value. Changes in the fair value ofavailable-for-sale financial assets are recognized in other comprehensive income. Available-for-sale financialasset. Financial assets are derecognized when the rights to receive cash flows from the investmentsfinancial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Whenavailable-for-saleClassification
From January 1, 2018 onwards, the Group classifies its financial assets, are sold,depending on the accumulatedGroup’s business model for managing the financial assets and the contractual terms of the related cash flows, under the following measurement categories: those to be measured at amortized cost, and those to be measured at fair value adjustments(either through other comprehensive income, or through profit or loss). Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. | (i) | The Group’s financial assets measured at amortized cost represent those financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest. Interest from these financial assets is included in interest income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains together with foreign exchange gains and losses. Impairment losses are presented in other operating expenses. |
| (ii) | For equity instruments that are not held for trading, the Group has made an irrevocable election at the time of initial recognition to account for these equity investments at FVOCI. There is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investments. Dividends from such investments continue to be recognized in profit or loss when the Group’s right to receive payments is established. |
| (iii) | Assets that do not meet the criteria for amortized cost or are not elected/classified as FVOCI are classified as FVPL. A gain or loss on a financial instrument that is subsequently measured at FVPL is recognized in profit or loss and presented net within interest and other income in the period in which it arises. |
| 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (l) | Investments and other financial assets (Continued) |
Impairment From January 1, 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost. The Group has adopted the simplified expected credit loss model for its accounts receivable and contract assets, which requires expected lifetime losses to be recognized from their initial recognition. For other debt instruments carried at amortized cost, which have low credit risk at both the beginning and end of the reporting period, the Group adopted the expected credit loss model. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Financial assets are written off when the Group is satisfied that recovery is remote. When loans or receivables have been written off, the Group continues to attempt to recover the receivable due. When recoveries are made, the recovered amount is recognized in profit or loss. Accounting policies applied until December 31, 2017 The Group has retrospectively applied IFRS 9, but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the Group’s previous accounting policy. Until December 31, 2017, the Group classifies its financial assets in the following categories: Financial assets at fair value through profit or loss; Held-to-maturity investments; Loans and receivables; and Available-for-sale financial assets. The classification determined on the purpose for which the investments were acquired. Management determined the classification of its investments at initial recognition. The Group assessed at the end of each reporting period whether there was objective evidence that a financial asset or group of financial assets was impaired. A financial asset or a group of financial assets was impaired and impairment losses were incurred only if there was objective evidence of impairment as a result of one or more loss events and that loss event (or events) had an impact on the estimated future cash flows of the financial asset or group of financial assets that could be reliably estimated. If any such evidence exists, any impairment loss is determined and recognized as follows: For unquoted equity securities carried at cost, the impairment loss is removedmeasured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for such equity securities are not reversed. For debt instruments classified as available-for-sale financial assets, if any impairment evidence exists, the cumulative loss (measured as the difference between the acquisition cost (net of any principal repayment and amortization) and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) is reclassified from equity and recognized in profit or loss. Interest If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss. For equity instruments classified as available-for-sale financial assets, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any impairment evidence exists, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss onavailable-for-sale debt instruments calculated using the effective interest method that financial asset previously recognized in profit or loss) is reclassified from equity and recognized in profit or loss. DividendsImpairment losses recognized in profit or loss onavailable-for-sale equity instruments are not reversed through profit or loss.
For trade and other current receivables carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (l) | Investments and other financial assets (Continued) |
Accounting policies applied until December 31, 2017 (Continued) Impairment losses are written off against the corresponding assets directly, except for impairment losses recognized in respect of debtors included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss when the Group’s right to receive payments is established. 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
loss. | | (n)(m) | Deferred revenueAccounts receivable and other receivables |
Deferred revenue consists primarily of prepaid service fees received from customers whichAccounts receivable are generally not refundable and revenue deferred for unredeemed point rewards under Customer Point Reward Program (“Reward Program”, see note 2(r)(iv)).
The prepaid service fees are statedinitially recognized at the amount of proceeds receivedconsideration that is unconditional and other receivables are initially recognized at fair value. Considering the discounting impact is immaterial, both of them are thereafter stated at cost less the amount already recognized as revenue.related loss allowance for impairment (see note 2(l)).
| | (o)(n) | Interest-bearing borrowings |
Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.
| (p) | Accounts payable and other payables |
Accounts payable and other payables are initially recognized at fair value and subsequently stated at amortized cost unless the effect of discounting would be immaterial.
| (q) | Cash and cash equivalents |
Cash and cash equivalents comprise bank deposits with original maturity within three months, cash at banks and in hand, demand deposits with banks, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(o) | Accounts payable and other payables |
Accounts payable and other payables are initially recognized at fair value. Considering the discounting impact is immaterial, both of them are thereafter stated at cost. Deferred revenue consists primarily of contract liability which is from the excess of the cumulative recognized consideration received or receivables from the contracted customer over the cumulative revenue, mainly including prepaid service fees received from customers which are generally not refundable and revenue deferred for unredeemed point rewards under customer point reward program (“Reward Program”). | (q) | Interest-bearing borrowings |
Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (r) | Revenue recognition from contracts with customers |
The Group mainly provides voice, data and other telecommunications services to its customers through entering into contracts that are either cancellable on monthly basis or for a fixed contract period generally with prepayment term and/or penalty for early termination. The Group also sells telecommunication related products to its customers. For the telecommunications services (such as voice and data services), telecommunication related products (such as handsets), customer point rewards and/or other promotional goods/services provided by the Group, if the customer can benefit from the goods or services and the Group’s promise to transfer the services or products is separately identifiable, the Group identifies them as separate performance obligations. Revenue is measured at the transaction price which is the amount of consideration to which the Group is entitled in exchange for transferring promised performance obligations to the customer excluding amounts collected on behalf of third parties. The amount of consideration is generally explicitly stated in the contract and does not include significant financing component. The Group may provide cash subsidies to third party agents in respect of specific telecommunications service contracts obtained via the agents. As the cash subsidies are ultimately enjoyed by end customers via the indirect sales channel, they represent consideration payable to customers and accounted for as a reduction of the transaction price. When control of a service or product is transferred to a customer, revenue is generally recognized in profit or loss as follows: | (i) | Revenue for each performance obligation is recognized when the Group satisfies the performance obligation by transferring the promised goods or services to the customer. Generally, revenue is recognized when the customer obtains the control of the telecommunications services over the time of provision of the services. Revenue is recognized when a customer obtains the control of the product at a point of time. |
| (ii) | For contracts which include the provision of multiple performance obligations including services, products and/or customer point rewards, the Group allocates the transaction price to each performance obligation based on the relative stand-alone selling price. The stand-alone selling price of products and services are mainly based on its observable selling price. If a stand-alone selling price is not directly observable, the Group considers all information that is reasonably available and maximise the use of observable inputs to estimate the stand-alone selling price. The standalone selling price of each point in the customer point rewards is based on its fair value. Revenue for each performance obligation is then recognized when the control of the promised goods or services is transferred to the customer. |
| (iii) | The Group usually controls the services and the products it provided before they are transferred to the customer. In certain situations, the Group would consider the primary responsibilities in the arrangement, the establishment of selling price, and the inventory risks to determine if the Group is acting as a principal or agent. If the Group has assessed and concluded that it does not obtain the control of a specified good before transferring to the customer, the Group is acting as agent in satisfying a performance obligation, and the revenue is recognized in the net amount of any fee or commission to which it expects to be entitled from another party. |
| 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (r) | Revenue recognition from contracts with customers (Continued) |
The Group has bothpre-paid and post-paid customers for its goods and services provided. Contract assets primarily relate to the Group’s rights to consideration for products or services provided to the customers but for which the Group does not have an unconditional right at the reporting date. In the post-paid contract, contract asset is created, which represents the difference between the amount of products revenue recognized upon sale of products or provision of service and the amount of consideration received/receivable from the customer. The contract asset is reclassified to accounts receivable as services are provided and billed. Contract liabilities arise when the Group receives consideration in advance of providing the goods or services promised in the contract. Contract liabilities are presented in deferred revenue on the consolidated balance sheets. The contract assets and the contract liabilities are classified as current andnon-current portions based on their respective recovery or settlement periods.Non-current portion of contract assets are presented in othernon-current assets. Incremental costs incurred to obtain a contract, which mainly comprise sales commissions payable to third party agents, are amortized on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the costs incurred to obtain a customer contract relates over the expected duration of the contract and recorded in selling expense, if it is expected to be recovered. When the expected amortization period is one year or less, the Group utilizes the practical expedient and expenses the costs as incurred. Capitalized incremental costs incurred to obtain a contract is recorded as othernon-current assets. Cost incurred to fulfil a contract represents the cost directly related to the Group’s telecommunications service contracts which are not within the scope of another accounting standard. The amount is amortized on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the costs incurred to fulfil a customer contract relates over the expected duration of the contract and recorded as network operation and support expenses, if it is expected to be recovered. Capitalized cost incurred to fulfil a contract is recorded as othernon-current assets based on its amortization period. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (r) | Revenue recognition from contracts with customers (Continued) |
Accounting policies applied until December 31, 2017 Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in profit or loss as follows: | | (i) | revenue derived from voice and data services are recognized when the service is rendered; |
| | (ii) | sales of products are recognized when the title is passed to the buyer; |
| | (iii) | for offerings which include the provision of services and sale of mobile handset, the Group determines the revenue from the sale of the mobile handset by deducting the fair value of the service element from the total contract consideration; and |
| | (iv) | for transactions which offer customer points reward when services are provided, the consideration allocated to the customer points reward is based on its fair value which is deducted from revenue and recorded as deferred revenue when the rewards are granted and recognized as revenue when the points are redeemed or expired. |
Interest income is recognized as it accrues using the effective interest method. Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits. 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (t) | Income tax (Continued) |
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (t) | Income tax (Continued) |
The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries and associates to the extent that, in the case of taxable temporary differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future. The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted. The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available. 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| (t) | Income tax (Continued) |
Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met: | – | | in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either: the same taxable entity; or different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | – | (u) | in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
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| – | | the same taxable entity; or
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| – | | different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.
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| (u) | Provisions and contingent liabilities |
Provisions are recognized for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be estimated reliably. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence ornon-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. | | (i) | Short-term employee benefits and contributions to defined contribution retirement plans |
Salaries, annual bonuses, paid annual leave, leave passage, contributions to defined contribution retirement plans and the cost ofnon-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | (v) | Employee benefits (Continued) |
| | (i) | Short-term employee benefits and contributions to defined contribution retirement plans (Continued) |
The Company and subsidiaries incorporated in Hong Kong are required to make contributions to Mandatory Provident Funds under the Hong Kong Mandatory Provident Fund (“MPF”) Schemes Ordinance. Under the MPF scheme, the employer and its employees are each required to make contributions to the scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$30,000. Such contributions are recognized as an expense in profit or loss as incurred. The employees of the subsidiaries in Mainland China participate in the defined contribution retirement plans managed by the local government authorities whereby the subsidiaries are required to contribute to the schemes at fixed rates of the employees’ salary costs. In addition to the local governmental defined contribution retirement plans, the subsidiaries also participate in a pension scheme launched by the Group managed by an independent insurance company whereby the subsidiaries are required to make contributions to the retirement plans at fixed rates of the employees’ salary costs or in accordance with the terms of the plans. The Group’s contributions to these plans are charged to profit or loss when incurred. The Company and subsidiaries have no obligations for the payment of retirement and other post-retirementpost-employment benefits of staff other than the contributions described above. The fair value of share options granted to employees is recognized as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the binomial lattice model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | (v) | Employee benefits (Continued) |
| | (ii) | Share-based payments (Continued) |
During the vesting period, the number of share options that is expected to vest is reviewed at each balance sheet date. Any resulting adjustment to the cumulative fair value recognized in prior years is credited/charged to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to the capital reserve). The equity amount is recognized in the capital reserve until either the option is exercised (when it is transferred to the share capital account) or the option expires (when it is released directly to retained profits). In the Company’s balance sheets, share-based payment transactions in which the Company grants share options to subsidiaries’ employees are accounted for as an increase in value of investments in subsidiaries, which is eliminated on consolidation. | | (iii) | Termination benefits |
Termination benefits are recognized when, and only when, the Group demonstrably commits itself to terminate employment which is without realistic possibility of withdrawal or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred. The capitalization of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalization of borrowing costs is suspended or ceased when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | (x) | Translation of foreign currencies |
The functional currency of majority of the entities within the Group is RMB. The Group adopted RMB, as its presentation currency in the preparation of the consolidated financial statements, which is the currency of the primary economic environment in which most of the Group’s entities operate. The Group adopted RMB as its presentation currency in the preparation of the consolidated financial statements. Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in currencies other than the functional currency are retranslated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognized in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates.Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined. The results of overseas entities are translated into RMB at the exchange rates approximating the foreign exchange rate ruling at the dates of transactions. Balance sheet items are translated into RMB at the exchange rates ruling at the balance sheet date. The resulting exchangecurrency translation differences are recognized in other comprehensive income and accumulated separately in equity in the exchange reserve. On disposal of an overseas entity, the cumulative amount of the exchangecurrency translation differences relating to that particular foreign operation is reclassified from equity to profit or loss. For the purpose of the consolidated statements of cash flows, the cash flows of overseas entities within the Group are translated into RMB by using the exchange rates approximating the foreign exchange rate ruling at the dates of the cash flows. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| | (a) | A person, or a close member of that person’s family, is related to the Group if that person: |
| | (i) | has control or joint control of the Group; |
| | (ii) | has significant influence over the Group; or |
| | (iii) | is a member of the key management personnel of the Group or the Group’s parent. |
| | (b) | An entity is related to the Group if any of the following conditions applies: |
| | (i) | The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); |
| | (ii) | One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); |
| | (iii) | Both entities are joint ventures of the same third party; |
| | (iv) | One entity is a joint venture of a third entity and the other entity is an associate of the third entity; |
| | (v) | The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; |
| | (vi) | The entity is controlled or jointly controlled by a person identified in note 2(y)(a); or |
| | (vii) | A person identified in note 2(y)(a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). |
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. | 2 | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
An operating segment is a component of the Group that engages in business activities from which the Group may earn revenue and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Group’s Chief Operating Decision Maker (“CODM”) in order to allocate resources and assess performance of the segment. The CODM has been identified as the Executive Directors of the Company. For the years presented, the Group as a whole is an operating segment since the Group is only engaged in telecommunications and related businesses. No geographical information has been disclosed as the majority of the Group’s operating activities are carried out in Mainland China. The Group’s assets located and operating revenue derived from activities outside Mainland China are less than 5% of the Group’s assets and operating revenue, respectively. | | (aa) | Dividend distribution |
Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s and the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders or directors, where appropriate. | 3 | CHANGES IN ACCOUNTING POLICIES |
The following new standards, annual improvements and interpretations are mandatory for the first time for the Group’s financial year beginning on January 1, 2019 and are applicable for the Group: IFRS 16 “Leases” IFRIC – Int 23 “Uncertainty over income tax treatments” Amendments to IAS 28 “Investments in associates and joint ventures” Annual Improvements to IFRS Standards 2015-2017 Cycle Amendments to IAS 19 “Employee benefits” Amendments to IFRS 9 “Financial instruments” New standards, annual improvement or interpretation to IFRS and IAS effective for the financial year beginning on January 1, 20172018 do not have a material impact on the Group other than IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers”, details of which are set out in note 3(b) and 3(c), respectively. New standards, annual improvement or interpretation to IFRS and IAS effective for the financial year beginning on January 1, 2019 do not have a material impact on the Group other than IFRS 16, details of which are set out in note 3(d). In addition, the IASB also published a number of new standards, amendments to standards and interpretations which are effective for the financial year beginning on or after January 1, 2020 and have not been early adopted by the Group (see note 40). Management is assessing the impact of such new standards and amendments to standards and will adopt the relevant standards and amendments to standards in the subsequent periods as required. | 3 | CHANGES IN ACCOUNTING POLICIES (CONTINUED) |
| (a) | Impact on the financial statements as of January 1, 2018 |
This note explains the impact of the adoption of IFRS 9 and IFRS 15 on the Group’s financial statements as of January 1, 2018. As explained in note 3(b), in accordance with the transitional provisions, IFRS 9 was adopted without restating the comparative figures. And as explained in note 3(c), IFRS 15 was generally adopted using the modified retrospective approach without restating comparative figures. The reclassifications and the adjustments are therefore recognized in the balance sheets on January 1, 2018. The following tables show the adjustments recognized for each individual line item. Line items that were not affected by the changes have not been included. The adjustments are explained in more detail in note 3(b) and note 3(c). Consolidated Balance Sheets (Extract) | | | | | | | | | | | | | | | | | | | | December 31, 2017 (As previously reported) | | | Changes in accounting policy – IFRS 9 | | | Changes in accounting policy – IFRS 15 | | | January 1, 2018 (As restated) | | |
|
|
| | | Million | | | Million | | | Million | | | Million | | Assets | | | | | | | | | | | | | | | | | Non-current assets | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | 132,499 | | | | (2,194 | ) | | | — | | | | 130,305 | | Deferred tax assets | | | 33,343 | | | | 24 | | | | (2,879 | ) | | | 30,488 | | Financial assets at fair value through other comprehensive income | | | — | | | | 44 | | | | — | | | | 44 | | Available-for-sale financial assets | | | 44 | | | | (44 | ) | | | — | | | | — | | Other non-current assets | | | — | | | | — | | | | 6,469 | | | | 6,469 | | | | | | | | | | | | | | | | | | | Current assets | | | | | | | | | | | | | | | | | Contract assets | | | — | | | | — | | | | 4,139 | | | | 4,139 | | Accounts receivable | | | 24,153 | | | | (195 | ) | | | — | | | | 23,958 | | Financial assets at fair value through profit or loss | | | — | | | | 65,630 | | | | — | | | | 65,630 | | Available-for-sale financial assets | | | 65,630 | | | | (65,630 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | Equity and liabilities | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | | | | | Accrued expenses and other payables | | | 190,866 | | | | — | | | | (782 | ) | | | 190,084 | | Deferred revenue | | | 85,282 | | | | — | | | | (385 | ) | | | 84,897 | | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | Reserves | | | 583,506 | | | | (2,365 | ) | | | 8,896 | | | | 590,037 | | | | | | | | | | | | | | | | | | |
| (b) | IFRS 9 “Financial Instruments” |
IFRS 9 replaces the provisions of IAS 39 “Financial Instruments: Recognition and Measurement” that mainly affect the recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets of the Group. The adoption of IFRS 9 from January 1, 2018 resulted in changes in accounting policies and adjustments to the amounts recognized in the financial statements. The new accounting policies are set out in note 2(l) above. In accordance with the transitional provisions, comparative figures have not been restated. | 3 | CHANGES IN ACCOUNTING POLICIES (CONTINUED) |
| (b) | IFRS 9 “Financial Instruments (Continued) |
Classification and measurement On January 1, 2018 (the date of initial application of IFRS 9), the Group’s management assessed the classification of the financial assets according to their business models and classified its financial instruments into the appropriate IFRS 9 categories. | (i) | Reclassification of debt investment from available-for-sale financial assets to FVPL |
In accordance with IFRS 9, the Group assessed and reclassified wealth management products issued by banks (“WMPs”) from available-for-sale financial assets to financial assets at FVPL (RMB65,630 million as of January 1, 2018). | (ii) | Equity investments previously classified as available-for-sale financial assets that are not held for trading |
For long-term investments, which are not held for trading and not expected to be sold in the short term, the Group elected to present in other comprehensive income for the changes in their fair value. As a result, RMB44 million were reclassified from available-for-sale financial assets to financial assets at FVOCI and accumulated fair value gains of RMB19 million were reclassified from the available-for-sale financial assets reserve to the FVOCI reserve on January 1, 2018, both of which are included in capital reserves. Impairment | (i) | Accounts receivable and contract assets |
Upon the adoption of the simplified expected credit loss model, the related retained profits were reduced by RMB165 million and the PRC statutory reserves were reduced by RMB6 million as of January 1, 2018. | (ii) | Other financial assets at amortized cost |
Other financial assets at amortized cost include cash and cash equivalents, bank deposits and other receivables, etc. They are considered to be of low credit risk and thus management considers that the expected credit loss is insignificant. Impact from the adoption of IFRS 9 by investments accounted for using the equity method Shanghai Pudong Development Bank Co., Ltd. (“SPD Bank”), a major associate of the Group has adopted IFRS 9 for the year beginning January 1, 2018 without restating the comparative figures in accordance with the transitional provisions stipulated in IFRS 9. Accordingly, the balance of investment accounted for using the equity method, the retained profits and PRC statutory reserves of the Group as of January 1, 2018 were reduced by RMB2,194 million, RMB2,194 million, and RMB548 million, respectively; while the other comprehensive income of the Group as of the same date was increased by RMB548 million. | (c) | IFRS 15 “Revenue from Contracts with Customers” |
The adoption of IFRS 15 from January 1, 2018 resulted in changes in accounting policies and adjustments to the amounts recognized in the financial statements. The new accounting policies are set out in note 2(r) above. | (i) | The impact on the Group’s equity |
Accounting for multiple performance obligations Prior to the adoption of IFRS 15, the consideration received from offerings which include the provision of services and sale of mobile handset, was allocated to each element using the residual method. Upon the adoption of IFRS 15, the total consideration from arrangement with multiple performance obligations, such as mobile services, telecommunication related products (such as handsets), customer point rewards and/or other promotional goods/services, is allocated to each performance obligation based on their relative stand-alone selling prices. In addition, prior to the adoption of IFRS 15, certain subsidies, payable to third party agents in respect of customer contracts obtained and ultimately enjoyed by end customers, were expensed as incurred. Upon the adoption of IFRS 15, such payments via the third party agents are qualified as consideration payable to a customer and accounted for as a reduction of the transaction price. To reflect these changes in policy, as of January 1, 2018, the Group recognized contract assets of RMB5,654 million, net of a related impairment provision amounting to RMB303 million, reduced its contract liabilities and receipts-in-advance by RMB1,167 million, respectively. Accordingly, the impact on the Group’s equity as of the same date were an increase of RMB4,188 million of retained profits, and an increase of RMB1,025 million of the PRC statutory reserves, respectively. | 3 | CHANGES IN ACCOUNTING POLICIES (CONTINUED) |
| (c) | IFRS 15 “Revenue from Contracts with Customers” (Continued) |
| (i) | The impact on the Group’s equity (Continued) |
Accounting for costs incurred to obtain a contract and to fulfil a contract Upon the adoption of IFRS 15, the Group recognizes contract costs for incremental commission expenses paid to the agents in conjunction with obtaining customer contracts, which were previously expensed as incurred. And such cost is amortized using the straight-line method over the expected duration of the customer contract. When the expected amortization period is one year or less, the Group utilizes the practical expedient and expenses the costs as incurred. Upon the adoption of IFRS 15, the Group recognized contract costs incurred to fulfil a contract for the costs directly related to the Group’s telecommunications service contracts and are not within the scope of another accounting standard, which were previously expensed as incurred. Such cost is amortized using the straight-line method over the expected duration of the customer contract. To reflect the above changes in policy, as of January 1, 2018, the Group recognized contract costs of RMB4,954 million. Accordingly, the impact on the Group’s equity as of the same date were an increase of RMB2,973 million of retained profits, and an increase of RMB710 million of the PRC statutory reserves, respectively. | (ii) | Summary of effects arising from initial application of IFRS 15 |
The following table shows the impact from the adoption of IFRS 15 relative to IAS 18 “Revenue” on certain impacted financial statement line items in the Group’s consolidated statements of comprehensive income for the year ended December 31, 2018 and consolidated balance sheets as of December 31, 2018. Line items that were not affected by the initial application have not been included. The impacted areas are consistent with those disclosed in note 3(c)(i). Consolidated Statements of Comprehensive Income(Extract) | | | | | | | | | | | | | | | | 2018 | | | | | As
reported | | | Adjustments | | | Amounts without adoption of IFRS 15 | | |
|
| | | Million | | | Million | | | Million | | Operating revenue | | | | | | | | | | | | | Revenue from telecommunications services | | | 670,907 | | | | 10,833 | | | | 681,740 | | Revenue from sales of products and others | | | 65,912 | | | | (5,821 | ) | | | 60,091 | | Operating expenses | | | | | | | | | | | | | Network operation and support expenses | | | 200,007 | | | | 86 | | | | 200,093 | | Selling expenses | | | 60,326 | | | | 6,048 | | | | 66,374 | | Cost of products sold | | | 66,231 | | | | 847 | | | | 67,078 | | Other operating expenses | | | 40,775 | | | | (32 | ) | | | 40,743 | |
Consolidated Balance Sheets (Extract) | | | | | | | | | | | | | | | | As of December 31, 2018 | | | | | As
reported | | | Adjustments | | | Balances without adoption of IFRS 15 | | |
|
| | | Million | | | Million | | | Million | | Assets | | | | | | | | | | | | | Non-current assets | | | | | | | | | | | | | Deferred tax assets | | | 29,654 | | | | 3,301 | | | | 32,955 | | Other non-current assets | | | 8,442 | | | | (8,442 | ) | | | — | | Current assets | | | | | | | | | | | | | Contract assets | | | 5,022 | | | | (5,022 | ) | | | — | | Equity and liabilities | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | Accrued expenses and other payables | | | 195,572 | | | | 68 | | | | 195,640 | | Deferred revenue | | | 63,185 | | | | 177 | | | | 63,362 | | Equity | | | | | | | | | | | | | Reserves | | | 650,275 | | | | (10,408 | ) | | | 639,867 | |
| 3 | CHANGES IN ACCOUNTING POLICIES (CONTINUED) |
The Group applied the IFRS 16 from its mandatory adoption date of January 1, 2019. The Group has applied the simplified transition approach and not restated comparative amounts for the year prior to first adoption, with the cumulative effect of initial adoption recognized as an adjustment to the opening balance sheets. As of January 1, 2019,right-of-use assets of the Group are measured on transition as if IFRS 16 have had always been applied. Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019, which was within the range between 3.5% and 4.0%. In applying IFRS 16, the Group has used the practical expedients permitted by the standard, including: applying a single discount rate to a portfolio of leases with reasonably similar characteristics; accounting for leases with a remaining lease term of less than 12 months as of January 1, 2019 in the same way as short-term leases; excluding initial direct costs for the measurement of theright-of-use asset at the date of initial application and using hindsight in determining the lease term where the contract contains options to extend or terminate the lease. The Group did not apply any other amendments, new standards or interpretationconsiders that is not yet effective for the current accounting year (see note 40).assets and liabilities arising from the lease are generated in a single transaction, therefore, the Group applies IAS 12 “Income Taxes” requirements to the leasing transaction as a whole. Temporary differences relating to right-of-use assets and lease liabilities are assessed on a net basis. | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | | | | | Revenue from telecommunications services | | | | | | | | | | | | | Voice services | | | 156,918 | | | | 209,949 | | | | 261,896 | | Data services | | | 493,350 | | | | 394,937 | | | | 303,425 | | Others | | | 18,083 | | | | 18,536 | | | | 18,768 | | | | | | | | | | | | | | | | | | | | | | 668,351 | | | | 623,422 | | | | 584,089 | | | | | | Revenue from sales of products and others | | | 72,163 | | | | 84,999 | | | | 84,246 | | | | | | | | | | | | | | | | | | | | | | 740,514 | | | | 708,421 | | | | 668,335 | | | | | | | | | | | | | | |
5 | EMPLOYEE BENEFIT AND RELATED EXPENSES(ii) | The reconciliation between the operating lease commitments disclosed as of December 31, 2018 and the lease liabilities recognized as of January 1, 2019 is as follows: |
| | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | | | | | Salaries, wages, labor service expenses and other benefits | | | 74,427 | | | | 69,546 | | | | 67,622 | | Retirement costs: contributions to defined contribution retirement plans | | | 11,086 | | | | 9,917 | | | | 7,183 | | | | | | | | | | | | | | | | | | | | | | 85,513 | | | 79,463 | | | 74,805 | | | | | | | | | | | | | | |
6 | | | | | | | | | | | Note | | | Million | | Operating lease commitments disclosed as of December 31, 2018 | | | | | | | 220,301 | | Discounted using the lessee’s incremental borrowing rate at the date of initial application | | | | | | | 202,651 | | Less: Short-term leases andOTHER OPERATING EXPENSESlow-value leases recognized on a straight-line basis as expense | | | | | | | (5,827 | ) | Contracts reassessed as service arrangement | | | (i) | | | | (90,520 | ) | Variable lease payments not recognized as lease liabilities | | | (ii) | | | | (26,097 | ) | | | | | | | | | | Lease liabilities recognized as of January 1, 2019 | | | | | | | 80,207 | | | | | | | | | | | Of which: | | | | | | | | | Current portion | | | | | | | 19,917 | | Non-current portion | | | | | | | 60,290 | |
Notes: | (i) | Contracts reassessed as service arrangement primarily comprise non-lease component of lease contracts of telecommunications towers and related assets, lines and network assets, etc.. |
| (ii) | Variable lease payments not recognized as lease liabilities primarily comprise variable lease payments not based on an index or a rate of lease contracts of telecommunications towers and related assets. |
| | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Note | | | Million | | | Million | | | Million | | | | | | | Maintenance | | | | | | | 55,737 | | | | 53,852 | | | | 53,991 | | Impairment loss of doubtful accounts | | | | | | | 3,392 | | | | 3,734 | | | | 4,839 | | Write-down of inventories | | | | | | | 297 | | | | 282 | | | | 272 | | Amortization of other intangible assets | | | | | | | 515 | | | | 499 | | | | 274 | | Operating lease charges | | | | | | | | | | | | | | | | | - land and buildings | | | | | | | 11,453 | | | | 11,628 | | | | 13,447 | | - others | | | (i) | | | | 3,698 | | | | 4,248 | | | | 6,186 | | Loss/(gain) on disposal of property, plant and equipment | | | | | | | 8 | | | | (180 | ) | | | (4 | ) | Write-off and impairment of property, plant and equipment (note 14) | | | | | | | 12,593 | | | | 7,216 | | | | 7,614 | | Power and utilities expenses | | | | | | | 30,518 | | | | 29,461 | | | | 27,134 | | Operation support and research and development expenses | | | (ii) | | | | 38,016 | | | | 32,296 | | | | 27,209 | | Auditors’ remuneration | | | | | | | | | | | | | | | | | - audit services | | | (iii) | | | | 107 | | | | 103 | | | | 97 | | - tax services | | | | | | | 3 | | | | 1 | | | | 1 | | - other services | | | | | | | 12 | | | | 9 | | | | 4 | | Others | | | (iv) | | | | 25,894 | | | | 23,924 | | | | 21,229 | | | | | | | | | | | | | | | | | | | | | | | | | | 182,243 | | | | 167,073 | | | | 162,293 | | | | | | | | | | | | | | | | | | |
| 3 | CHANGES IN ACCOUNTING POLICIES (CONTINUED) |
| (d) | IFRS 16 “Leases” (Continued) |
| (iii) | Summary of effects arising from initial application of IFRS 16 |
The following table shows the impact from the adoption of IFRS 16 on certain impacted financial statement line items in the Group’s consolidated balance sheets as of December 31, 2018. Line items that were not affected by the changes have not been included. Consolidated Balance Sheets (Extracted) | | | | | | | | | | | | | | | | December 31, | | | Changes
in | | | | | | | | 2018 | | | accounting | | | January 1, | | | | | (As previously | | | policy | | | 2019 | | | | | reported) | | | – IFRS 16 | | | (As restated) | | | | | Million | | | Million | | | Million | | Assets | | | | | | | | | | | | | Non-current assets | | | | | | | | | | | | | Right-of-use assets | | | — | | | | 84,289 | | | | 84,289 | | Land use rights and others | | | 27,778 | | | | (4,665 | ) | | | 23,113 | | Investments accounted for using the equity method | | | 145,325 | | | | (1,216 | ) | | | 144,109 | | Deferred tax assets | | | 29,654 | | | | 488 | | | | 30,142 | | | | | | | | | | | | | | | Current assets | | | | | | | | | | | | | Prepayments and other current assets | | | 27,002 | | | | (1,811 | ) | | | 25,191 | | | | | | | | | | | | | | | Equity and liabilities | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | Lease liabilities | | | — | | | | 19,917 | | | | 19,917 | | | | | | | | | | | | | | | Non-current liabilities | | | | | | | | | | | | | Lease liabilities –non-current | | | — | | | | 60,290 | | | | 60,290 | | Deferred tax liabilities | | | 822 | | | | (16 | ) | | | 806 | | Equity | | | | | | | | | | | | | Reserves | | | 650,275 | | | | (3,106 | ) | | | 647,169 | |
| 3 | CHANGES IN ACCOUNTING POLICIES (CONTINUED) |
| (d) | IFRS 16 “Leases”(Continued) |
| (iii) | Summary of effects arising from initial application of IFRS 16 (Continued) |
To ensure the consistency of the accounting policies adopted by the Group and its associates and joint ventures, the opening balance of investment accounted for using the equity method, the opening retained profits and PRC statutory reserves of the Group as of January 1, 2019 were reduced by RMB1,216 million, RMB1,202 million and RMB14 million, respectively upon the adoption of IFRS 16, which were included in the table above. | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Revenue from telecommunications services | | | | | | | | | | | | | Voice services | | | 88,624 | | | | 108,083 | | | | 156,918 | | Data services | | | | | | | | | | | | | -SMS & MMS | | | 28,648 | | | | 28,800 | | | | 28,058 | | -Wireless data traffic | | | 384,999 | | | | 383,297 | | | | 364,906 | | -Wireline broadband | | | 68,835 | | | | 54,285 | | | | 39,731 | | -Applications and information services | | | 82,543 | | | | 75,701 | | | | 60,655 | | Others | | | 20,743 | | | | 20,741 | | | | 18,083 | | | | | | | | | | | | | | | | | | 674,392 | | | | 670,907 | | | | 668,351 | | Revenue from sales of products and others | | | 71,525 | | | | 65,912 | | | | 72,163 | | | | | | | | | | | | | | | | | | 745,917 | | | | 736,819 | | | | 740,514 | | | | | | | | | | | | | | |
The majority of the Group’s operating revenue is from contracts with customers, the remaining is not material. | 4 | OPERATING REVENUE (CONTINUED) |
| (a) | Assets related to contracts with customers |
The Group has recognized the following assets related to contract with customers: | | | | | | | | | | | | | | | | | | | As of | | | As of | | | | | Note | | | December 31, 2019 | | | December 31, 2018 | | | | | | | | Million | | | Million | | Contract assets | | | (i | ) | | | 6,567 | | | | 6,489 | | Less: current portion | | | | | | | (5,003 | ) | | | (5,022 | ) | | | | | | | | | | | | | | Non-current portion recorded in othernon-current assets | | | | | | | 1,564 | | | | 1,467 | | Contract costs recorded in othernon-current assets | | | (ii | ) | | | 15,987 | | | | 6,975 | | | | | | | | | | | | | | | Othernon-current assets | | | | | | | 17,551 | | | | 8,442 | | | | | | | | | | | | | | |
Note: | | (i) | Other operating lease charges represent the operating lease charges for motor vehicles, computer and other office equipment.Changes in contract assets: |
| | | | | | | | | | | | Contract assets | | | | | Gross amount | | | Loss allowance | | | | | Million | | | Million | | As of January 1, 2019 | | | 6,831 | | | | (342 | ) | Increase resulting from satisfaction of performance obligation | | | 6,886 | | | | — | | Reclassified to accounts receivable | | | (6,834 | ) | | | — | | Net impairment loss of contract assets | | | — | | | | 26 | | | | | | | | | | | As of December 31, 2019 | | | 6,883 | | | | (316 | ) | | | | | | | | | |
| | (ii) | OperationChanges in contract costs |
| | | | | | | | | | | | Contract costs | | | | | 2019 | | | 2018 | | | | | Million | | | Million | | As of January 1 | | | 6,975 | | | | 4,954 | | Addition | | | 24,149 | | | | 9,711 | | Amortization for the year | | | (15,137 | ) | | | (7,690 | ) | | | | | | | | | | As of December 31 | | | 15,987 | | | | 6,975 | | | | | | | | | | |
| 4 | OPERATING REVENUE (CONTINUED) |
| (a) | Assets related to contracts with customers (Continued) |
Note (Continued): | (ii) | Changes in contract costs (Continued) |
Contract costs primarily include sales commissions payable to third party agents and costs related to connecting a customer to the Group’s network for the provision of telecommunications services. The increase of contract costs was mainly due to the Group’s continuing investment in the industrial informatization and household market. | (b) | Details of contract liabilities |
Contract liabilities are presented in deferred revenue in the consolidated balance sheets. Changes in contract liabilities are as follows: | | | | | | | | | | | | Contract liabilities | | | | | 2019 | | | 2018 | | | | | Million | | | Million | | As of January 1 | | | 62,812 | | | | 81,147 | | Opening balance recognized in the consolidated statement of comprehensive income for the year | | | (56,409 | ) | | | (66,370 | ) | Other changes for the year | | | 51,028 | | | | 48,035 | | | | | | | | | | | As of December 31 | | | 57,431 | | | | 62,812 | | | | | | | | | | |
| 4 | OPERATING REVENUE (CONTINUED) |
| (c) | Unsatisfied long-term contracts |
The unsatisfied performance obligation of the Group is mainly relating to telecommunications services. The Group generally enters into service contracts with customers monthly or for a fixed term, and bills the customers on monthly basis based on the contract terms for the Group’s unconditional right to consideration. For the contracts that have an original expected duration of one year or less and the performance obligations which are regarded as satisfied as billed, the Group has applied the practical expedient permitted under IFRS 15, therefore, the information about the remaining performance obligations were not disclosed. | 5 | NETWORK OPERATION AND SUPPORT EXPENSES |
For the year ended December 31, 2019, to better reflect the cost structure, the Group optimized the presentation of operating expenses. The changes in presentation have no effect on reported operating revenue, operating expenses or net profits for any of the years/periods presented. The comparative figures have been reclassified to conform to current year’s presentation. The new presentation classifies operating expenses into network operation and support expenses, depreciation and amortization, employee benefit and related expenses, selling expenses, cost of products sold and other operating expenses. Details of network operation and support expenses are as follows: | | | | | | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Note | | | Million | | | Million | | | Million | | Maintenance | | | | | | | 53,216 | | | | 54,569 | | | | 55,737 | | Power and utilities expenses | | | | | | | 32,837 | | | | 32,032 | | | | 30,518 | | Operation support and related expenses | | | | | | | 39,764 | | | | 41,087 | | | | 36,612 | | Charges for use of tower assets | | | (i | ) | | | 25,518 | | | | 38,981 | | | | 36,946 | | Charges for use of lines and network assets | | | (ii | ) | | | 7,715 | | | | 8,489 | | | | 9,390 | | Charges for use of other assets | | | (ii | ) | | | 7,492 | | | | 16,102 | | | | 15,151 | | Others | | | | | | | 9,268 | | | | 8,747 | | | | 7,986 | | | | | | | | | | | | | | | | | | | | | | | | | | 175,810 | | | | 200,007 | | | | 192,340 | | | | | | | | | | | | | | | | | | |
Note: | (i) | For the year ended December 31, 2019, charges for use of tower assets included the non-lease component charges (maintenance, utility connection and telecommunications equipment room and related support services) and researchthe lease component charges of variable lease payments not based on an index or a rate, which are recorded in profit or loss as incurred. |
| (ii) | For the year ended December 31, 2019, charges for use of lines and development expenses mainly include support expenses for new business operation, research and development cost for new technology evolution, amortization of testing equipment,network assets and other related costs.assets mainly included thenon-lease components charges and the lease components charges, such as short-term leases payments, leases payments oflow-value assets and variable leases payments not based on an index or a rate, which are recorded in profit or loss as incurred. |
| | (iii) | For the year ended December 31, 2019, short-term leases payments and leases payments of low-value assets amounted to RMB6,757 million, and variable leases payments not based on an index or a rate, which are recorded in profit or loss as incurred, amounted to RMB8,186 million. |
| 6 | EMPLOYEE BENEFIT AND RELATED EXPENSES |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Salaries, wages, labor service expenses and other benefits | | | 86,610 | | | | 81,843 | | | | 74,427 | | Retirement costs: contributions to defined contribution retirement plans | | | 15,908 | | | | 12,096 | | | | 11,086 | | | | | | | | | | | | | | | | | | 102,518 | | | | 93,939 | | | | 85,513 | | | | | | | | | | | | | | |
| 7 | OTHER OPERATING EXPENSES |
| | | | | | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | | | | | | | (Note 5) | | | (Note 5) | | | | | Note | | | Million | | | Million | | | Million | | Interconnection | | | | | | | 21,037 | | | | 20,692 | | | | 21,762 | | Credit impairment losses | | | | | | | 5,761 | | | | 4,635 | | | | 3,392 | | Write-down of inventories | | | | | | | 171 | | | | 155 | | | | 297 | | (Gain)/loss on disposal of property, plant and equipment | | | | | | | (64 | ) | | | 8 | | | | 8 | | Write-off and impairment of property, plant and equipment | | | | | | | 2,975 | | | | 1,250 | | | | 12,593 | | Auditors’ remuneration | | | | | | | | | | | | | | | | | - audit services | | | (i | ) | | | 111 | | | | 108 | | | | 107 | | - tax services | | | | | | | 2 | | | | 3 | | | | 3 | | - other services | | | | | | | 10 | | | | 6 | | | | 12 | | Others | | | (ii | ) | | | 16,241 | | | | 13,918 | | | | 19,312 | | | | | | | | | | | | | | | | | | | | | | | | | | 46,244 | | | | 40,775 | | | | 57,486 | | | | | | | | | | | | | | | | | | |
Note: | (i) | Audit services include reporting on the Group’s internal controlcontrols over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of the United States of America with theat a service fee amount of RMB22,000,000 (2016: RMB22,000,000; 2015: RMB20,000,000)RMB22 million (2018: RMB22 million; 2017: RMB22 million). |
| | (iv)(ii) | Others consist of administrative expenses, property management expenses, taxes and surcharges, and other miscellaneous expenses. |
7 | PROCEEDS RECEIVABLE FOR THE TRANSFER OF TOWER ASSETS |
On October 14, 2015, China Mobile Communication Co., Ltd. (“CMC”), a wholly-owned subsidiary of the Company, jointly with China United Network Communications Corporation Limited (“China Unicom”), China Telecom Corporation Limited (“China Telecom”), and China Reform Holdings Corporation Ltd. (“CRHC”), entered into an agreement with China Tower Corporation Limited (“China Tower”), pursuant to which China Tower (i) purchased telecommunications towers and related assets (“Tower Assets”) from CMC, China Unicom and China Telecom and (ii) issued new equity shares to CRHC. The consideration of Tower Assets was determined based on the appraised value and subject to adjustment in accordance with the terms of the transaction agreement by each party as of the date of delivery. China Tower agreed to settle the consideration by way of issuing its equity shares to each party, plus cash consideration equalling to the excess of total consideration over the amount settled by equity shares. Upon completion of the above transactions, China Tower would be owned by CMC, China Unicom, China Telecom and CRHC with their respective shares of equity interests of 38.0%, 28.1%, 27.9% and 6.0%.
On October 31, 2015, CMC completed the transfer of Tower Assets to China Tower. In return, China Tower issued equity shares to CMC and shall pay CMC the remaining cash consideration. The first payment of RMB5,000,000,000 has been made in February 2016 and the remaining balance of cash consideration was settled in December 2017.
The gain arising from the transfer of CMC’s Tower Assets, which has eliminated unrealized profits due to the Group’s interest in China Tower, is recorded as “Gain on the transfer of Tower Assets” in the consolidated statements of comprehensive income for the year ended December 31, 2015.
| | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | | | | | Penalty and compensation income | | | 1,118 | | | | 764 | | | | 658 | | Dividend income from unlisted securities | | | — | | | | — | | | | 11 | | Others | | | 1,271 | | | | 1,204 | | | | 1,131 | | | | | | | | | | | | | | | | | | | | | | 2,389 | | | | 1,968 | | | | 1,800 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Compensation income | | | 915 | | | | 1,184 | | | | 1,118 | | Others | | | 3,114 | | | | 1,722 | | | | 1,271 | | | | | | | | | | | | | | | | | | 4,029 | | | | 2,906 | | | | 2,389 | | | | | | | | | | | �� | | | |
| 9 | FINANCE COSTSINTEREST AND OTHER INCOME |
| | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | | | | | Interest on bonds | | | 187 | | | | 228 | | | | 257 | | Interest on bank deposits received and entrusted loans (note 35(a)) | | | 21 | | | | 7 | | | | 194 | | Others | | | 2 | | | | — | | | | 4 | | | | | | | | | | | | | | | | | | | | | | 210 | | | | 235 | | | | 455 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Interest income | | | 10,065 | | | | 11,443 | | | | 12,884 | | Fair value gains recognized, net | | | 5,495 | | | | 4,442 | | | | 2,999 | | | | | | | | | | | | | | | | | | 15,560 | | | | 15,885 | | | | 15,883 | | | | | | | | | | | | | | |
| 10 | DIRECTORS’ REMUNERATIONFINANCE COSTS |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Interest for lease liabilities | | | 3,052 | | | | — | | | | — | | Interest on short-term deposits received (note 35(a)) | | | 187 | | | | 142 | | | | 21 | | Interest on bonds | | | — | | | | — | | | | 187 | | Others | | | 7 | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | 3,246 | | | | 144 | | | | 210 | | | | | | | | | | | | | | |
| 11 | DIRECTORS’ AND SENIOR MANAGEMENT’S REMUNERATION |
Directors’ remuneration during 2019 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Contributions | | | | | | | | | | | | | | relating to | | | | | | | | | | | Salaries, | | | social insurance, | | | | | | | | Directors’ | | | allowances | | | housing fund and | | | 2019 | | | | | fees | | | and bonuses | | | retirement scheme | | | Total | | | | | ’000 | | | ’000 | | | ’000 | | | ’000 | | Executive directors (Expressed in RMB) | | | | | | | | | | | | | | | | | YANG Jie1 | | | — | | | | 461 | | | | 169 | | | | 630 | | SHANG Bing2 | | | — | | | | 1,354 | | | | 89 | | | | 1,443 | | LI Yue3 | | | — | | | | 1,585 | | | | 187 | | | | 1,772 | | Wang Yuhang4 | | | — | | | | 415 | | | | 163 | | | | 578 | | DONG Xin5 | | | — | | | | 1,469 | | | | 195 | | | | 1,664 | | | | | | | | | | | | | | | | | | | | | | — | | | | 5,284 | | | | 803 | | | | 6,087 | | | | | | | | | | | | | | | | | | | Independentnon-executive directors (Expressed in Hong Kong dollar) | | | | | | | | | | | | | | | | | CHENG Mo Chi, Moses | | | 460 | | | | — | | | | — | | | | 460 | | CHOW Man Yiu, Paul | | | 455 | | | | — | | | | — | | | | 455 | | YIU Kin Wah, Stephen* | | | 470 | | | | — | | | | — | | | | 470 | | YANG Qiang** | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | 1,385 | | | | — | | | | — | | | | 1,385 | | | | | | | | | | | | | | | | | | |
Directors’ remuneration during 2018 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Contributions | | | | | | | | | | | | | | relating to | | | | | | | | | | | Salaries, | | | social insurance, | | | | | | | | Directors’ | | | allowances | | | housing fund and | | | 2018 | | | | | fees | | | and bonuses | | | retirement scheme | | | Total | | | | | ’000 | | | ’000 | | | ’000 | | | ’000 | | Executive directors (Expressed in RMB) | | | | | | | | | | | | | | | | | YANG Jie1 | | | — | | | | — | | | | — | | | | — | | SHANG Bing2 | | | — | | | | 867 | | | | 134 | | | | 1,001 | | LI Yue3 | | | — | | | | 1,000 | | | | 163 | | | | 1,163 | | SHA Yuejia6 | | | — | | | | 745 | | | | 104 | | | | 849 | | DONG Xin5 | | | — | | | | 890 | | | | 157 | | | | 1,047 | | | | | | | | | | | | | | | | | | | | | | — | | | | 3,502 | | | | 558 | | | | 4,060 | | | | | | | | | | | | | | | | | | | Independentnon-executive directors (Expressed in Hong Kong dollar) | | | | | | | | | | | | | | | | | WONG Kwong Shing, Frank*** | | | 177 | | | | — | | | | — | | | | 177 | | CHENG Mo Chi, Moses | | | 460 | | | | — | | | | — | | | | 460 | | CHOW Man Yiu, Paul | | | 455 | | | | — | | | | — | | | | 455 | | YIU Kin Wah, Stephen* | | | 417 | | | | — | | | | — | | | | 417 | | YANG Qiang** | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | 1,509 | | | | — | | | | — | | | | 1,509 | | | | | | | | | | | | | | | | | | |
| 11 | DIRECTORS’ AND SENIOR MANAGEMENT’S REMUNERATION (CONTINUED) |
Directors’ remuneration during 2017 is as follows: | | | | | | | | | | | | | | | | | | | | Directors’
fees | | | Salaries,
allowances
and bonuses | | | Contributions
relating to
social insurance,
housing fund
and retirement
scheme | | | 2017
Total | | | | | ’000 | | | ’000 | | | ’000 | | | ’000 | | | | | | | Executive directors (Expressed in RMB) | | | | | | | | | | | | | | | | | | | | | | SHANG Bing | | | — | | | | 781 | | | | 123 | | | | 904 | | LI Yue (Chief Executive Officer) | | | — | | | | 781 | | | | 151 | | | | 932 | | LIU Aili* | | | — | | | | 592 | | | | 110 | | | | 702 | | SHA Yuejia | | | — | | | | 702 | | | | 148 | | | | 850 | | DONG Xin** | | | — | | | | 695 | | | | 145 | | | | 840 | | | | | | | | | | | | | | | | | | | | | | — | | | | 3,551 | | | | 677 | | | | 4,228 | | | | | | | | | | | | | | | | | | | | | | | | Independent non-executive directors (Expressed in Hong Kong
dollar) | | | | | | | | | | | | | | | | | | | | | | WONG Kwong Shing, Frank | | | 470 | | | | — | | | | — | | | | 470 | | CHENG Mo Chi, Moses | | | 460 | | | | — | | | | — | | | | 460 | | CHOW Man Yiu, Paul | | | 455 | | | | — | | | | — | | | | 455 | | YIU Kin Wah, Stephen*** | | | 255 | | | | — | | | | — | | | | 255 | | | | | | | | | | | | | | | | | | | | | | 1,640 | | | | — | | | | — | | | | 1,640 | | | | | | | | | | | | | | | | | | |
10 | DIRECTORS’ REMUNERATION (CONTINUED) |
Directors’ remuneration during 2016 is as follows:
| | | | | | | | | | | | | | | | | | �� | | Directors’
fees | | | Salaries,
allowances
and bonuses | | | Contributions
relating to
social insurance,
housing fund
and retirement
scheme | | | 2016
Total | | | | | ’000 | | | ’000 | | | ’000 | | | ’000 | | | | | | | Executive directors (Expressed in RMB) | | | | | | | | | | | | | | | | | | | | | | SHANG Bing# | | | — | | | | 498 | | | | 122 | | | | 620 | | LI Yue (Chief Executive Officer) | | | — | | | | 717 | | | | 147 | | | | 864 | | LIU Aili | | | — | | | | 662 | | | | 141 | | | | 803 | | XUE Taohai## | | | — | | | | 646 | | | | 143 | | | | 789 | | SHA Yuejia | | | — | | | | 662 | | | | 141 | | | | 803 | | | | | | | | | | | | | | | | | | | | | | — | | | | 3,185 | | | | 694 | | | | 3,879 | | | | | | | | | | | | | | | | | | | | | | | | Independent non-executive directors (Expressed in Hong Kong
dollar) | | | | | | | | | | | | | | | | | | | | | | LO Ka Shui### | | | 130 | | | | — | | | | — | | | | 130 | | WONG Kwong Shing, Frank | | | 470 | | | | — | | | | — | | | | 470 | | CHENG Mo Chi, Moses | | | 452 | | | | — | | | | — | | | | 452 | | CHOW Man Yiu, Paul | | | 405 | | | | — | | | | — | | | | 405 | | | | | | | | | | | | | | | | | | | | | | 1,457 | | | | — | | | | — | | | | 1,457 | | | | | | | | | | | | | | | | | | |
Directors’ remuneration during 2015 is as follows:
| | | | | | | | | | | | | | | | | | | | Directors’
fees | | | Salaries,
allowances
and bonuses | | | Contributions
relating to
social insurance,
housing fund
and retirement
scheme | | | 2015
Total | | | | | ’000 | | | ’000 | | | ’000 | | | ’000 | | | | | | | Executive directors (Expressed in RMB) | | | | | | | | | | | | | | | | | | | | | | SHANG Bing1 | | | — | | | | 107 | | | | 30 | | | | 137 | | XI Guohua2 | | | — | | | | 377 | | | | 113 | | | | 490 | | LI Yue (Chief Executive Officer) | | | — | | | | 437 | | | | 138 | | | | 575 | | LIU Aili | | | — | | | | 365 | | | | 133 | | | | 498 | | XUE Taohai | | | — | | | | 387 | | | | 135 | | | | 522 | | HUANG Wenlin3 | | | — | | | | 139 | | | | 21 | | | | 160 | | SHA Yuejia | | | — | | | | 365 | | | | 133 | | | | 498 | | | | | | | | | | | | | | | | | | | | | | — | | | | 2,177 | | | | 703 | | | | 2,880 | | | | | | | | | | | | | | | | | | | | | | | | Independent non-executive directors (Expressed in Hong Kong
dollar) | | | | | | | | | | | | | | | | | | | | | | LO Ka Shui | | | 325 | | | | — | | | | — | | | | 325 | | WONG Kwong Shing, Frank | | | 470 | | | | — | | | | — | | | | 470 | | CHENG Mo Chi, Moses | | | 440 | | | | — | | | | — | | | | 440 | | CHOW Man Yiu, Paul | | | 330 | | | | — | | | | — | | | | 330 | | | | | | | | | | | | | | | | | | | | | | 1,565 | | | | — | | | | — | | | | 1,565 | | | | | | | | | | | | | | | | | | |
10 | DIRECTORS’ REMUNERATION (CONTINUED) |
| | | | | | | | | | | | | | | | | | | | | | | | | | Contributions | | | | | | | | | | | | | | relating to | | | | | | | | | | | Salaries, | | | social insurance, | | | | | | | | Directors’ | | | allowances | | | housing fund and | | | 2017 | | | | | fees | | | and bonuses | | | retirement scheme | | | Total | | | | | ’000 | | | ’000 | | | ’000 | | | ’000 | | Executive directors (Expressed in RMB) | | | | | | | | | | | | | | | | | SHANG Bing2 | | | — | | | | 781 | | | | 123 | | | | 904 | | LI Yue (Chief Executive Officer)3 | | | — | | | | 781 | | | | 151 | | | | 932 | | LIU Aili7 | | | — | | | | 592 | | | | 110 | | | | 702 | | SHA Yuejia6 | | | — | | | | 702 | | | | 148 | | | | 850 | | DONG Xin5 | | | — | | | | 695 | | | | 145 | | | | 840 | | | | | | | | | | | | | | | | | | | | | | — | | | | 3,551 | | | | 677 | | | | 4,228 | | | | | | | | | | | | | | | | | | | Independentnon-executive directors (Expressed in Hong Kong dollar) | | | | | | | | | | | | | | | | | WONG Kwong Shing, Frank*** | | | 470 | | | | — | | | | — | | | | 470 | | CHENG Mo Chi, Moses | | | 460 | | | | — | | | | — | | | | 460 | | CHOW Man Yiu, Paul | | | 455 | | | | — | | | | — | | | | 455 | | YIU Kin Wah, Stephen* | | | 255 | | | | — | | | | — | | | | 255 | | | | | | | | | | | | | | | | | | | | | | 1,640 | | | | — | | | | — | | | | 1,640 | | | | | | | | | | | | | | | | | | |
| | *1 | Mr. LIU AiliYANG Jie was appointed as an executive director and the chairman of the Company with effect from March 21, 2019. |
| 2 | Mr. SHANG Bing resigned from thehis position as an executive director and the chairman of the Company with effect from March 4, 2019. |
| 3 | Mr. LI Yue resigned from his position as an executive director and chief executive officer of the Company with effect from October 11, 2019. |
| 4 | Mr. WANG Yuhang was appointed as an executive director of the Company with effect from September 29, 2017.October 24, 2019. |
| | **5 | Mr. DONG Xin was appointed as an executive director of the Company with effect from March 23, 2017. |
| 6 | Mr. SHA Yuejia resigned from his position as executive director of the Company with effect from May 17, 2018. |
| 7 | Mr. LIU Aili resigned from his position as executive director of the Company with effect from September 29, 2017. |
| 11 | DIRECTORS’ AND SENIOR MANAGEMENT’S REMUNERATION (CONTINUED) |
| | *** | Mr. Stephen YIU Kin Wah was appointed as an independentnon-executive director of the Company with effect from March 23, 2017. |
| | #** | The unpaid portionDr. YANG Qiang was appointed as an independentnon-executive director and a member of executive directors’ performance related bonuses for 2015 was included in executive directors’ salaries, allowances and bonuses in 2016. Mr. SHANG Bing has been serving the Company since September 2015.
|
| ## | Mr. XUE Taohai resigned from the position as executive directoraudit committee of the Company with effect from March 23, 2017.May 17, 2018 and he voluntarily waived his director’s fees.
|
| | ###*** | Mr. LO Ka ShuiFrank WONG Kwong Shing resigned from the position asrole of independentnon-executive director of the Company with effect from May 26, 2016. |
| 1 | Mr. SHANG Bing was appointed as an executive director and chairman of the Company with effect from September 10, 2015.
|
| 2 | Mr. XI Guohua resigned from the position as executive director and chairman of the Company with effect from August 24, 2015.
|
| 3 | Madam HUANG Wenlin resigned from the position as executive director of the Company with effect from March 19, 2015.17, 2018.
|
In 2015, 20162017, 2018 and 2017,2019, executive directors of the Company voluntarily waived their directors’ fees. The unpaid portion of executive directors’ performance related bonuses for 20172019 will be determined based on the evaluation conducted in 2018,2020, and the additional bonuses related to their term of service will be determined based on the evaluation conducted upon the completion of three-year evaluation period. Directors’ remuneration paid during 2019 included directors’ performance related bonuses and additional bonuses related to their term of service for previous years determined and paid during the year. The Company’s senior management’s remuneration level during 2019, including basic remuneration for the year, performance related bonuses for prior year and additional bonuses related to their three-year term of service, was within the range between RMB1,500,000 to RMB2,000,000. 1112 | INDIVIDUALS WITH HIGHEST EMOLUMENTS |
For the year ended December 31, 2017, 2018 and 2019, none of the five individuals with the highest emoluments in the Group are directors or senior management. The emoluments payable to the five individuals with highest emoluments during 2015, 20162017, 2018 and 20172019 are as follows: | | | | 2017 | | | 2016 | | | 2015 | | | | | | | | | | | ’000 | | | ’000 | | | ’000 | | | 2019 | | | 2018 | | | 2017 | | | | | ’000 | | | ’000 | | | ’000 | | Salaries, allowances and benefits in kind | | | 5,259 | | | | 5,602 | | | | 8,135 | | | | 6,592 | | | | 6,579 | | | | 5,259 | | Performance related bonuses | | | 4,014 | | | | 2,029 | | | | 1,814 | | | | 4,314 | | | | 4,208 | | | | 4,014 | | Retirement scheme contributions | | | 158 | | | | 157 | | | | 148 | | | | 187 | | | | 156 | | | | 158 | | | | | | | | | | | | | | | | | | | | | | | | 9,431 | | | | 7,788 | | | | 10,097 | | | 11,093 | | | 10,943 | | | 9,431 | | | | | | | | | | | | | | | | | | | | |
The emoluments fell within the following bands: | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Number of
individuals | | | Number of
individuals | | | Number of
individuals | | | | | | Emolument bands | | | | | | | | | | | | | 1,500,001 - 2,000,000 | | | 3 | | | | 5 | | | | 4 | | 2,000,001 - 2,500,000 | | | 2 | | | | — | | | | 1 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Number of individuals | | | Number of individuals | | | Number of individuals | | Emolument bands | | | | | | | | | | | | | 1,500,001—2,000,000 | | | — | | | | — | | | | 3 | | 2,000,001—2,500,000 | | | 5 | | | | 5 | | | | 2 | | | | | | | | | | | | | | |
| | (a) | Taxation in the consolidated statements of comprehensive income represents: |
| | | | | | | 2017 | | | 2016 | | | 2015 | | | | | | | | | | | | | Note | | | Million | | | Million | | | Million | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Note | | | Million | | | Million | | | Million | | Current tax | | | | | | | | | | | | | | | | | Provision for the PRC enterprise income tax on the estimated taxable profits for the year | | | | (i) | | | | 36,989 | | | | 34,395 | | | | 36,945 | | Provision for Hong Kong profits tax on the estimated assessable profits for the year | | | (i | ) | | | 260 | | | | 193 | | | | 164 | | | | (ii) | | | | 269 | | | | 275 | | | | 260 | | Provision for the PRC enterprise income tax on the estimated taxable profits for the year | | | (ii | ) | | | 36,945 | | | | 39,709 | | | | 39,588 | | | | | | | | | | | | | | | | | | | | | | 37,258 | | | | 34,670 | | | | 37,205 | | Deferred tax | | | | | | | | | | Origination and reversal of temporary differences, net (note 22) | | | | | | (1,916 | ) | | | 1,274 | | | | (3,482 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 37,205 | | | | 39,902 | | | | 39,752 | | | | | | 35,342 | | | | 35,944 | | | | 33,723 | | | | | | | | | | | | | | | Deferred tax | | | | | | | | | | | Origination and reversal of temporary differences (note 20) | | | (iii | ) | | | (3,482 | ) | | | (4,279 | ) | | | (4,673 | ) | | | | | | | | | | | | | | | | | | | | | 33,723 | | | | 35,623 | | | | 35,079 | | | | | | | | | | | | | | | |
Note: | | (i) | The provision for Hong Kong profits tax is calculated at 16.5% (2016: 16.5%; 2015: 16.5%) of the estimated assessable profits for the year ended December 31, 2017. |
| (ii) | The provision for the PRC enterprise income tax is based on the statutory tax rate of 25% (2016:(2018: 25%; 2015:2017: 25%) on the estimated taxable profits determined in accordance with the relevant income tax rules and regulations of the PRC for the year ended December 31, 2017.2019. Certain subsidiaries of the Company enjoy the preferential tax rate of 15% (2016:(2018: 15%; 2015:2017: 15%). |
| (ii) | The provision for Hong Kong profits tax is calculated at 16.5% (2018: 16.5%; 2017: 16.5%) of the estimated assessable profits for the year ended December 31, 2019. |
| | (iii) | Deferred taxes of the Group are recognized based on tax rates that are expectedPursuant to apply to the periods when the temporary differences are realized or settled. |
| (iv) | On April 22, 2009, SAT issued the “Notice regarding Matters on Determination of Tax Residence Status of Chinese-controlled Offshore Incorporated Enterprises under Rules of Effective Management” issued by SAT in 2009 (“2009 Notice”). The, the Company is qualified as a PRC offshore-registered resident enterprise for purposes of the 2009 Notice. In accordance with the 2009 Notice and the PRC enterprise income tax law,enterprise. Accordingly, the dividend income of the Company from its subsidiaries in the PRC is exempted from PRC enterprise income tax. |
| | (b) | Reconciliation between income tax expense and accounting profit at applicable tax rates: |
| | | | 2017 | | | 2016 | | | 2015 | | | | | | | | | | | Million | | | Million | | | Million | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Profit before taxation | | | 148,137 | | | | 144,462 | | | | 143,734 | | | | 142,133 | | | | 153,895 | | | | 148,137 | | | | | | | | | | | | | | | | | | | | | Notional tax on profit before tax, calculated at the PRC’s statutory tax rate of 25% (Note) | | | 37,034 | | | | 36,116 | | | | 35,934 | | | | 35,533 | | | | 38,474 | | | | 37,034 | | Tax effect ofnon-taxable items | | | | | | | | | | | | | - Share of profit of investments accounted for using the equity method | | | (2,487 | ) | | | (2,159 | ) | | | (2,023 | ) | | - Interest income | | | (41 | ) | | | (22 | ) | | | (31 | ) | | – Income from investments accounted for using the equity method | | | | (3,160 | ) | | | (3,465 | ) | | | (2,487 | ) | – Interest and other income | | | | (75 | ) | | | (131 | ) | | | (41 | ) | Tax effect ofnon-deductible expenses on the PRC operations | | | 772 | | | | 798 | | | | 986 | | | | 1,211 | | | | 604 | | | | 772 | | Tax effect ofnon-deductible expenses on Hong Kong operations | | | 70 | | | | 76 | | | | 68 | | | | 114 | | | | 85 | | | | 70 | | Rate differential of certain PRC operations (note 12(a)(ii)) | | | (2,317 | ) | | | (1,580 | ) | | | (1,576 | ) | | Rate differential on Hong Kong operations (note 12(a)(i)) | | | (182 | ) | | | (133 | ) | | | (122 | ) | | Rate differential of certain PRC operations (note 13(a)(i)) | | | | (930 | ) | | | (1,835 | ) | | | (2,317 | ) | Rate differential of Hong Kong operations (note 13(a)(ii)) | | | | (177 | ) | | | (189 | ) | | | (182 | ) | Tax effect of deductible temporary difference for which no deferred tax asset was recognized | | | 154 | | | | 1,562 | | | | 98 | | | | 668 | | | | 1,414 | | | | 154 | | Tax effect of deductible tax loss for which no deferred tax asset was recognized | | | 818 | | | | 1,349 | | | | 356 | | | | 2,019 | | | | 1,267 | | | | 818 | | Tax effect on the eliminated unrealized profits related to the transfer of Tower Assets | | | — | | | | — | | | | 1,547 | | | Others | | | (98 | ) | | | (384 | ) | | | (158 | ) | | | 139 | | | | (280 | ) | | | (98 | ) | | | | | | | | | | | | | | | | | | | | | | | Taxation | | | 33,723 | | | | 35,623 | | | | 35,079 | | | | 35,342 | | | | 35,944 | | | | 33,723 | | | | | | | | | | | | | | | | | | | | |
Note: The PRC’s statutory tax rate is adopted as the majority of the Group’s operations are subject to this rate. | | (c) | The tax credited/(charged)/credited relating to components of other comprehensive income is as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Before
tax
Million | | | Tax
charged
Million | | | After
tax
Million | | | Before
tax
Million | | | Tax
charged
Million | | | After
tax
Million | | | Before
tax
Million | | | Tax
credited
Million | | | After
tax
Million | | Change in value ofavailable-for-sale financial assets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (7 | ) | | | 2 | | | | (5 | ) | Changes in value of financial assets at FVOCI | | | (74 | ) | | | (1 | ) | | | (75 | ) | | | (168 | ) | | | — | | | | (168 | ) | | | — | | | | — | | | | — | | Currency translation differences | | | 683 | | | | — | | | | 683 | | | | 1,160 | | | | — | | | | 1,160 | | | | (735 | ) | | | — | | | | (735 | ) | Share of other comprehensive income/(loss) of investments accounted for using the equity method | | | 442 | | | | — | | | | 442 | | | | 1,248 | | | | — | | | | 1,248 | | | | (1,038 | ) | | | — | | | | (1,038 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income/(loss) | | | 1,051 | | | | (1 | ) | | | 1,050 | | | | 2,240 | | | | — | | | | 2,240 | | | | (1,780 | ) | | | 2 | | | | (1,778 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current tax | | | | | | | — | | | | | | | | | | | | — | | | | | | | | | | | | — | | | | | | Deferred tax | | | | | | | (1 | ) | | | | | | | | | | | — | | | | | | | | | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1 | ) | | | | | | | | | | | — | | | | | | | | | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Before
tax | | | Tax
credited | | | After
tax | | | Before
tax | | | Tax
charged | | | After
tax | | | Before
tax | | | Tax
charged | | | After
tax | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | | | | | | | | | | Change in value ofavailable-for-sale financial assets | | | (7 | ) | | | 2 | | | | (5 | ) | | | 32 | | | | (8 | ) | | | 24 | | | | — | | | | — | | | | — | | Currency translation differences | | | (735 | ) | | | — | | | | (735 | ) | | | 774 | | | | — | | | | 774 | | | | 603 | | | | — | | | | 603 | | Share of other comprehensive (loss)/income of investments accounted for using the equity method | | | (1,038 | ) | | | — | | | | (1,038 | ) | | | (1,059 | ) | | | — | | | | (1,059 | ) | | | 901 | | | | — | | | | 901 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive (loss)/income | | | (1,780 | ) | | | 2 | | | | (1,778 | ) | | | (253 | ) | | | (8 | ) | | | (261 | ) | | | 1,504 | | | | — | | | | 1,504 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current tax | | | | | | | — | | | | | | | | | | | | — | | | | | | | | | | | | — | | | | | | Deferred tax | | | | | | | 2 | | | | | | | | | | | | (8 | ) | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2 | | | | | | | | | | | | (8 | ) | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (a) | Basic earnings per share |
The calculation of basic earnings per share for the year is based on the profit attributable to equity shareholders of the Company of RMB114,279,000,000 (2016: RMB108,741,000,000; 2015: RMB108,539,000,000)RMB106,641 million (2018: RMB117,781 million; 2017: RMB114,279 million) and the weighted average number of 20,475,482,897 shares (2016:(2018: 20,475,482,897 shares; 2015: 20,473,119,0882017: 20,475,482,897 shares) in issue during the year, calculated as follows:year. Weighted average number of shares
| | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Number of shares | | | Number of shares | | | Number of shares | | | | | | Issued shares as of January 1 | | | 20,475,482,897 | | | | 20,475,482,897 | | | | 20,438,426,514 | | Effect of share options exercised | | | — | | | | — | | | | 34,692,574 | | | | | | | | | | | | | | | | | | | Weighted average number of shares in issue during the year | | | 20,475,482,897 | | | | 20,475,482,897 | | | | 20,473,119,088 | | | | | | | | | | | | | | |
| | (b) | Diluted earnings per share |
The calculation of diluted earnings per share for the year is based on the profit attributable to equity shareholders of the Company which is used in calculating diluted earnings per share, calculated as follows, of RMB114,279,000,000 (2016: RMB108,741,000,000; 2015: RMB108,539,000,000)RMB106,050 million (2018: RMB117,781 million; 2017: RMB114,279 million) and the weighted average number of 20,475,482,897 shares (2016:(2018: 20,475,482,897 shares; 2015: 20,479,705,7632017: 20,475,482,897 shares), calculated as follows: Weighted average number of shares (diluted) in issue during the year.
| | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Number of shares | | | Number of shares | | | Number of shares | | | | | | Weighted average number of shares in issue during the year | | | 20,475,482,897 | | | | 20,475,482,897 | | | | 20,473,119,088 | | Dilutive equivalent shares arising from share options | | | — | | | | — | | | | 6,586,675 | | | | | | | | | | | | | | | | | | | Weighted average number of shares (diluted) during the year | | | 20,475,482,897 | | | | 20,475,482,897 | | | | 20,479,705,763 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Profit attributable to equity shareholders of the Company used in calculating basic earnings per share | | | 106,641 | | | | 117,781 | | | | 114,279 | | Add: Dilution impact on share of profit of investment in an associate due to the associate’s convertible bonds (note 23) | | | 41 | | | | — | | | | — | | Less: Fair value gain on the associate’s convertible bonds held by the Group, net of tax | | | (632 | ) | | | — | | | | — | | | | | | | | | | | | | | | Profit attributable to equity shareholders of the Company used in calculating diluted earnings per share | | | 106,050 | | | | 117,781 | | | | 114,279 | | | | | | | | | | | | | | |
In 2016 and 2017, there was no dilutive potential ordinary shares of the Company outstanding (note 33). Therefore, there was no dilution impact on weighted average number of shares (diluted) of the Company.
1415 | PROPERTY, PLANT AND EQUIPMENT |
| | | | | | | | | | | | | | | | | | | | Buildings | | | Telecommunications
transceivers,
switching centers,
transmission and
other network
equipment | | | Office
equipment,
furniture,
fixtures
and others | | | Total | | | | | Million | | | Million | | | Million | | | Million | | | | | | | Cost: | | | | | | | | | | | | | | | | | As of January 1, 2016 | | | 129,460 | | | | 1,174,803 | | | | 22,784 | | | | 1,327,047 | | Transferred from construction in progress | | | 8,476 | | | | 172,502 | | | | 2,267 | | | | 183,245 | | Other additions | | | 214 | | | | 2,367 | | | | 287 | | | | 2,868 | | Disposals | | | (1,048 | ) | | | (5,017 | ) | | | (138 | ) | | | (6,203 | ) | Assetswritten-off | | | (308 | ) | | | (58,650 | ) | | | (2,210 | ) | | | (61,168 | ) | Exchange differences | | | 129 | | | | 262 | | | | 1 | | | | 392 | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | 136,923 | | | | 1,286,267 | | | | 22,991 | | | | 1,446,181 | | | | | | | | | | | | | | | | | | | | | | | | As of January 1, 2017 | | | 136,923 | | | | 1,286,267 | | | | 22,991 | | | | 1,446,181 | | | | | | | Transferred from construction in progress | | | 10,577 | | | | 174,250 | | | | 833 | | | | 185,660 | | Other additions | | | 820 | | | | 962 | | | | 1,193 | | | | 2,975 | | Disposals | | | (72 | ) | | | (181 | ) | | | (109 | ) | | | (362 | ) | Assetswritten-off | | | (331 | ) | | | (38,971 | ) | | | (1,117 | ) | | | (40,419 | ) | Exchange differences | | | (141 | ) | | | (359 | ) | | | (4 | ) | | | (504 | ) | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2017 | | | 147,776 | | | | 1,421,968 | | | | 23,787 | | | | 1,593,531 | | | | | | | | | | | | | | | | | | | | | | | | Accumulated depreciation and impairment: | | | | | | | | | | | | | | | | | | | | | | As of January 1, 2016 | | | 36,825 | | | | 689,564 | | | | 15,027 | | | | 741,416 | | Charge for the year | | | 5,310 | | | | 129,915 | | | | 2,945 | | | | 138,170 | | Written back on disposals | | | (446 | ) | | | (2,336 | ) | | | (68 | ) | | | (2,850 | ) | Assetswritten-off and impairment loss | | | (203 | ) | | | (51,108 | ) | | | (1,805 | ) | | | (53,116 | ) | Exchange differences | | | 16 | | | | 186 | | | | 3 | | | | 205 | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | 41,502 | | | | 766,221 | | | | 16,102 | | | | 823,825 | | | | | | | | | | | | | | | | | | | | | | | | As of January 1, 2017 | | | 41,502 | | | | 766,221 | | | | 16,102 | | | | 823,825 | | Charge for the year | | | 5,695 | | | | 143,026 | | | | 1,227 | | | | 149,948 | | Written back on disposals | | | (58 | ) | | | (45 | ) | | | (105 | ) | | | (208 | ) | Assetswritten-off and impairment loss | | | (299 | ) | | | (26,465 | ) | | | (1,068 | ) | | | (27,832 | ) | Exchange differences | | | (20 | ) | | | (208 | ) | | | (3 | ) | | | (231 | ) | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2017 | | | 46,820 | | | | 882,529 | | | | 16,153 | | | | 945,502 | | | | | | | | | | | | | | | | | | | | | | | | Net book value: | | | | | | | | | | | | | | | | | As of December 31, 2017 | | | 100,956 | | | | 539,439 | | | | 7,634 | | | | 648,029 | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | 95,421 | | | | 520,046 | | | | 6,889 | | | | 622,356 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Buildings
Million | | | Telecommunications
transceivers,
switching centers,
transmission and
other network
equipment Million | | | Office equipment,
furniture, fixtures
and others
Million | | | Total
Million | | Cost: | | | | | | | | | | | | | | | | | As of January 1, 2018 | | | 147,776 | | | | 1,421,968 | | | | 23,787 | | | | 1,593,531 | | Transferred from construction in progress | | | 7,624 | | | | 160,654 | | | | 1,616 | | | | 169,894 | | Other additions | | | 257 | | | | 465 | | | | 1,504 | | | | 2,226 | | Disposals | | | (18 | ) | | | (1,304 | ) | | | (118 | ) | | | (1,440 | ) | Written-off | | | (323 | ) | | | (33,168 | ) | | | (1,490 | ) | | | (34,981 | ) | Exchange differences | | | 135 | | | | 236 | | | | 2 | | | | 373 | | | | | | | | | | | | | | | | | | | As of December 31, 2018 | | | 155,451 | | | | 1,548,851 | | | | 25,301 | | | | 1,729,603 | | | | | | | | | | | | | | | | | | | As of January 1, 2019 | | | 155,451 | | | | 1,548,851 | | | | 25,301 | | | | 1,729,603 | | Transferred from construction in progress | | | 6,251 | | | | 159,098 | | | | 2,165 | | | | 167,514 | | Other additions | | | 539 | | | | 1,235 | | | | 911 | | | | 2,685 | | Disposals | | | — | | | | (28 | ) | | | (19 | ) | | | (47 | ) | Written-off | | | (822 | ) | | | (100,962 | ) | | | (2,450 | ) | | | (104,234 | ) | Exchange differences | | | 71 | | | | 161 | | | | 9 | | | | 241 | | | | | | | | | | | | | | | | | | | As of December 31, 2019 | | | 161,490 | | | | 1,608,355 | | | | 25,917 | | | | 1,795,762 | | | | | | | | | | | | | | | | | | | Accumulated depreciation and impairment: | | | | | | | | | | | | | | | | | As of January 1, 2018 | | | 46,820 | | | | 882,529 | | | | 16,153 | | | | 945,502 | | Charge for the year | | | 5,625 | | | | 145,504 | | | | 1,480 | | | | 152,609 | | Written back on disposals | | | (15 | ) | | | (1,297 | ) | | | (116 | ) | | | (1,428 | ) | Written-off | | | (290 | ) | | | (32,064 | ) | | | (1,372 | ) | | | (33,726 | ) | Exchange differences | | | 18 | | | | 131 | | | | 1 | | | | 150 | | | | | | | | | | | | | | | | | | | As of December 31, 2018 | | | 52,158 | | | | 994,803 | | | | 16,146 | | | | 1,063,107 | | | | | | | | | | | | | | | | | | | As of January 1, 2019 | | | 52,158 | | | | 994,803 | | | | 16,146 | | | | 1,063,107 | | Charge for the year | | | 5,983 | | | | 150,243 | | | | 1,817 | | | | 158,043 | | Written back on disposals | | | — | | | | (13 | ) | | | (14 | ) | | | (27 | ) | Written-off | | | (33 | ) | | | (99,027 | ) | | | (1,192 | ) | | | (100,252 | ) | Exchange differences | | | 9 | | | | 49 | | | | 1 | | | | 59 | | | | | | | | | | | | | | | | | | | As of December 31, 2019 | | | 58,117 | | | | 1,046,055 | | | | 16,758 | | | | 1,120,930 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net book value: | | | | | | | | | | | | | | | | | As of December 31, 2019 | | | 103,373 | | | | 562,300 | | | | 9,159 | | | | 674,832 | | | | | | | | | | | | | | | | | | | As of December 31, 2018 | | | 103,293 | | | | 554,048 | | | | 9,155 | | | | 666,496 | | | | | | | | | | | | | | | | | | |
14 | PROPERTY, PLANT AND EQUIPMENT (CONTINUED) |
AsFor the year ended December 31, 2017, as a result of the optimization of 4G network coverage, the continuing impact of the mobile Internet substitution effect, and particularly, the significant progress of Voice over LTE (“VoLTE”) business services, this year, the usage and utilization of the Group’s 2G network has been decreasing rapidly. Meanwhile, due to the further decline of voice tariff, the revenue from voice services dropped even faster and the management anticipates more pressure on the profitability of 2G wireless and related assets (“2G Network Assets”). Therefore, management performed impairment testbased on the 2G Network Assets as of December 31, 2017. For the impairment testing purpose, the recoverable amounts (note 2(i)(ii)) of 2G Network Assets was determined based onvalue-in-use (“VIU”) calculations, i.e. the present value of estimated future net cash flows expected to arise from the continuing use of the 2G Network Assets. After considering the historical results, the prevailing market trends and the expected remaining useful lives of 2G Network Assets, the Group has made key assumptions and estimates on the period covered by the cash flow forecast and the estimated future revenue of 2G Network Assets to estimate the present value of future net cash flows applying thepre-tax discount rate of 11%. Based on the impairment test results, the Groupmanagement recognized an impairment loss of RMB10,450,000,000 forRMB10,450 million on the 2G Network Assets. No additional impairment was provided in 2018 and 2019.
This note provides lease information about the Group as a lessee. | | | | | | | | | | | | | | | | | | | | Telecommunications Towers and related
assets | | | Buildings
and premises | | | Others | | | Total | | | | | Million | | | Million | | | Million | | | Million | | Cost: | | | | | | | | | | | | | | | | | As of January 1, 2019 | | | 75,169 | | | | 35,790 | | | | 3,545 | | | | 114,504 | | Additions | | | 5,696 | | | | 9,135 | | | | 1,139 | | | | 15,970 | | Early termination and modification of lease contracts | | | (1,890 | ) | | | (1,620 | ) | | | (567 | ) | | | (4,077 | ) | Exchange gains and losses | | | — | | | | 22 | | | | — | | | | 22 | | | | | | | | | | | | | | | | | | | As of December 31, 2019 | | | 78,975 | | | | 43,327 | | | | 4,117 | | | | 126,419 | | | | | | | | | | | | | | | | | | | Accumulated amortization and impairment: | | | | | | | | | | | | | | | | | As of January 1, 2019 | | | 15,299 | | | | 12,409 | | | | 2,507 | | | | 30,215 | | Charge for the year | | | 14,738 | | | | 7,675 | | | | 338 | | | | 22,751 | | Early termination of lease contracts | | | (276 | ) | | | (435 | ) | | | (151 | ) | | | (862 | ) | Exchange gains and losses | | | — | | | | 7 | | | | — | | | | 7 | | | | | | | | | | | | | | | | | | | As of December 31, 2019 | | | 29,761 | | | | 19,656 | | | | 2,694 | | | | 52,111 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net book value: | | | | | | | | | | | | | | | | | As of December 31, 2019 | | | 49,214 | | | | 23,671 | | | | 1,423 | | | | 74,308 | | | | | | | | | | | | | | | | | | | As of January 1, 2019 | | | 59,870 | | | | 23,381 | | | | 1,038 | | | | 84,289 | | | | | | | | | | | | | | | | | | |
| (b) | Amounts recognized in the consolidated statement of comprehensive income |
For the year ended December 31, 2017 (2016: nil; 2015: nil).2019, the depreciation charge ofright-of-use assets recognized in the consolidated statement of comprehensive income amounted to RMB22,751 million. Other than the depreciation charge ofright-of-use assets, the amounts recognized in the consolidated statement of comprehensive income in relation to interest expense of lease liabilities, and expenses related to short-term lease,low-value lease which is not recorded as short-term lease and variable lease payment are disclosed in Note 5 and Note 10, respectively. 1517 | CONSTRUCTION IN PROGRESS |
| | | | 2017 | | | 2016 | | | | | | | | | Million | | | Million | | | 2019 | | | 2018 | | | | | Million | | | Million | | As of January 1 | | | 89,853 | | | | 88,012 | | | | 72,180 | | | | 78,112 | | Additions | | | 173,919 | | | | 185,086 | | | | 163,312 | | | | 163,962 | | Transferred to property, plant and equipment | | | (185,660 | ) | | | (183,245 | ) | | | (167,514 | ) | | | (169,894 | ) | | | | | | | | | | | | | | | As of December 31 | | | 78,112 | | | | 89,853 | | | | 67,978 | | | | 72,180 | | | | | | | | | | | | | | |
As of December 31, 2017,2019, construction in progress primarily comprises expenditure incurred on the network expansion projects but not yet completed. 1618 | LAND LEASE PREPAYMENTSUSE RIGHTS AND OTHERS |
As of December 31, 2019, total land use rights amounted to RMB16,489 million (2018: RMB16,593 million). For the year ended December 31, 2017,2019, the amortization of land lease prepaymentsuse rights expensed in the profit or loss amounted to approximately RMB446,000,000 (2016:RMB462 million (2018: approximately RMB443,000,000; 2015:RMB467 million; 2017: approximately RMB426,000,000)RMB446 million). In addition to the land use rights, this item also comprises long-term prepaid expenses and financial assets. | | | | 2017 | | | 2016 | | | | | | | | | Million | | | Million | | | 2019 | | | 2018 | | | | | Million | | | Million | | Cost and carrying amount: | | | | | | | | | | As of January 1 and December 31 | | | 35,343 | | | | 35,343 | | | | 35,343 | | | | 35,343 | | | | | | | | | | | | | | |
Impairment tests for goodwill As set out in IAS 36 “Impairment of Assets”, a cash-generating unit is the smallest identifiable group of assets that generate cash inflows from continuing use that are largely independent of the cash flows from other assets or groups of assets. For the purpose of impairment tests of goodwill, goodwill is allocated to groups of cash-generating units (being subsidiaries acquired in each acquisition). Such groups of cash-generating units represent the lowest level within the Group for which the goodwill is monitored for internal management purposes.
As of December 31, 2017,2019, the goodwill of RMB35,300,000,000RMB 35,300 million is attributable to the cash-generating unitunits in relation to the operation in Mainland China which management currently monitors. The recoverable amount of the cash-generating unit is determined based on the VIU calculations by using the discounted cash flow method. This method considers thepre-tax cash flows of the subsidiaries (cash-generating unit) for the five years ending December 31, 2022 with subsequent transition to perpetuity.2024 and the projected perpetual cash flows after the fifth year. For the five years ending December 31, 2022,2024, the average growth rate is assumed 1.5% while for the years beyond December 31, 2022,2024, the assumed continual growth rate to perpetuity is 1%. The present value of cash flows is calculated by discounting the cash flow usingpre-tax interest rates of approximately 11%. The management performed impairment test for the goodwill in relation to the operation in Mainland China and determined such goodwill was not impaired. Reasonably possible changes in key assumptions will not lead to the goodwill impairment loss. The following list contains only the particulars of subsidiaries, as of December 31, 2017, which principally affected the results, assets or liabilities of the Group. The class of shares held is ordinary unless otherwise stated. | | | | | | | | | | | | | | | | | | | | | | Place of
incorporation/ | | | | | | Proportion of | | | | | | incorporation/ | | Particulars | | | ownership interest | | | | | | establishment | | of issued and | | | Held by the | | | Held by a | | | | Name of company* | | establishment
and operation | | paid up capital | | | Company Particulars of issued
and paid up capital | | | Held by the
Company | | | Held by a
subsidiary | | | Principal activity | | | | | | | China Mobile Communication
(BVI) Limited | |
| British Virgin Islands(“
Islands (“BVI”) |
| | | HK$1 | | | | 100%100 | % | | | — | | | Investment holding company | China Mobile Communication
Co., Ltd. (“CMC”)** | | | | | | CMC**
| | Mainland China | | | | RMB1,641,848,326 | | | | — | | | | 100%100 | % | | Network and business coordination center | | | | | | | China Mobile Group Guangdong Co., Ltd. (“Guangdong Mobile”) | | | Mainland China | | | | RMB5,594,840,700 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Zhejiang Co., Ltd. | | | Mainland China | | | | RMB2,117,790,000 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Jiangsu Co., Ltd. | | | Mainland China | | | | RMB2,800,000,000 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Fujian Co., Ltd. | | | Mainland China | | | | RMB5,247,480,000 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Henan Co., Ltd. | | | Mainland China | | | | RMB4,367,733,641 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Hainan Co., Ltd. | | | Mainland China | | | | RMB643,000,000 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Beijing Co., Ltd. | | | Mainland China | | | | RMB6,124,696,053 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Shanghai Co., Ltd. | | | Mainland China | | | | RMB6,038,667,706 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Tianjin Co., Ltd. | | | Mainland China | | | | RMB2,151,035,483 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Hebei Co., Ltd. | | | Mainland China | | | RMB4,314,668,600 | RMB4,314,668,531 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Liaoning Co., Ltd. | | | Mainland China | | | | RMB5,140,126,680 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Shandong Co., Ltd. | | | Mainland China | | | | RMB6,341,851,146 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Guangxi Co., Ltd. | | | Mainland China | | | | RMB2,340,750,100 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Anhui Co., Ltd. | | | Mainland China | | | | RMB4,099,495,494 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Jiangxi Co., Ltd. | | | Mainland China | | | | RMB2,932,824,234 | | | | — | | | | 100%100 | % | | Telecommunications operator | | | | | | | China Mobile Group Chongqing Co., Ltd. | | | Mainland China | | | | RMB3,029,645,401 | | | | — | | | | 100%100 | % | | Telecommunications operator |
18 | SUBSIDIARIES (CONTINUED) |
| | | | | | | | | | | | | | | Place of | | | | | Proportion of | | | | | incorporation/ | | | Particulars | | ownership interest | | | | | establishment | | | of issued and | | Held by the | | Held by a | | | Name of company*
| | and operation | | | paid up capital
| | Company
| | subsidiary
| | Principal activity
| | | | | | | China Mobile Group Sichuan Co., Ltd. | | | Mainland China | | | | RMB7,483,625,572 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Hubei Co., Ltd. | | | Mainland China | | | | RMB3,961,279,556 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Hunan Co., Ltd. | | | Mainland China | | | | RMB4,015,668,593 | | | | — | | 100% | | 100 | % | | Telecommunications operator |
| 20 | SUBSIDIARIES (CONTINUED) |
| | | | | | | | | | | | | | | | | | | | | Place of
incorporation/ | | | | | | Proportion of ownership interest | | | | Name of company* | | establishment
and operation | | | Particulars of issued
and paid up capital | | | Held by the
Company | | | Held by a
subsidiary | | | Principal activity | China Mobile Group Shaanxi Co., Ltd. | | | Mainland China | | | | RMB3,171,267,431 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Shanxi Co., Ltd. | | | Mainland China | | | | RMB2,773,448,313 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Neimenggu Co., Ltd. | | | Mainland China | | | | RMB2,862,621,870 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Jilin Co., Ltd. | | | Mainland China | | | | RMB3,277,579,314 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Heilongjiang Co., Ltd. | | | Mainland China | | | | RMB4,500,508,035 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Guizhou Co., Ltd. | | | Mainland China | | | | RMB2,541,981,749 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Yunnan Co., Ltd. | | | Mainland China | | | | RMB4,137,130,733 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Xizang Co., Ltd. | | | Mainland China | | | | RMB848,643,686 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Gansu Co., Ltd. | | | Mainland China | | | | RMB1,702,599,589 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Qinghai Co., Ltd. | | | Mainland China | | | | RMB902,564,911 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Ningxia Co., Ltd. | | | Mainland China | | | | RMB740,447,232 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Xinjiang Co., Ltd. | | | Mainland China | | | RMB2,581,599,600 | RMB2,581,599,639 | | | | — | | 100% | | 100 | % | | Telecommunications operator | | | | | | | China Mobile Group Design Institute Co., Ltd. | | | Mainland China | | | RMB160,232,500 | RMB160,232,547 | | | | — | | 100% | | 100 | % | | Provision of telecommunications network planning design and consulting services | China Mobile Holding Company Limited** | | | Mainland China | | | | US$30,000,000 | | | | 100 | % | | | — | | | Investment holding company | China Mobile Information Technology Co., Ltd.** | | | Mainland China | | | | US$7,633,000 | | | | — | | | | 100 | % | | Provision of roaming clearance, IT system operation, technology support services | Aspire Holdings Limited | | | Cayman Islands | | | | HK$93,964,583 | | | | 66.41 | % | | | — | | | Investment holding company | Aspire (BVI) Limited# | | | BVI | | | | US$1,000 | | | | — | | | | 100 | % | | Investment holding company | Aspire Technologies (Shenzhen) Limited**# | | | Mainland China | | | | US$10,000,000 | | | | — | | | | 100 | % | | Development, services and maintenance of industry value-added platform | Aspire Information Network (Shenzhen) Limited**# | | | Mainland China | | | | US$5,000,000 | | | | — | | | | 100 | % | | Provision of mobile data solutions, system integration and development | Aspire Information Technologies (Beijing) Limited**# | | | Mainland China | | | | US$5,000,000 | | | | — | | | | 100 | % | | Operation support and capability service of digital content |
1820 | SUBSIDIARIES (CONTINUED) |
| | | | | | | | | | | | | | | | | | | | | | Place of
incorporation/ | | | | Proportion of | | | Proportion of ownership interest | | incorporation/ | | Particulars | | ownership interest | | | | | establishment and | | of issued and | | Held by the | | Held by a | | | Name of company* | | establishment
and operation | | | Particulars of issued
and paid up capital | | | Held by the
Company | | | Held by a
subsidiary | | | paid up capitalPrincipal
| | Company activity
| | subsidiary
| | Principal activity
| | | | | | | China Mobile Holding Company Limited**
| | Mainland China | | US$30,000,000 | | 100% | | — | | Investment holding company
| | | | | | | China Mobile (Shenzhen) Limited**
| | Mainland China | | US$7,633,000 | | — | | 100% | | Provision of roaming clearance services
| | | | | | | Aspire Holdings Limited
| | Cayman Islands | | HK$93,964,583 | | 66.41% | | — | | Investment holding company
| | | | | | | Aspire (BVI) Limited#
| | BVI | | US$1,000 | | — | | 100% | | Investment holding company
| | | | | | | Aspire Technologies (Shenzhen) Limited**#
| | Mainland China | | US$10,000,000 | | — | | 100% | | Technology platform development and maintenance
| | | | | | | Aspire Information Network (Shenzhen) Limited**#
| | Mainland China | | US$5,000,000 | | — | | 100% | | Provision of mobile data solutions, system integration and development
| | | | | | | Aspire Information Technologies (Beijing) Limited**#
| | Mainland China | | US$5,000,000 | | — | | 100% | | Technology platform development and maintenance
| | | | | | | Fujian FUNO Mobile Communication Technology Company Limited*** | | | Mainland China | | US$3,800,000 | | RMB60,000,000 | | | | — | | 51% | | 51 | % | | Network construction and maintenance, network planning and optimizing, training and communication services | | | | | | | Advanced Roaming & Clearing House Limited | | | BVI | | | | US$2 | | 100% | | 100 | % | | | — | | | Provision of roaming clearance services | | | | | | | Fit Best Limited | | | BVI | | | | US$1 | | 100% | | 100 | % | | | — | | | Investment holding company | | | | | | | China Mobile Hong Kong Company Limited | | | Hong Kong | | | | HK$951,046,930 | | | | — | | 100% | | 100 | % | | Provision of telecommunications and related services | | | | | | | China Mobile International Holdings Limited | | | Hong Kong | | HK$16,495,670,000 | | 100%HK$19,319,810,000 | | | | 100 | % | | | — | | | Investment holding company | | | | | | | China Mobile International Limited | | | Hong Kong | | | | HK$6,400,000,0008,100,000,000 | | | | — | | 100% | | 100 | % | | Provision of voice and roaming clearance services, Internet services and value-added services | | | | | | | China Mobile Group Device Co., Ltd. | | | Mainland China | | | | RMB6,200,000,000 | | | | — | | 99.97% | | 99.97 | % | | Provision of electronic communication products design services and sale of related products | China Mobile Group Finance Co., Ltd. (“China Mobile Finance”) | | | Mainland China | | | | RMB11,627,783,669 | | | | — | | | | 92 | % | | Provision ofnon-banking financial services | China Mobile IoT Company Limited | | | Mainland China | | | | RMB3,000,000,000 | | | | — | | | | 100 | % | | Provision of network services | China Mobile (Suzhou) Software Technology Co., Ltd. | | | Mainland China | | | | RMB980,000,000 | | | | — | | | | 100 | % | | Provision of Mobile Cloud research and development and operation support services | China MobileE-Commerce Co., Ltd. (“China MobileE-Commerce”) | | | Mainland China | | | | RMB500,000,000 | | | | — | | | | 100 | % | | Provision ofe-payment ,e-commerce and Internet finance services | China Mobile (Hangzhou) Information Technology Co., Ltd. | | | Mainland China | | | | RMB1,250,000,000 | | | | — | | | | 100 | % | | Provision of family information products, capability research and development services | China Mobile Online Services Co., Ltd. | | | Mainland China | | | | RMB2,000,000,000 | | | | — | | | | 100 | % | | Provision of call center and internet information services |
1820 | SUBSIDIARIES (CONTINUED) |
| | | | | | | | | | | | | | | | | | | | | | Place of
incorporation/ | | | | Proportion of | | | Proportion of ownership interest | | incorporation/ | | Particulars
| | ownership interest | | | | | establishment and | | of issued and | | Held by the | | Held by a | | | Name of company* | | establishment
and operation | | | Particulars of issued
and paid up capital | | | Held by the
Company | | | Held by a
subsidiary | | | paid up capital
| | Company
| | subsidiary
| | Principal activity | | | | | | | China Mobile Group Finance Co., Ltd. (“China Mobile Finance”)
| | Mainland China | | RMB11,627,783,669 | | — | | 92% | | Provision ofnon-banking financial services
| | | | | | | China Mobile IoT Company Limited
| | Mainland China | | RMB1,000,000,000 | | — | | 100% | | Provision of
network servicesactivity
| | | | | | | China Mobile (Suzhou) Software Technology Co., Ltd.
| | Mainland China | | RMB980,000,000 | | — | | 100% | | Provision of
computer hardware and software research and development services
| | | | | | | China Mobile (Hangzhou)
Information Technology Co., Ltd.
| | Mainland China | | RMB1,150,000,000 | | — | | 100% | | Provision of computer hardware and software research and development services
| | | | | | | China Mobile Online Services Co., Ltd.
| | Mainland China | | RMB50,000,000 | | — | | 100% | | Provision of call center services
| | | | | | | MIGU Company Limited | |
| Mainland
China |
| | | RMB7,000,000,000 | | | | — | | 100% | | 100 | % | | Provision of Mobilemobile Internet digital content services | | | | | | | CMChina Mobile TieTong Company Limited
| |
| Mainland
China |
| | | RMB31,880,000,000 | | | | — | | 100% | | 100 | % | | Provision of engineering, maintenance, sales and telecommunications services | | | | | | | China Mobile Internet Company Limited | |
| Mainland
China |
| | RMB2,000,000,000 | RMB2,900,000,000 | | | | — | | 100% | | 100 | % | | Provision of value added telecommunicationsInternet related services | | | | | | | China Mobile Investment Holdings Company Limited | |
| Mainland
China |
| | RMB330,000,000 | RMB975,920,000 | | | | — | | 100% | | 100 | % | | Investment holding company | | | | | | | China Mobile System Integration Co., Ltd. (formerly known as China Mobile Quantong System Integration Co., Ltd.) | |
| Mainland
China |
| | | RMB550,000,000 | | | | — | | 100% | | 100 | % | | Provision of computer system integration, construction, maintenance and related technology development services | China Mobile (Chengdu) ICT Co., Ltd. | |
| Mainland
China |
| | | RMB300,000,000 | | | | — | | | | 100 | % | | Provision of Information technology products and technology research and development services | China Mobile (Shanghai) ICT Co., Ltd. | |
| Mainland
China |
| | | RMB200,000,000 | | | | — | | | | 100 | % | | Provision of Information technology products and technology research and development services | China Mobile Financial Technology Co., Ltd. | |
| Mainland
China |
| | | RMB500,000,000 | | | | — | | | | 100 | % | | Provision ofe-payment ,e-commerce and Internet finance services | China Mobile Xiong’an Information & Telecommunication Technology Company Limited | |
| Mainland
China |
| | | RMB150,000,000 | | | | — | | | | 100 | % | | Provision of Information technology products and technology research and development services | Zhongyidong Information Technology Co., Ltd. | |
| Mainland
China |
| | | RMB1,000,000,000 | | | | — | | | | 100 | % | | Provision of IT solution including digital technology |
| * | The nature of all the legal entities established in the Mainland China is limited liability company. |
| ** | Companies registered as wholly owned foreign enterprises in the Mainland China. |
| *** | Company registered as a sino-foreign equity joint venture in the Mainland China. |
| # | # | Effective interest held by the Group is 66.41%. |
1921 | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD |
The amounts recognized in the consolidated balance sheets are as follows: | | | | As of | | | As of | | | | | | December 31,
2017 | | | December 31,
2016 | | | | | | Million | | | Million | | | | | | | | | | | As of
December 31, 2019
Million | | | As of
January 1, 2019
(As restated)
(Note 3)
Million | | | As of
December 31, 2018
(As previously
reported) Million | | Associates | | | 131,636 | | | | 123,255 | | | | 154,004 | | | | 142,843 | | | | 144,059 | | Joint ventures | | | 863 | | | | 784 | | | | 1,224 | | | | 1,266 | | | | 1,266 | | | | | | | | | | | | | | | | | | | | | | 155,228 | | | | 144,109 | | | | 145,325 | | | | | 132,499 | | | | 124,039 | | | | | | | | | | | | | | | | | | |
Details of majorprincipal associates, all of which are listed on exchanges, are as follows: | | | | | | | | | | | Name of associate | | Place of
incorporation/
establishment
and operation | | | Proportion of
ownership
interest held by
by the Company or
its subsidiary | | | Principal Activity | | | | activity | Unlisted company
| | | | | | | | | | | | | | | China TowerSPD Bank
| | | PRC | | | | 38%18 | % | | | Construction,
maintenance and
operationProvision of
telecommunications
towers banking services
| | | | | Listed company
| | | | | | | | | | | | | | | Shanghai Pudong Development Bank Co., Ltd. (“SPD Bank”China Tower Corporation Limited
(“China Tower”) (Note)
| | | PRC | | | | 18%28 | % | | | ProvisionConstruction, maintenance and operation of
banking services telecommunications towers
| | | | | IFLYTEK Co., Ltd.
(“IFLYTEK”) | | | PRC | | | | 13%13 | % | | | Provision of
Chinese speech intelligent voice and
language
technology
artificial intelligence products and services | | | | | True Corporation Public Company Limited (“
(“True Corporation”) | | | Thailand | | | | 18%18 | % | | | Provision of
telecommunications
services |
Note:
| 21 | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) |
| (i) | Summary financial information on principal associates: |
| | | | | | | | | | | | SPD Bank | | | | | As of December 31 | | | | | 2019
Million | | | 2018
Million | | Total assets | | | 7,005,929 | | | | 6,289,606 | | Total liabilities | | | 6,444,878 | | | | 5,811,226 | | Total equity | | | 561,051 | | | | 478,380 | | | | | | | | | | | Total equity attributable to ordinary equity shareholders | | | 493,945 | | | | 441,642 | | Percentage of ownership of the Group | | | 18% | | | | 18% | | | | | | | | | | | Total equity attributable to the Group | | | 89,774 | | | | 80,291 | | The impact of fair value adjustments at the time of acquisition, goodwill and others | | | 6,084 | | | | 6,660 | | | | | | | | | | | Interest in associates | | | 95,858 | | | | 86,951 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | China Tower | | | IFLYTEK | | | True Corporation | | | | | As of December 31 | | | As of December 31 | | | As of December 31 | | | | | 2019
Million | | | 2018
Million | | | 2019
Million | | | 2018
Million | | | 2019
Million | | | 2018
Million | | Total current assets | | | 40,995 | | | | 31,799 | | | | 11,430 | | | | 7,762 | | | | 31,298 | | | | 26,309 | | Totalnon-current assets | | | 297,072 | | | | 283,565 | | | | 8,671 | | | | 7,540 | | | | 90,680 | | | | 78,251 | | Total current liabilities | | | 128,364 | | | | 114,759 | | | | 6,866 | | | | 5,813 | | | | 35,186 | | | | 43,097 | | Totalnon-current liabilities | | | 27,142 | | | | 20,103 | | | | 1,500 | | | | 1,278 | | | | 57,457 | | | | 33,215 | | Total equity | | | 182,561 | | | | 180,502 | | | | 11,735 | | | | 8,211 | | | | 29,335 | | | | 28,248 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity attributable to equity shareholders | | | 182,559 | | | | 180,502 | | | | 11,418 | | | | 7,971 | | | | 29,184 | | | | 28,123 | | Percentage of ownership of the Group | | | 28% | | | | 28% | | | | 13% | | | | 13% | | | | 18% | | | | 18% | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity attributable to the Group | | | 51,281 | | | | 50,414 | | | | 1,465 | | | | 1,075 | | | | 5,253 | | | | 5,062 | | The impact of fair value adjustments at the time of acquisition, goodwill and others | | | — | | | | — | | | | 810 | | | | 812 | | | | 1,834 | | | | 2,851 | | Elimination of unrealized profits resulting from the transfer of Tower Assets and its realization | | | (2,543) | | | | (3,115) | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest in associates | | | 48,738 | | | | 47,299 | | | | 2,275 | | | | 1,887 | | | | 7,087 | | | | 7,913 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 21 | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) |
| (i) | Summary financial information on principal associates (Continued): |
The Group’s shareholding percentage in SPD Bank has been diluted from 18.98% to 18.18% as a result from SPD Bank’s issuance of new ordinary shares to other companies in 2017. Up to the release day of these financial statements, SPD Bank has not yet announced its audited annual results for the year ended December 31, 2017, therefore, the Group has recognized its share of SPD Bank’s and IFLYTEK’s comprehensive income for the year 20172019 based on the financial information which was already released and publicly disclosed by SPD Bank and publicly disclosed,IFLYTEK. On August 8, 2018, China Tower successfully listed on the Main Board of The Stock Exchange of Hong Kong Limited and made an offering of 46,663,856,000 new ordinary shares (including both Hong Kong and International offerings with some information suchover-allotment option exercised) at a price of HK$1.26 per share. The Group’s shareholding in China Tower has been diluted from 38% to 28% and the gain as total liabilities and totala result of equity not provided. 19 | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) |
interest dilution following the initial public offering of China Tower amounted to approximately RMB2,271 million was recorded in income from investments accounted for using the equity method. | | | | | | | | | | | | | | | | | | | | | | | | | | | | SPD Bank | | | China Tower | | | | | 2019
Million | | | 2018
Million | | | 2017
Million | | | 2019
Million | | | 2018
Million | | | 2017
Million | | Revenue | | | 190,688 | | | | 170,865 | | | | 168,619 | | | | 76,428 | | | | 71,819 | | | | 68,665 | | Profit before taxation | | | 69,817 | | | | 65,284 | | | | 69,828 | | | | 6,837 | | | | 3,475 | | | | 2,685 | | Profit attributable to ordinary equity shareholders | | | 57,186 | | | | 54,189 | | | | 52,533 | | | | 5,222 | | | | 2,650 | | | | 1,943 | | Other comprehensive income/(loss) attributable to ordinary equity shareholders | | | 2,608 | | | | 6,979 | | | | (5,568 | ) | | | — | | | | — | | | | — | | Total comprehensive income attributable to ordinary equity shareholders | | | 59,794 | | | | 61,168 | | | | 46,965 | | | | 5,222 | | | | 2,650 | | | | 1,943 | | Dividends received from associates | | | 1,867 | | | | 533 | | | | 821 | | | | 111 | | | | — | | | | — | |
| (i) | Summary financial information on principal associates: |
| | | | | | | | | | | | SPD Bank | | | | | As of December 31 | | | | | 2017 | | | 2016 | | | | | Million | | | Million | | Total assets | | | 6,135,061 | | | | 5,857,263 | | Total liabilities | | | — | | | | 5,484,329 | | Total equity | | | — | | | | 372,934 | | | | | | | | | | | Total equity attributable to ordinary equity shareholders | | | 395,466 | | | | 338,027 | | Percentage of ownership of the Group | | | 18% | | | | 19% | | | | | | | | | | | Total equity attributable to the Group | | | 71,896 | | | | 64,158 | | The impact of fair value adjustments at the time of acquisition and goodwill | | | 6,663 | | | | 7,780 | | | | | | | | | | | Interest in associates | | | 78,559 | | | | 71,938 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | IFLYTEK | | | True Corporation | | | China Tower | | | | | As of December 31 | | | As of December 31 | | | As of December 31 | | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | Total current assets | | | 7,329 | | | | 5,533 | | | | 23,566 | | | | 23,135 | | | | 30,517 | | | | 39,565 | | Totalnon-current assets | | | 6,151 | | | | 4,881 | | | | 69,511 | | | | 61,532 | | | | 292,125 | | | | 272,103 | | Total current liabilities | | | 4,428 | | | | 2,521 | | | | 39,589 | | | | 30,333 | | | | 150,438 | | | | 171,568 | | Totalnon-current liabilities | | | 1,042 | | | | 674 | | | | 26,643 | | | | 29,492 | | | | 44,710 | | | | 14,548 | | Total equity | | | 8,010 | | | | 7,219 | | | | 26,845 | | | | 24,842 | | | | 127,494 | | | | 125,552 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity attributable to equity shareholders | | | 7,759 | | | | 7,061 | | | | 26,711 | | | | 24,714 | | | | 127,494 | | | | 125,552 | | Percentage of ownership of the Group | | | 13% | | | | 14% | | | | 18% | | | | 18% | | | | 38% | | | | 38% | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity attributable to the Group | | | 1,047 | | | | 962 | | | | 4,808 | | | | 4,449 | | | | 48,448 | | | | 47,710 | | The impact of fair value adjustments at the time of acquisition and goodwill | | | 805 | | | | 814 | | | | 2,664 | | | | 2,847 | | | | — | | | | — | | Elimination of unrealized profits resulting from the transfer of Tower Assets and its realization | | | — | | | | — | | | | — | | | | — | | | | (4,856 | ) | | | (5,474 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Interest in associates | | | 1,852 | | | | 1,776 | | | | 7,472 | | | | 7,296 | | | | 43,592 | | | | 42,236 | | | | | | | | | | | | | | | | | | | | | | | | | | |
19 | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) |
| (i) | Summary financial information on principal associates (Continued): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | SPD Bank | | | IFLYTEK | | | | | 2017 | | | 2016 | | | 2015 | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | Revenue | | | 168,619 | | | | 160,792 | | | | 146,550 | | | | 5,458 | | | | 3,320 | | | | 2,501 | | Profit before taxation | | | 69,785 | | | | 69,975 | | | | 66,877 | | | | 584 | | | | 561 | | | | 465 | | Profit attributable to ordinary equity shareholders for the year | | | 52,515 | | | | 51,374 | | | | 49,704 | | | | 428 | | | | 484 | | | | 425 | | Other comprehensive (loss)/income | | | (5,568 | ) | | | (5,480 | ) | | | 4,458 | | | | — | | | | — | | | | — | | Total comprehensive income | | | 46,947 | | | | 45,894 | | | | 54,162 | | | | 428 | | | | 484 | | | | 425 | | Dividends received from associates | | | 821 | | | | 1,921 | | | | 2,824 | | | | 18 | | | | 18 | | | | 18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | True Corporation | | | China Tower | | | | | 2017 | | | 2016 | | | 2015 | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | Revenue | | | 28,262 | | | | 23,520 | | | | 21,416 | | | | 68,665 | | | | 54,474 | | | | 10,325 | | Profit/(loss) before taxation | | | 726 | | | | (437 | ) | | | 839 | | | | 2,685 | | | | (776 | ) | | | (3,864 | ) | Profit/(loss) for the year | | | 465 | | | | (531 | ) | | | 795 | | | | 1,943 | | | | (575 | ) | | | (2,944 | ) | Other comprehensive income/(loss) | | | 32 | | | | (87 | ) | | | — | | | | — | | | | — | | | | — | | Total comprehensive income/(loss) | | | 497 | | | | (618 | ) | | | 795 | | | | 1,943 | | | | (575 | ) | | | (2,944 | ) | Dividends received from associates | | | — | | | | 5 | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | IFLYTEK | | | True Corporation | | | | | 2019
Million | | | 2018
Million | | | 2017
Million | | | 2019
Million | | | 2018
Million | | | 2017
Million | | Revenue | | | 10,079 | | | | 7,917 | | | | 5,458 | | | | 31,423 | | | | 33,214 | | | | 28,262 | | Profit before taxation | | | 995 | | | | 659 | | | | 584 | | | | 1,727 | | | | 2,662 | | | | 726 | | Profit attributable to ordinary equity shareholders | | | 819 | | | | 542 | | | | 428 | | | | 1,256 | | | | 1,444 | | | | 465 | | Other comprehensive income/(loss) attributable to ordinary equity shareholders | | | — | | | | 1 | | | | — | | | | (186 | ) | | | (46 | ) | | | 32 | | Total comprehensive income attributable to ordinary equity shareholders | | | 819 | | | | 543 | | | | 428 | | | | 1,070 | | | | 1,398 | | | | 497 | | Dividends received from associates | | | 27 | | | | 18 | | | | 18 | | | | 117 | | | | 39 | | | | — | |
| | (ii) | The fair values of the interests in SPD Bank, IFLYTEK and True Corporationlisted associates are based on quoted market prices (level 1: quoted price (unadjusted) in active markets) at the balance sheet date without any deduction for transaction costs and disclosed as follows: |
| | | | As of December 31,
2017 | | | As of December 31,
2016 | | | As of December 31, 2019 | | | As of December 31, 2018 | | | | | Carrying
amount | | | Fair
value | | | Carrying
amount | | | Fair
value | | | Carrying amount | | | Fair value | | | Carrying amount | | | Fair value | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | SPD Bank | | | 78,559 | | | | 67,166 | | | | 71,938 | | | | 66,522 | | | | 95,858 | | | | 65,993 | | | | 86,951 | | | | 52,282 | | China Tower | | | | 48,738 | | | | 75,729 | | | | 47,299 | | | | 63,738 | | IFLYTEK | | | 1,852 | | | | 10,598 | | | | 1,776 | | | | 4,854 | | | | 2,275 | | | | 9,268 | | | | 1,887 | | | | 6,623 | | True Corporation | | | 7,472 | | | | 7,450 | | | | 7,296 | | | | 8,297 | | | | 7,087 | | | | 6,432 | | | | 7,913 | | | | 6,589 | | | | | | | | | | | | | | | | | Interest in listed associates | | | 87,883 | | | | 85,214 | | | | 81,010 | | | | 79,673 | | | | | | | | | | | | | | | | |
1921 | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) |
| | (iii) | The Group assesses at the end of each reporting period whether there is objective evidence that interest in associates are impaired. |
As of December 31, 2017,2019, the fair value of investment in SPD Bank was RMB67,166,000,000 (2016: RMB66,522,000,000),RMB65,993 million (2018: RMB52,282 million) based on its quoted market price, which was below its carrying amount by approximately 14.5% (2016:31.2% (2018: approximately 7.5%39.9%). Management of the Group performed an impairment test accordingly considering such impairment indicator. Theand determined the respective recoverable amount of the interest in SPD Bank is determined byinvestment based on its VIU. The calculation usedhas consideredpre-tax cash flow projections of SPD Bank for the five years ending December 31, 20222024 with subsequentan extrapolation made to perpetuity. The discount rate used to discount the cash flows to their respective net present values was based on a cost of capital used to evaluate investments of similar nature in Mainland China. Management judgement is required in estimating the future cash flows of SPD Bank. The key assumptions are determined with reference to external sources of information. Based on the management’s assessment results and sensitivity analysis performed, there was no impairment of the investment as of December 31, 2017. Reasonably possible changes in key assumptions will not lead to the impairment loss.2019. As of December 31, 2017,2019, the fair value of investment in True Corporation was RMB7,450,000,000 (2016: RMB8,297,000,000),RMB6,432 million (2018: RMB6,589 million) based on its quoted market price, which was below its carrying amount by approximately 0.3% (2016: exceeding by9.2% (2018: approximately 13.7%16.7%). SinceManagement of the decline inGroup performed an impairment test and determined its recoverable amount as the higher of its fair value less costs of interest in True Corporation is not significant or prolonged,disposal and VIU. Based on the management’s assessment results, there was no objective evidenceimpairment of impairmentthe investment as of December 31, 2017.2019. TheOther than above, the management has determined that there was no impairment indicator of the Group’s interests in other associates as of December 31, 20162018 and 2017.2019.
Details of a major joint venture are as follows: In 2015, CMC, a wholly-owned subsidiary of the Company, together with State Development & Investment Corporation and China Mobile State Development & Investment Management Company Limited (45% of its registered capital is owned by CMCC), established China Mobile Innovative Business Fund (Shenzhen) Partnership (Limited Partnership) (the “Fund”). The Group recognized the investment as interest in a joint venture. CMC committed to invest RMB1,500,000,000 in cash,RMB1,500 million, which represents 50% of the equity interest inof the Fund. As of December 31, 2017,2019, CMC hashad contributed RMB759,000,000 (2016: RMB721,000,000)RMB1,256 million (2018: RMB1,134 million) to the Fund and has awith an outstanding commitment to further invest RMB741,000,000 (2016: RMB779,000,000)RMB244 million (2018: RMB366 million) to the Fund upon the request to be lodged by the Fund. There arewere no contingent liabilities relating to the Group’s interest in thethis joint venture.venture as of December 31, 2019. 2022 | DEFERRED TAX ASSETS AND LIABILITIES |
The analysis of deferred tax assets and liabilities are as follows: | | | | As of
December 31,
2017 | | | As of
December 31,
2016 | | | As of | | | As of | | | | | Million | | | Million | | | December 31,
2019 | | | December 31,
2018 | | | | | Million | | | Million | | Deferred tax assets: | | | | | | | | | - Deferred tax asset to be recovered after 12 months | | | 8,236 | | | | 6,607 | | | | 3,519 | | | | 2,982 | | - Deferred tax asset to be recovered within 12 months | | | 25,107 | | | | 23,160 | | | | 29,109 | | | | 26,672 | | | | | | | | | | | | | | | | | | | 32,628 | | | | 29,654 | | | | | 33,343 | | | | 29,767 | | | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | - Deferred tax liabilities to be settled after 12 months | | | (258 | ) | | | (248 | ) | | | (857 | ) | | | (598 | ) | - Deferred tax liabilities to be settled within 12 months | | | (104 | ) | | | (44 | ) | | | (531 | ) | | | (224 | ) | | | | | | | | | | | | | | | | | | (1,388 | ) | | | (822 | ) | | | | (362 | ) | | | (292 | ) | | | | | | | | | | | | | | |
2022 | DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) |
Deferred tax assets and liabilities recognized and the movements during 20172019 | | | | | | | | | | | | | | | | | | | | | | | | As of
January 1,
2017 | | | (Charged)/
credited to profit or loss | | | Credited to
other
comprehensive
income | | | Exchange
differences | | | As of
December 31,
2017 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | | | | | | Deferred tax assets arising from: | | | | | | | | | | | | | | | | | | | | | | | | | | | Write-down for obsolete inventories | | | 175 | | | | (55 | ) | | | — | | | | — | | | | 120 | | Write-off and impairment of certain network equipment and related assets | | | 4,538 | | | | 2,544 | | | | — | | | | — | | | | 7,082 | | Accrued operating expenses | | | 17,969 | | | | 965 | | | | — | | | | — | | | | 18,934 | | Deferred revenue from Reward Program | | | 5,796 | | | | 147 | | | | — | | | | — | | | | 5,943 | | Impairment loss for doubtful accounts | | | 1,297 | | | | (27 | ) | | | — | | | | — | | | | 1,270 | | Change in value ofavailable-for-sale financial assets | | | (8 | ) | | | — | | | | 2 | | | | — | | | | (6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 29,767 | | | | 3,574 | | | | 2 | | | | — | | | | 33,343 | | | | | | | | Deferred tax liabilities arising from: | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation allowance in excess of related depreciation | | | (292 | ) | | | (92 | ) | | | — | | | | 22 | | | | (362 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 29,475 | | | | 3,482 | | | | 2 | | | | 22 | | | | 32,981 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of
December 31,
2018 (As
previously
reported) | | | Changes
in
accounting
policies
(Note 3) | | | As of
January 1,
2019 (As
restated) | | | (Charged)/
credited
to profit
or loss | | | Charged to
other
comprehensive
income | | | Exchange
differences | | | As of
December 31,
2019 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | Net deferred tax assets after offsetting: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Write-down of obsolete inventories | | | 75 | | | | — | | | | 75 | | | | (62 | ) | | | — | | | | — | | | | 13 | | Depreciation,write-off and impairment of property, plant and equipment | | | 5,289 | | | | — | | | | 5,289 | | | | 833 | | | | — | | | | — | | | | 6,122 | | Accrued expenses and others | | | 17,715 | | | | — | | | | 17,715 | | | | 1,003 | | | | — | | | | — | | | | 18,718 | | Deferred revenue from Reward Program | | | 5,784 | | | | — | | | | 5,784 | | | | (299 | ) | | | — | | | | — | | | | 5,485 | | Credit impairment losses | | | 1,458 | | | | — | | | | 1,458 | | | | 179 | | | | — | | | | — | | | | 1,637 | | Recognition of right-of-use assets and lease liabilities | | | — | | | | 488 | | | | 488 | | | | 281 | | | | — | | | | — | | | | 769 | | Change in value of financial assets at FVOCI | | | (6 | ) | | | — | | | | (6 | ) | | | — | | | | (1 | ) | | | — | | | | (7 | ) | Contract asset, contract liability and contract cost relating to customer contract | | | (661 | ) | | | — | | | | (661 | ) | | | 552 | | | | — | | | | — | | | | (109 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 29,654 | | | | 488 | | | | 30,142 | | | | 2,487 | | | | (1 | ) | | | — | | | | 32,628 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net deferred tax liabilities after offsetting: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation of property, plant and equipment | | | (1,117 | ) | | | — | | | | (1,117 | ) | | | (1,152 | ) | | | — | | | | (13 | ) | | | (2,282 | ) | Recognition ofright-of-use assets and lease liabilities | | | — | | | | 16 | | | | 16 | | | | 45 | | | | — | | | | — | | | | 61 | | Deferred revenue from Reward Program | | | 157 | | | | — | | | | 157 | | | | 109 | | | | — | | | | — | | | | 266 | | Accrued expenses and others | | | 138 | | | | — | | | | 138 | | | | 427 | | | | — | | | | 2 | | | | 567 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (822 | ) | | | 16 | | | | (806 | ) | | | (571 | ) | | | — | | | | (11 | ) | | | (1,388 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 28,832 | | | | 504 | | | | 29,336 | | | | 1,916 | | | | (1 | ) | | | (11 | ) | | | 31,240 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) |
Deferred tax assets and liabilities recognized and the movements during 20162018 | | | | | | | | | | | | | | | | | | | | | | | | As of
January 1,
2016 | | | (Charged)/ credited to
profit or loss | | | Charged to other
comprehensive
income | | | Exchange
differences | | | As of
December 31,
2016 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | | | | | | Deferred tax assets arising from: | | | | | | | | | | | | | | | | | | | | | | | | | | | Write-down for obsolete inventories | | | 217 | | | | (42 | ) | | | — | | | | — | | | | 175 | | Write-off and impairment of certain network equipment and related assets | | | 4,152 | | | | 386 | | | | — | | | | — | | | | 4,538 | | Accrued operating expenses | | | 14,125 | | | | 3,844 | | | | — | | | | — | | | | 17,969 | | Deferred revenue from Reward Program | | | 5,350 | | | | 446 | | | | — | | | | — | | | | 5,796 | | Impairment loss for doubtful accounts | | | 1,579 | | | | (282 | ) | | | — | | | | — | | | | 1,297 | | Change in value of available-for-sale financial assets | | | — | | | | — | | | | (8 | ) | | | — | | | | (8 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,423 | | | | 4,352 | | | | (8 | ) | | | — | | | | 29,767 | | | | | | | | Deferred tax liabilities arising from: | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation allowance in excess of related depreciation | | | (203 | ) | | | (73 | ) | | | — | | | | (16 | ) | | | (292 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 25,220 | | | | 4,279 | | | | (8 | ) | | | (16 | ) | | | 29,475 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | As of
January 1,
2018 | | | (Charged)/
credited
to profit
or loss | | | Charged to
other
comprehensive
income | | | Exchange
differences | | | As of
December 31,
2018 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | Net deferred tax assets after offsetting: | | | | | | | | | | | | | | | | | | | | | Write-down of obsolete inventories | | | 120 | | | | (45 | ) | | | — | | | | — | | | | 75 | | Depreciation,write-off and impairment of property, plant and equipment | | | 7,082 | | | | (1,793 | ) | | | — | | | | — | | | | 5,289 | | Accrued expenses and others | | | 18,934 | | | | (1,219 | ) | | | — | | | | — | | | | 17,715 | | Deferred revenue from Reward Program | | | 5,943 | | | | (159 | ) | | | — | | | | — | | | | 5,784 | | Credit impairment losses | | | 1,294 | | | | 164 | | | | — | | | | — | | | | 1,458 | | Change in value of financial assets at FVOCI | | | (6 | ) | | | — | | | | — | | | | — | | | | (6 | ) | Contract asset, contract liability and contract cost relating to customer contract | | | (2,879 | ) | | | 2,218 | | | | — | | | | — | | | | (661 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 30,488 | | | | (834 | ) | | | — | | | | — | | | | 29,654 | | | | | | | | | | | | | | | | | | | | | | | Net deferred tax liabilities after offsetting: | | | | | | | | | | | | | | | | | | | | | Depreciation of property, plant and equipment | | | (362 | ) | | | (736 | ) | | | — | | | | (19 | ) | | | (1,117 | ) | Others | | | — | | | | 296 | | | | — | | | | (1 | ) | | | 295 | | | | | | | | | | | | | | | | | | | | | | | | | | (362 | ) | | | (440 | ) | | | — | | | | (20 | ) | | | (822 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 30,126 | | | | (1,274 | ) | | | — | | | | (20 | ) | | | 28,832 | | | | | | | | | | | | | | | | | | | | | | |
Deferred tax assets are recognized for deductible temporary differences and tax losses carry-forwards only to the extent that the realization of the related tax benefit through future taxable profits is probable. Certain subsidiaries of the Group did not recognize deferred tax assets of RMB1,716,000,000 (2016: RMB1,562,000,000) and RMB2,079,000,000 (2016: RMB1,349,000,000)RMB8,677 million (2018: RMB6,476 million) in respect of deductible temporary differences and tax losses amounting to RMB6,885,000,000 (2016: RMB6,249,000,000) and RMB8,713,000,000 (2016: RMB5,504,000,000) respectivelyRMB42,469 million (2018: RMB29,026 million) that can be carried forward against future taxable income as of December 31, 2017.2019. The deductible tax losses are allowed to be carried forward inwithin next five years against the future taxable profits.profits, while those of high-tech enterprises are allowed to be within next ten years. 2123 | AVAILABLE-FOR-SALEFAIR VALUE MEASUREMENT OF FINANCIAL ASSETS INSTRUMENTS |
| | | | | | | | | | | | | | | | | | | As of
December 31,
2017 | | | As of
December 31,
2016 | | | | | Note | | | Million | | | Million | | | | | | Equity investments | | | (i) | | | | 44 | | | | 35 | | Wealth management products issued by banks | | | (ii) | | | | 65,630 | | | | 31,897 | | | | | | | | | | | | | | | | | | | | | | 65,674 | | | | 31,932 | | | | | | Less: current portion | | | | | | | (65,630 | ) | | | (31,897 | ) | | | | | | | | | | | | | | | | | | Non-current portion | | | | | | | 44 | | | | 35 | | | | | | | | | | | | | | |
| | | | | | | | | | | | Financial assets at fair
value through other
comprehensive
income(“FVOCI”)(i) | | | Financial assets at fair
value through profit
or loss (“FVPL”)(ii) | | | | | Million | | | Million | | As of December 31, 2018 | | | | | | | | | -Current portion | | | — | | | | 76,425 | | -Non-current portion | | | 587 | | | | 501 | | | | | | | | | | | | | | 587 | | | | 76,926 | | Addition | | | — | | | | 161,343 | | Maturity | | | — | | | | (129,505 | ) | Fair value gains recognized in profit or loss | | | — | | | | 5,495 | | Fair value losses recognized in other comprehensive income, before tax | | | (74 | ) | | | — | | | | | | | | | | | As of December 31, 2019 | | | 513 | | | | 114,259 | | Less: Current portion | | | — | | | | (114,259 | ) | | | | | | | | | | Non-current portion | | | 513 | | | | — | | | | | | | | | | |
Note: | | (i) | The category of FVOCI is primarily the equity investments in listed companies that are not held for trading. The equity investments represent the Group’s investments in other companies at fair values (level(mainly level 1: quoted price (unadjusted) in active markets; or level 3: inputs for the assets or liability that are not based on observable market data (that is, unobservable inputs))markets) through other comprehensive income as of December 31, 2017.2018 and 2019. |
| | (ii) | The wealth management productscategory of FVPL mainly comprises WMPs offered by various financial institutions in China amounting to RMB103,328 million and the Group’s investment in the convertible bonds issued by banksSPD Bank (“CB”) amounting to RMB9,928 million. All the WMPs will mature within one year with variable return rates indexed to the performance of underlying assets. As of December 31, 2017,2019 and 2018, they were measured at fair values (level 3: inputs for the carrying amount approximated the fair value (level 3 of fair value hierarchy)assets or liabilities that are not based on observable market data (that is unobservable inputs)). The fair values arewere determined based on cash flow discounted assuming the expected return will be obtained upon maturity. The CB was acquired by Guangdong Mobile, a wholly-owned subsidiary of the Company in October 2019 at a purchase consideration of RMB9,085 million upon SPD Bank publicly issued the instruments. The CB have been listed for trading and can be converted into equity shares of SPD Bank from May 4, 2020 to October 27, 2025. The CB were measured at the fair value as level 1 of fair value hierarchy. |
There were no transfers between the levels of fair value hierarchy for the year ended December 31, 2018 and 2019. | 24 | RESTRICTED BANK DEPOSITS |
22 | RESTRICTED BANK DEPOSITS |
| | | | As of December 31, 2017 | | | As of December 31, 2016 | | | | | | | | | | | | | | | | | Non-current
assets | | | Current
assets | | | Total | | | Non-current
assets | | | Current
assets | | | Total | | | As of December 31, 2019 | | | As of December 31, 2018 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Non-current
assets
Million | | | Current
assets
Million | | | Total
Million | | | Non-current
assets
Million | | | Current
assets
Million | | | Total
Million | | Restricted bank deposits | | | | | | | | | | | | | | | | | | | | | | | | | - Statutory deposit reserves (Note) | | | 3,453 | | | | — | | | | 3,453 | | | | 4,527 | | | | — | | | | 4,527 | | | | 8,586 | | | | — | | | | 8,586 | | | | 4,486 | | | | — | | | | 4,486 | | - Deposited customer reserves (Note) | | | 3,047 | | | | — | | | | 3,047 | | | | — | | | | — | | | | — | | | | 1,435 | | | | — | | | | 1,435 | | | | 7,882 | | | | — | | | | 7,882 | | - Pledged bank deposits | | | 4 | | | | 691 | | | | 695 | | | | 1 | | | | 197 | | | | 198 | | | | 42 | | | | 371 | | | | 413 | | | | 1 | | | | 9 | | | | 10 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,504 | | | | 691 | | | | 7,195 | | | | 4,528 | | | | 197 | | | | 4,725 | | | | 10,063 | | | | 371 | | | | 10,434 | | | | 12,369 | | | | 9 | | | | 12,378 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Note: | The statutory deposit reserves and the deposited customer reserves are deposited by the subsidiaries of the Company, China Mobile Finance and China MobileE-Commerce, Co., Ltd., a wholly-owned subsidiary of the Company, respectively, in accordance with relevant requirements of the People’s Bank of China (“PBOC”), which are not available for use in the Group’s daily operations. |
| | | | | | | | | | | | As of | | | As of | | | | | December 31,
2017 | | | December 31,
2016 | | | | | Million | | | Million | | | | | SIM cards, handsets and other terminals | | | 8,357 | | | | 7,696 | | Other consumables | | | 1,865 | | | | 1,136 | | | | | | | | | | | | | | | | | 10,222 | | | | 8,832 | | | | | | | | | | |
| | | | | | | | | | | | As of | | | As of | | | | | December 31,
2019 Million | | | December 31,
2018 Million | | Handsets, SIM cards and other terminals | | | 5,205 | | | | 6,939 | | Other consumables | | | 2,133 | | | | 1,918 | | | | | | | | | | | | | | 7,338 | | | | 8,857 | | | | | | | | | | |
Aging analysis of accounts receivable, net of allowance for impairment loss of doubtful accountsallowance is as follows: | | | | As of | | | As of | | | | | | December 31,
2017 | | | December 31,
2016 | | | | | | | | | Million | | | Million | | | As of | | | As of | | | | | December 31, 2019
Million | | | December 31, 2018
Million | | Within 30 days | | | 13,711 | | | | 10,974 | | | | 14,353 | | | | 11,160 | | 31 - 60 days | | | 3,002 | | | | 2,726 | | | | 3,789 | | | | 3,680 | | 61 - 90 days | | | 1,798 | | | | 1,540 | | | | 3,035 | | | | 2,358 | | Over 90 days | | | 5,642 | | | | 3,805 | | | 90 days - 1 year | | | | 9,575 | | | | 7,649 | | Over 1 year | | | | 1,942 | | | | 1,693 | | | | | | | | | | | | | | | | | | | 32,694 | | | | 26,540 | | | | | 24,153 | | | | 19,045 | | | | | | | | | | | | | | | |
Accounts receivable primarily comprise receivables from customers and telecommunications operators. Accounts receivable from the provision of telecommunications services to customers are mainly due for payment within one month from date of billing. Customers with balances that are overdue or exceedhave exceeded credit limits are required to settle all outstanding balances before any further telecommunications services can be provided. The increase of accounts receivable over 90 days is mainly due to receivables arisingthe increase in revenue from other telecommunications operatorscorporate markets. Customers from corporate markets normally enjoy longer credit term and certain corporate customers that are within credit term. Accounts receivable are expected to be recovered within one year.
24 | ACCOUNTS RECEIVABLE (CONTINUED) |
have better creditability. | | (b) | Impairment loss allowance of accounts receivable |
Impairment loss in respect of accounts receivable is recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against accounts receivable directly.
The following table summarizes the changes in impairment loss allowance of doubtful accounts:accounts receivable: | | | | | | | | | | | | 2019 | | | 2018 | | | | | Million | | | Million | | As of January 1 | | | 7,269 | | | | 5,863 | | Credit loss recognized | | | 5,833 | | | | 4,480 | | Accounts receivable written off | | | (3,545 | ) | | | (3,074 | ) | | | | | | | | | | As of December 31 | | | 9,557 | | | | 7,269 | | | | | | | | | | |
| | | | | | | | | | | | 2017 | | | 2016 | | | | | Million | | | Million | | | | | As of January 1 | | | 5,762 | | | | 6,549 | | Impairment loss recognized | | | 3,415 | | | | 3,797 | | Accounts receivable written off | | | (3,509 | ) | | | (4,584 | ) | | | | | | | | | | | | | As of December 31 | | | 5,668 | | | | 5,762 | | | | | | | | | | |
| 27 | (c) | Past due but not impaired |
The aging analysis of the accounts receivable that are past due but not impaired is as follows:
| | | | | | | | | | | | As of | | | As of | | | | | December 31,
2017 | | | December 31,
2016 | | | | | Million | | | Million | | | | | Past due within 1 month | | | 848 | | | | 577 | | | | | | | | | | |
As of December 31, 2017, accounts receivable of RMB848,000,000 (2016: RMB577,000,000) were past due but not impaired. Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.
Remaining receivables that were neither past due nor impaired relate to a wide range of customers for which there was no recent history of default. The Group does not hold any collateral over these balances.
25 | OTHER RECEIVABLES, PREPAYMENTS AND OTHER CURRENT ASSETS |
Other receivables, comprise certain items which are measured at amortized cost, are expected to be recovered within one year,year. They primarily includinginclude interest receivable from banks, utilities deposits, and rental deposits, short-term loans and short-term debt investments; Among which, short-term loans of RMB13,650,000,000 (2016: RMB4,650,000,000) granted to other companiesChina Tower through China Mobile Finance atwas RMB7,450 million (2018: RMB11,000 million), and other short-term loans granted to banks and other financial institutions as well as short-term debt investments purchased through China Mobile Finance was RMB11,464 million (2018: RMB13,260 million). The interest rates of short-term loans are mutually agreed among the interest rate agreed by each partyparties with reference to the market interest rate.rates. Prepayments and other current assets primarily consist of rentalmaintenance prepayments, maintenancepower and utilities prepayments and input VATvalue-added tax to be deducted. As of December 31, 20162018 and 2017,2019, there were no significant overdue amounts for other receivables. 2628 | AMOUNTS DUE FROM/TO ULTIMATE HOLDING COMPANY |
Amount due from ultimate holding company is unsecured, interest free, repayable on demand and arising in the ordinary course of business. As of December 31, 2017,2019, amount due to ultimate holding company comprises the short-term deposits of CMCC and its subsidiaries excluding the Group (“CMCC Group”) in China Mobile Finance amounting to RMB8,611,000,000 (2016: RMB5,552,000,000)RMB21,637 million (2018: RMB10,873 million) and the corresponding interest payable arising from the deposits. The deposits are unsecured and carry interest at prevailing market rate. Bank deposits represent term deposits with banks with original maturity exceeding three months. The applicable interest rate is determined in accordance with the benchmark interest rate published by PBOC or with reference to the market interest rate. 2830 | CASH AND CASH EQUIVALENTS |
| | | | As of | | | As of | | | | | | December 31,
2017 | | | December 31,
2016 | | | | | | | | | Million | | | Million | | | As of | | | As of | | | | | December 31, 2019
Million | | | December 31, 2018
Million | | Bank deposits with original maturity within three months | | | 5,907 | | | | 15,115 | | | | 8,959 | | | | 3,470 | | Cash at banks and in hand | | | 114,729 | | | | 75,298 | | | Cash at banks and on hand | | | | 166,974 | | | | 53,832 | | | | | | | | | | | | | | | | | | | 175,933 | | | | 57,302 | | | | | 120,636 | | | | 90,413 | | | | | | | | | | | | | | | |
29 | INTEREST-BEARING BORROWINGS |
| | | | | | | | | | | As of | | | As of | | | | December 31
2017 | | | December 31,
2016 | | | | Million | | | Million | | | | | Bonds
| | | — | | | | 4,998 | | | | | | | | | | |
As of December 31, 2016, the bonds represented the balance of fifteen-year guaranteed bonds issued by Guangdong Mobile, a wholly-owned subsidiary of the Company, with a principal amount of RMB5,000,000,000, at an issue price equal to the face value of the bonds. The bonds were unsecured and bear interest at the rate of 4.5% per annum which was payable annually. The bonds was repaid on October 28, 2017.
Accounts payable primarily include payables for expenditure of network expansion, maintenance and interconnection expenses. The aging analysis of accounts payable is as follows: | | | | As of | | | As of | | | | | | December 31,
2017 | | | December 31,
2016 | | | | | | | | | Million | | | Million | | | As of | | | As of | | | | | December 31, 2019
Million | | | December 31, 2018
Million | | Payable in the periods below: | | | | | | | | | | Within 1 month or on demand | | | 201,429 | | | | 215,775 | | | | 139,856 | | | | 164,081 | | After 1 month but within 3 months | | | 13,086 | | | | 14,677 | | | | 6,270 | | | | 8,902 | | After 3 months but within 6 months | | | 7,660 | | | | 8,231 | | | | 4,839 | | | | 7,349 | | After 6 months but within 9 months | | | 2,761 | | | | 4,342 | | | | 4,569 | | | | 3,411 | | After 9 months but within 12 months | | | 8,233 | | | | 7,813 | | | | 9,284 | | | | 7,104 | | | | | | | | | | | | | | | | | | | 164,818 | | | | 190,847 | | | | | 233,169 | | | | 250,838 | | | | | | | | | | | | | | | |
All of the accounts payable are expected to be settled within one year or are repayable on demand. Deferred revenue primarily includes prepaid service fees received from customers and unredeemed point rewards. | | | | | | | | | | | | 2019 | | | 2018 | | | | | Million | | | Million | | As of January 1 | | | | | | | | | - Current portion | | | 63,185 | | | | 84,897 | | -Non-current portion | | | 4,881 | | | | 2,888 | | | | | | | | | | | | | | 68,066 | | | | 87,785 | | Additions during the year | | | 256,432 | | | | 299,383 | | Recognized in the consolidated statements of comprehensive income | | | (259,812 | ) | | | (319,102 | ) | | | | | | | | | | As of December 31 | | | 64,686 | | | | 68,066 | | Less: Current portion | | | (57,825 | ) | | | (63,185 | ) | | | | | | | | | | Non-current portion | | | 6,861 | | | | 4,881 | | | | | | | | | | |
| | | | | | | | | | | | 2017 | | | 2016 | | | | | Million | | | Million | | As of January 1 | | | | | | | | | - Current portion | | | 84,289 | | | | 78,100 | | -Non-current portion | | | 2,175 | | | | 1,291 | | Additions during the year | | | 352,011 | | | | 359,626 | | Recognized in the consolidated statements of comprehensive income | | | (350,305 | ) | | | (352,553 | ) | | | | | | | | | | | | | As of December 31 | | | 88,170 | | | | 86,464 | | Less: Current portion | | | (85,282 | ) | | | (84,289 | ) | | | | | | | | | | | | | Non-current portion | | | 2,888 | | | | 2,175 | | | | | | | | | | |
3233 | ACCRUED EXPENSES AND OTHER PAYABLES |
| | | | | | | | | | | | As of | | | As of | | | | | December 31,
2017 | | | December 31,
2016 | | | | | Million | | | Million | | | | | Receipts-in-advance | | | 73,583 | | | | 75,819 | | Other payables | | | 26,643 | | | | 24,523 | | Accrued salaries, wages, labor service expenses and other benefits | | | 6,535 | | | | 6,241 | | Accrued expenses | | | 84,105 | | | | 74,367 | | | | | | | | | | | | | | | | | 190,866 | | | | 180,950 | | | | | | | | | | |
33 | EQUITY SETTLED SHARE-BASED TRANSACTIONS |
Pursuant to a resolution passed at the Annual General Meeting held on June 24, 2002, the current share option scheme (the “Current Scheme”) was adopted.
Under the Current Scheme, the directors of the Company may, at their discretion, invite employees, including executive directors andnon-executive directors of the Company, any of its holding companies and any of their respective subsidiaries and any entity in which the Company or any of its subsidiaries holds an equity interest, to receive options to subscribe for shares of the Company. The consideration payable for the grant of option under the Current Scheme is HK$1.00.
The maximum aggregate number of shares which can be subscribed for pursuant to options that are or may be granted under the above scheme equals to 10% of the total issued share capital of the Company as of the date of adoption of the Current Scheme. Options lapsed or cancelled in accordance with the terms of the Current Scheme will not be counted for the purpose of calculating this 10% limit.
The HKEX requires the exercise price of options to be at least the higher of the closing price of the shares on the HKEX on the date on which the option was granted and the average closing price of the shares on the HKEX for the five trading days immediately preceding the date on which the option was granted.
For options granted under the Current Scheme, the exercise price of options shall be determined by the directors of the Company at their discretion provided that such price may not be set below a minimum price which is the highest of:
| | | | | | | | | | | | As of | | | As of | | | | | December 31, 2019
Million | | | December 31, 2018
Million | | Receipts-in-advance | | | 69,421 | | | | 69,629 | | Other payables | | | 28,962 | | | | 31,990 | | Accrued salaries, wages and other benefits | | | 7,213 | | | | 6,950 | | Accrued expenses | | | 76,772 | | | | 87,003 | | | | | | | | | | | | | | 182,368 | | | | 195,572 | | | | | | | | | | |
| 34 | (i) | the closing price of the shares on the HKEX on the date on which the option was granted; andCAPITAL, RESERVES AND DIVIDENDS |
| | (ii)(a) | the average closing price of the shares on the HKEX for the five trading days immediately preceding the date on which the option was granted.Share capital |
Under the Current Scheme, the term of the option is determined by the directors at their discretion, provided that all options shall be exercised within 10 years after the date on which the option is granted.
No options were outstanding as of December 31, 2016 and 2017.
No share options were granted to the directors of the company or other employees of the Group or lapsed during 2016 and 2017.
34 | CAPITAL, RESERVES AND DIVIDENDS |
Ordinary shares, issued and fully paid: | | | | | | | | | | | | | | | | | | | | | | Equivalent | | | | | Number | | | HK$ | | | RMB | | | | | of shares | | | Million | | | Million | | As of January 1 and December 31, 2016 and 2017 | | | 20,475,482,897 | | | | 382,263 | | | | 402,130 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Number | | | HK$ | | | Equivalent
RMB | | | | | of shares | | | Million | | | Million | | As of January 1 and December 31, 2018 and 2019 | | | 20,475,482,897 | | | | 382,263 | | | | 402,130 | | | | | | | | | | | | | | |
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets. | 34 | CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
| | (i) | Dividends attributable to the year: |
| | | | | | | | | | | | | | | | 2017 Million | | | 2016 Million | | | 2015 Million | | Ordinary interim dividend declared and paid of HK$1.623 (equivalent to approximately RMB1.409) (2016: HK$1.489 (equivalent to approximately RMB1.273); 2015: HK$1.525 (equivalent to approximately RMB1.203)) per share | | | 28,211 | | | | 26,227 | | | | 25,629 | | | | | | Special dividend declared and paid of HK$3.200 (equivalent to approximately RMB2.777) per share | | | 55,621 | | | | — | | | | — | | | | | | Ordinary final dividend proposed after the balance sheet date of HK$1.582 (equivalent to approximately RMB1.322) (2016: HK$1.243 (equivalent to approximately RMB1.112); 2015: HK$1.196 (equivalent to approximately RMB1.002)) per share | | | 27,077 | | | | 22,766 | | | | 20,516 | | | | | | | | | | | | | | | | | | 110,909 | | | | 48,993 | | | | 46,145 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Ordinary interim dividend declared and paid of HK$1.527 (equivalent to approximately RMB1.343) (2018: HK$1.826 (equivalent to approximately RMB1.540); 2017: HK$1.623 (equivalent to approximately RMB1.409)) per share | | | 28,206 | | | | 32,870 | | | | 28,211 | | Special dividend declared and paid of HK$3.200 (equivalent to approximately RMB2.777) per share in 2017 | | | — | | | | — | | | | 55,621 | | Ordinary final dividend proposed after the balance sheet date of HK$1.723 (equivalent to approximately RMB1.543 million) (2018: HK$1.391 (equivalent to approximately RMB1.219); 2017: HK$1.582 (equivalent to approximately RMB1.322)) per share | | | 31,602 | | | | 24,955 | | | | 27,077 | | | | | | | | | | | | | | | | | | 59,808 | | | 57,825 | | | 110,909 | | | | | | | | | | | | | | |
The proposed ordinary final dividend, which is declared in Hong Kong dollar is translated into RMB with reference to the rate HK$1 = RMB0.83591,RMB0.89578, being the rate announced by the State Administration of Foreign Exchange in the PRC on December 29, 2017 (December 31, 2016: HK$1 = RMB0.89451; December 31, 2015: HK$1 = RMB0.83778).2019. As the ordinary final dividend iswas declared after the balance sheet date, such dividend is not recognized as liability as of December 31, 2017. 2019.34 | CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
In accordance with the 2009 Notice and the PRC enterprise income tax law, the Company is required to withhold enterprise income tax equal to 10% of any dividend, when it is distributed tonon-resident enterprise shareholders whose names appeared on the Company’s register of members, as of the record date for such dividend, and who were not individuals. | 34 | CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
| | (ii)(b) | Dividends (Continued) |
| (ii) | Dividends attributable to the previous financial year, approved and paid during the year: |
| | | | | | | | | | | | | | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Ordinary final dividend in respect of the previous financial year, approved and paid during the year, of HK$1.391 (equivalent to approximately RMB1.219) (2018: HK$1.582 (equivalent to approximately RMB1.322); 2017: HK$1.243 (equivalent to approximately RMB1.112)) per share | | | 25,059 | | | | 27,060 | | | | 22,204 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Million | | | Million | | | Million | | Ordinary final dividend in respect of the previous financial year, approved and paid during the year, of HK$1.243 (equivalent to approximately RMB1.112) (2016: HK$1.196 (equivalent to approximately RMB1.002); 2015: HK$1.380 (equivalent to approximately RMB1.089)) per share | | | 22,204 | | | | 20,764 | | | | 22,283 | | | | | | | | | | | | | | |
| 34 | (c) | Nature and purpose of reservesCAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
| | (i)(c) | Nature and purpose of different reserves |
The capital reserve mainly comprises the following: | – | RMB295,665,000,000 debit balance brought forward as a result of the elimination of goodwill arising on the acquisition of subsidiaries before January 1, 2001 against the capital reserve; |
RMB295,665 million debit balance brought forward as a result of the elimination of goodwill arising on the acquisition of subsidiaries before January 1, 2001 against the capital reserve; Share of other comprehensive income/(loss) of investments accounted for using the equity method; The changes in fair value of financial assets at FVOCI, net of tax, until the financial assets are derecognized; and The difference between the consideration and the carrying amounts of net assets of acquired business under business combinations under common control. | | –(ii) | Share of other comprehensive income/(loss) of investments accounted for using the equity method; |
| – | The changes in fair value ofavailable-for-sale financial assets through other comprehensive income, net of tax, until the financial assets are derecognised; and |
| – | The difference between the consideration and the aggregate carrying amounts of Target Assets and Businesses acquired from the controlling party under business combinations under common control (see note 2(b)). |
34 | CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
| (c) | Nature and purpose of reserves (Continued) |
| (ii) | PRC statutory reserves |
PRC statutory reserves mainly include statutory surplus reserve and discretionary surplus reserve. In accordance with the Company Law of the PRC, domestic enterprises in Mainland China are required to transfer 10% of their profit after taxation, as determined under accounting principles generally accepted in the PRC (“PRC GAAP”), to the statutory surplus reserve until such reserve balance reaches 50% of the registered capital of relevant Mainland subsidiaries. Moreover, upon a resolution made by the shareholders, a certain percentage of domestic enterprises’ profit after taxation, as determined under PRC GAAP, is transferred to the discretionary surplus reserve. During the year, appropriations were made by such subsidiaries to the statutory surplus reserves and discretionary surplus reserves accordingly. The statutory and discretionary surplus reserves can be used to reduce previous years’ losses, if any, and may be converted intopaid-up capital, provided that the statutory reserve after such conversion is not less than 25% of the registered capital of relevant subsidiaries. In accordance with relevant regulations issued by the Ministry of Finance of the PRC, a subsidiary of the Company, China Mobile Finance, is required to set aside a reserve through appropriations of profit after tax according to a certain ratio of the ending balance of its gross risk-bearing assets to cover potential losses against such assets. | 34 | CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
| | (iii)(c) | Nature and purpose of reserves (Continued) |
The exchange reserve comprises all foreign exchangecurrency translation differences arising from the translation of theforeign currency denominated financial statements of overseas entities.enterprises. The reserve is dealt with in accordance with the accounting policies set out in note 2(x). 34 | CAPITAL, RESERVES AND DIVIDENDS (CONTINUED) |
The Group’s primary objectives of capital management are to maintain a reasonable capital structure and to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders. The Group actively and regularly reviews and manages its capital structure to stabilize the capital position and prevent operation risk. Meanwhile, the Group will maximize the shareholders’ return when having high level of borrowings and will make adjustment on the capital structure in accordance with the changes in economic conditions. The Group monitors capital on the basis of totaldebt-to-book capitalization ratio. This ratio is calculated as total borrowings divided by book capitalization (equal to the total equity attributable to equity shareholders of the Company as shown in the consolidated balance sheets and total borrowings). As of December 31, 2017,2019 and 2018, the Group’s totaldebt-to-book capitalization ratio was nil (2016: 0.5%).nil. Except for China Mobile Finance that is subject to certain capital requirements imposed by China Banking and Insurance Regulatory Commission, the Company and its other subsidiaries are not subject to externally imposed capital requirements. | 35 | RELATED PARTY TRANSACTIONS |
| | (a) | Transactions with CMCC Group |
The following is a summary of principal related party transactions entered into by the Group with CMCC Group for the years ended December 31, 2015, 20162017, 2018 and 2017.2019. The majority of these transactions also constitute continuing connected transactions as defined under Chapter 14A of Listing Rules. Further details of these continuing connected transactions are disclosed under the paragraph “Connected Transactions” in the Report of Directors. | | | | | | | | | | | | | | | | | | Note | | 2019
Million | | | 2018
Million | | | 2017
Million | | Telecommunications services revenue | | (i) | | | 495 | | | | 71 | | | | 47 | | Property leasing and management services revenue | | (ii) | | | 197 | | | | 226 | | | | 188 | | Telecommunications services charges | | (i) | | | 103 | | | | — | | | | — | | Property leasing and management services charges | | (ii) | | | 1,129 | | | | 1,009 | | | | 999 | | Charges for use of network assets | | (iii) | | | 1,448 | | | | 2,308 | | | | 2,494 | | Charges of use of network capacity | | (iii) | | | 30 | | | | 402 | | | | 1,047 | | Interest expenses | | (iv) | | | 187 | | | | 142 | | | | 21 | | Short-term bank deposits received | | (iv) | | | 21,637 | | | | 10,873 | | | | 8,611 | | Short-term bank deposits repaid | | (iv) | | | 10,873 | | | | 8,611 | | | | 5,552 | | Consideration of assets transferred | | (v) | | | 873 | | | | — | | | | — | | | | | | | | | | | | | | | | |
The outstanding balances related to transactions with CMCC Group are included in the following accounts captions summarized as follows: | | | | | | | | | | | | | | | | | | | As of | | | As of | | | | | | | | December 31,
2019 | | | December 31, 2018 | | | | | Note | | | Million | | | Million | | Accounts receivable | | | | | | | 630 | | | | 282 | | Other receivables | | | | | | | 277 | | | | 145 | | Prepayments and other current assets | | | | | | | 2 | | | | 5 | | Amounts due from ultimate holding company | | | | | | | 1,350 | | | | 570 | | Right-of-use assets | | | | | | | 399 | | | | — | | Lease liabilities | | | | | | | 468 | | | | — | | Accounts payable | | | | | | | 6,741 | | | | 5,825 | | Accrued expenses and other payables | | | | | | | 90 | | | | 80 | | Amounts due to ultimate holding company | | | (iv) | | | | 21,677 | | | | 11,020 | | | | | | | | | | | | | | |
These amounts arise in the ordinary course of business and with terms determined through mutual negotiation. | | | | | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Note | | Million | | | Million | | | Million | | | | | | | Telecommunications services revenue | | (i) | | | 47 | | | | 159 | | | | 474 | | Property leasing and management services revenue | | (ii) | | | 188 | | | | 197 | | | | 191 | | Property leasing and management services charges | | (ii) | | | 999 | | | | 976 | | | | 956 | | Network assets leasing charges | | (iii) | | | 2,494 | | | | 2,738 | | | | 4,376 | | Network capacity leasing charges | | (iii) | | | 1,047 | | | | 2,696 | | | | 4,757 | | Entrusted loans received | | (iv) | | | — | | | | — | | | | 8,592 | | Entrusted loans repaid | | (iv) | | | — | | | | — | | | | 18,834 | | Short-term bank deposits received | | (iv) | | | 8,611 | | | | 5,552 | | | | 7,274 | | Short-term bank deposits repaid | | (iv) | | | 5,552 | | | | 7,274 | | | | 4,181 | | Interest expenses | | (iv) | | | 21 | | | | 7 | | | | 194 | | | | | | | | | | | | | | | | |
| 35 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| (a) | Transactions with CMCC Group (Continued) |
Note: | | (i) | The amounts represent telecommunications services settlement received/receivable or paid/payable from CMCC Group for the telecommunications project planning, design and construction services, telecommunications line and pipeline construction services, and telecommunications line maintenance services. |
| | (ii) | The amount representsamounts represent the rentalcharges of property leasing and property management fees received/receivable from or paid/payable to CMCC Group in respect of offices, retail outlets and warehouses. For the year ended December 31, 2019, the amounts included the depreciation ofright-of-use assets recognized in relation to the property leasing agreements and the finance cost associated with the lease liabilities. |
| | (iii) | The amounts represent the charges for use of network assets leasing settlement paid/payable to CMCC Group, and theTD-SCDMA network capacity charges paid/payable to CMCC Group. On December 29, 2008, the Company entered into a network capacity leasing agreement with CMCC Group for the provision ofTD-SCDMA related services. Based on the lease classification assessments, the Group does not substantially bear the risks and reward incidental to the ownership of the leased network assets, and accordingly the Group accounts for the network assets leasing and the network capacity leasing as operating leases. |
| | (iv) | The amounts represent the entrusted loans/bank deposits received from or repaid to CMCC Group and interest expenses paid/payable to CMCC Group in respect of the entrusted loans/bank deposits. |
35 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| | (b)(v) | Amounts due from/On August 9, 2019, the Group completed an acquisition of assets related to CMCC Group the “Village Connect” project, at a total consideration of RMB873 million. |
| 35 | RELATED PARTY TRANSACTIONS (CONTINUED) |
Amounts due from/
| (b) | Principal transactions with associates and joint ventures of the Group |
The following is a summary of principal related party transactions entered into by the Group with the associates and joint ventures of the Group for the year ended December 31, 2017, 2018 and 2019. | | | | | | | | | | | | | | | | | | Note | | 2019
Million | | | 2018
Million | | | 2017
Million | | Telecommunications services revenue | | (i) | | | 535 | | | | 604 | | | | 828 | | Property leasing and management services revenue | | (ii) | | | 30 | | | | 40 | | | | 99 | | Interest and other income | | (iii) | | | 6,130 | | | | 4,083 | | | | 4,807 | | Dividend income | | | | | 2,299 | | | | 691 | | | | 847 | | Related costs for use of tower assets | | (iv) | | | 39,843 | | | | 37,837 | | | | 36,335 | | | | | | | | | | | | | | | | |
The outstanding balances related to CMCCtransactions with the associates and joint ventures of the Group other than amount due from/to ultimate holding company, are included in the following accounts captions summarized as follows: | | | | | | | | | | | | As of
December 31,
2017 | | | As of
December 31,
2016 | | | | | Million | | | Million | | | | | Accounts receivable | | | 301 | | | | 354 | | Other receivables | | | 116 | | | | 105 | | Accounts payable | | | 4,580 | | | | 4,251 | | Accrued expenses and other payables | | | 131 | | | | 88 | | | | | | | | | | |
The amounts are unsecured, interest-free, repayable on demand/on contract terms and arise in the ordinary course of business. | | | | | | | | | | | | | | | | As of December 31,
2019 | | | As of December 31,
2018 | | | | | Note | | Million | | | Million | | Accounts receivable | | (i) | | | 225 | | | | 240 | | Interest receivable | | (iii) | | | 831 | | | | 829 | | Right-of-use assets | | (iv) | | | 40,316 | | | | — | | Other receivables | | (v) | | | 9,545 | | | | 12,518 | | Financial assets at FVPL | | (vi) | | | 54,490 | | | | 41,128 | | Bank deposits | | (vii) | | | 59,205 | | | | 44,955 | | Prepayments and other current assets | | | | | 36 | | | | 160 | | Lease liabilities | | (iv) | | | 43,142 | | | | — | | Accounts payable | | (iv) | | | 4,708 | | | | 3,252 | | Bills payable | | (iv) | | | 356 | | | | 135 | | Accrued expenses and other payables | | (iv) | | | 6,511 | | | | 7,301 | | | | | | | | | | | | |
| 35 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| | (c)(b) | SignificantPrincipal transactions with associates and joint ventureventures of the Group and of CMCC Group (Continued) |
The Group has entered into transactions with associates and joint venture of the Group or CMCC Group. The major transactions entered into by the Group and these companies and amounts due from/to these companies are as follows:
| | | | | | | | | | | | | | | | As of
December 31,
2017 | | | As of
December 31,
2016 | | | | | Note | | Million | | | Million | | | | | | Accounts receivable | | (i) | | | 313 | | | | 29 | | Interest receivable | | (ii) | | | 997 | | | | 2,134 | | Other receivables | | (iii) | | | 12,565 | | | | 9,862 | | Proceeds receivable for the transfer of Tower Assets (note 7) | | | | | — | | | | 57,152 | | Prepayments and other current assets | | | | | 51 | | | | 17 | | Available-for-sale financial assets | | (iii) | | | 31,778 | | | | 17,222 | | Bank deposits | | (iii) | | | 62,969 | | | | 37,631 | | Accounts payable | | (iv) | | | 4,479 | | | | 4,076 | | Accrued expenses and other payables | | (iv) | | | 5,429 | | | | 4,185 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | | | Note | | Million | | | Million | | | Million | | | | | | | Telecommunications services revenue | | (i) | | | 828 | | | | 637 | | | | 767 | | Telecommunications services charges | | (v) | | | — | | | | 422 | | | | 774 | | Property leasing and management services revenue | | (vi) | | | 99 | | | | 1 | | | | 6 | | Gain on the transfer of Tower Assets | | (iv) | | | — | | | | — | | | | 15,525 | | Charges for use of tower assets | | (iv) | | | 36,335 | | | | 28,144 | | | | 5,563 | | Interest income | | (ii) | | | 4,807 | | | | 4,140 | | | | 1,699 | | Dividend income | | | | | 847 | | | | 1,944 | | | | 2,842 | | | | | | | | | | | | | | | | |
Note: | | (i) | The amounts represent the telecommunications services revenue received/receivable from the Group’s associates.associates and joint ventures. |
| | (ii) | The amounts represent the property leasing revenue received/receivable from China Tower. |
| (iii) | The amounts primarily represent interest received/receivable from deposits placed with SPD Bank, placements with SPD Bank and short-term loans granted byto China Mobile Finance toTower; and they also include income derived from WMP purchased from SPD Bank and the income from the CB publicly issued by SPD Bank as mentioned in Note 23. |
| (iv) | The amounts primarily represent theright-of-use assets and lease liabilities recognized and the amount paid/payable to China Tower for the use of telecommunications towers. Related costs for use of tower assets include charges for use of tower assets, the depreciation of theright-of-use assets, and the finance cost associated with the lease liabilities. |
| (v) | Other receivables primarily represent the short-term loans granted to China Tower and the proceeds receivable for the transferplacements with SPD Bank and withholding power and utilities expenses and lease charges payable on behalf of China Tower, Assets.etc. The interest raterates of short-term loans are mutually agreed among both parties with reference to the market interest rates. |
| (vi) | The amounts represent the WMP purchased from SPD Bank and the CB publicly issued by SPD Bank. The return rates of WMP are determined with reference to market conditions and the fair values of CB are based on quoted market prices (level 1). |
| (vii) | The amounts represent the deposits placed with SPD Bank, the interest rate of which is determined in accordance with the benchmark interest rate published by PBOC. |
| 35 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| | (c) | Significant transactionsTransactions with associates and joint venture of the Group andventures of CMCC Group (Continued) |
Note (Continued):
In addition, the Group has entered into transactions with associates and joint ventures of CMCC Group during the ordinary course of the Group’s business based on terms comparable to terms of transactions enacted with other entities, the amounts of such transactions and related outstanding balances were not material. | | (iii)(d) | Other receivables primarily represent the short-term loans granted by China Mobile Finance to SPD Bank and China Tower, and withholding power and utilities expenses and lease charges due from China Tower, etc.. The loans will mature by or before December 2018.Available-for-sale financial assets represent the wealth management products purchased from SPD Bank and bank deposits represent the deposits placed with SPD Bank. |
| (iv) | The amounts represent the gain arising from the transfer of Tower Assets on October 31, 2015 (note 7) and the charges paid/payable to China Tower for the use of telecommunications towers and related assets (“Leased Tower”). On July 8, 2016, CMC and China Tower finalized the leasing and pricing arrangement in relation to the lease of Leased Tower, and entered into an agreement (the “Lease Agreement”). Accordingly, the respective provincial companies of CMC and China Tower entered into provincial company service agreements for the leasing of individual Leased Tower based on their actual service requirements. Pursuant to the management’s assessment, the 5 years lease terms of the Lease Agreement does not account for the major part of the economic lives of the Leased Tower and the present value of the minimum lease payments is not considered substantial comparing to the fair value of the corresponding Leased Tower. At the end of the lease term, there is no purchase option granted to the Group to purchase the Leased Tower. The Group also does not bear any gains or losses in the fluctuation in the fair value of the Leased Tower at the end of the lease terms. As a result, the Group does not substantially bear the risks and reward incidental to the ownership of the Leased Tower, and hence the Group accounts for the Leased Tower leasing as operating leases. On January 31, 2018, CMC and China Tower unanimously agreed on supplementary provisions to the Lease Agreement (“Supplementary Agreement”). The Supplementary Agreement mainly included: the adjustments to the pricing of tower products, the term of the agreement shall be 5 years, effective from January 1, 2018 and expiring on December 31, 2022. The Supplementary Agreement will not affect the Group’s judgement on operating lease aforementioned. |
| (v) | The amount represents the telecommunications services charges paid/payable to Union Mobile Pay Co., Ltd., an associate of CMCC Group until July 2016. |
| (vi) | The amount represents the property leasing revenue received/receivable from SPD Bank and China Tower. |
35 | RELATED PARTY TRANSACTIONS (CONTINUED) |
| (d) | Transactions with other government-related entities in the PRC |
The Group is a government-related enterprise and operates in an economic regime currently dominated by entities directly or indirectly controlled by the PRC government through government authorities, agencies, affiliations and other organization (collectively referred to as “government-related entities”). Apart from transactions with CMCC Group (notes 2628 and 35(a)), and associates and joint venture (note 35(c)35(b)) and the transaction to increase contribution to the Fund (note 19)21), the Group has collectively, but not individually, significant transactions with other government-related entities which include but not limited to the following: | – | | rendering and receiving telecommunications services, including interconnection revenue/charges
|
rendering and receiving telecommunications services, including interconnection revenue/charges | – | | purchasing of goods, including use of public utilities
|
purchasing of goods, including use of public utilities | – | | placing of bank deposits
|
These transactions are conducted induring the ordinary course of the Group’s business based on terms comparable to the terms of transactions enacted with other entities that are not government-related. The Group prices all its telecommunications services and products based on commercial negotiations with reference to rules and regulations stipulated by related authorities of the PRC Government, where applicable. The Group has also established its procurement policies and approval processes for purchases of products and services, which do not depend on whether the counterparties are government-related entities or not. | | (e) | For key management personnel remuneration, please refer to note 10. 11. |
| 36 | FINANCIAL RISK MANAGEMENT AND FAIR VALUES |
Exposure to credit, liquidity, interest rate and foreign currency risks arises in the normal course of the Group’s business. The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below: | | (a) | Credit risk and concentration risk |
The Group’s credit risk is primarily attributable to the financial assets in the consolidated balance sheets, which mainly include deposits with banks, wealth management products issued by banks,WMPs (recorded in FVPL), CB (recorded in FVPL), accounts receivable and other receivables. The maximum exposure to credit risk is represented by the carrying amount of the financial assets. Substantially all the Group’s cash at banks and bank deposits are deposited in financial institutions in Mainland China and Hong Kong. The credit risk on liquid funds is limited as the majority of counterparties are financial institutions with high credit ratings assigned by international credit-rating agencies and large state-controlled financial institutions. Wealth management productsWMPs are issued by major domestic banks investing in low risk underlying assets, which mainly consist of bank deposits, treasury bond, central bank bill, local government debt, corporate bond or debt with high credit ratings, and the related credit risks are low. CB are bonds with AAA credit rating bonds issued by SPD Bank, with a low level of credit risks. The accounts receivable of the Group is primarily comprised of receivables due from customers and other telecommunications operators. Accounts receivable from individual customers are spread among an extensive number of customers and the majority of the receivables from customers are due for payment within one month from the date of billing. For corporate customers, the credit period granted by the Group is based on the service contract terms, normally not exceeding 1 year. Other receivables primarily comprise interest receivable from banks, utilities deposits, rental deposits and short-term loans granted to other companies through China Mobile Finance. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis, taking into account the counter parties’ financial position, the Group’s past experience and other factors. As such, management considers the aggregate risks arising from the possibility of credit losses is limited and to be acceptable. ConcentrationsMeanwhile, concentrations of credit risk with respect to accounts receivable are limited due to the Group’s customer base being large and unrelated. As such, management does not expect any significantconsiders the aggregate risks arising from the possibility of credit losses of accounts receivable that have not been provided for by way of allowances as shown in note 24(c).is limited and acceptable.
| 36 | FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED) |
| (a) | Credit risk and concentration risk (Continued) |
| | (b)(ii) | Impairment of financial assets |
The Group has 3 types of assets that are subject to expected credit loss model: | – | Other financial assets at amortized cost |
Accounts receivable and contract assets The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all accounts receivable and contract assets. To measure the expected credit losses, accounts receivable have been grouped by amounts due from individual customers, corporate customers, and other miscellaneous customer groups based on similar credit risk characteristics and ages. The expected loss rate as of December 31, 2018 and 2019 was determined as follows for each customers group of accounts receivable due from individual customers and corporate customers, respectively: | | | | | | | | | | | | | | | | | | | | Within
30 days | | | 31 days to
90 days | | | 91 days to
1 year | | | Over 1
year | | Individual customers | | | | | | | | | | | | | | | | | Expected loss rate | | | 2 | % | | | 20 | % | | | 80 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | Within
180 days | | | 181 days
to 1 year | | | 1 year to 2 years | | | 2 years to
3 years | | | Over 3
years | | Corporate customers | | | | | | | | | | | | | | | | | | | | | Expected loss rate | | | 2 | % | | | 20 | % | | | 60 | % | | | 80 | % | | | 100 | % |
Receivables from other customers are of lower risk, and the expected credit loss is insignificant. Credit impairment losses on accounts receivable and contract assets are presented within other operating expenses. Subsequent recoveries of amounts previously written off are credited against the same line item. Individual receivables which were known to be uncollectible were written off by reducing the carrying amount directly. | 36 | FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED) |
| (a) | Credit risk and concentration risk (Continued) |
| (ii) | Impairment of financial assets (Continued) |
Other financial assets at amortized cost Other financial assets at amortized cost include cash and cash equivalents, bank deposits, other receivables and amounts due from ultimate holding company, etc. They are considered to be of low credit risk and thus the impairment loss allowance recognized is limited to 12 months. Management considers that the expected credit loss is insignificant. Liquidity risk refers to the risk that funds will not be available to meet liabilities as they fall due, and results from timing and amount mismatches of cash inflow and outflow. The Group manages liquidity risk by maintaining sufficient cash balances and bank deposits (which are readily convertible to known amounts of cash) to meet its funding needs, including working capital, principal and interest payments on debts,for short-term deposits of CMCC Group received by China Mobile Finance, dividend payments and capital expenditures. | 36 | FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED) |
| (b) | Liquidity risk (Continued) |
The following table sets out the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on the undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on prevailing rates at the balance sheet date) and the earliest date the Group would be required to repay: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying
amount | | | Total contractual
undiscounted
cash flow | | | Within
1 year or on
demand | | | More than 1 year but
less than 3 years | | | More than 3 years but
less than 5 years | | | More than 5 years | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | As of December 31, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | Accounts payable | | | 164,818 | | | | 164,818 | | | | 164,818 | | | | — | | | | — | | | | — | | Bills payable | | | 2,896 | | | | 2,896 | | | | 2,896 | | | | — | | | | — | | | | — | | Accrued expenses and other payables | | | 182,368 | | | | 182,368 | | | | 182,368 | | | | — | | | | — | | | | — | | Amount due to ultimate holding company | | | 21,677 | | | | 21,677 | | | | 21,677 | | | | — | | | | — | | | | — | | Lease liabilities | | | 74,303 | | | | 80,973 | | | | 23,814 | | | | 39,791 | | | | 9,662 | | | | 7,706 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 446,062 | | | | 452,732 | | | | 395,573 | | | | 39,791 | | | | 9,662 | | | | 7,706 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying
amount | | | Total contractual
undiscounted
cash flow | | | Within
1 year or on
demand | | | More than 1 year but
less than 3 years | | | More than 3 years but
less than 5 years | | | More than 5 years | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | As of December 31, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | Accounts payable | | | 190,847 | | | | 190,847 | | | | 190,847 | | | | — | | | | — | | | | — | | Bills payable | | | 3,221 | | | | 3,221 | | | | 3,221 | | | | — | | | | — | | | | — | | Accrued expenses and other payables | | | 195,572 | | | | 195,572 | | | | 195,572 | | | | — | | | | — | | | | — | | Amount due to ultimate holding company | | | 11,020 | | | | 11,020 | | | | 11,020 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 400,660 | | | | 400,660 | | | | 400,660 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | As of December 31, 2017 | | | | | Carrying
amount | | | Total
contractual undiscounted
cash flow | | | Within 1 year or on
demand | | | | | Million | | | Million | | | Million | | | | | | Accounts payable | | | 233,169 | | | | 233,169 | | | | 233,169 | | Bills payable | | | 3,303 | | | | 3,303 | | | | 3,303 | | Accrued expenses and other payables | | | 190,866 | | | | 190,866 | | | | 190,866 | | Amount due to ultimate holding company | | | 8,646 | | | | 8,646 | | | | 8,646 | | | | | | | | | | | | | | | | | | 435,984 | | | | 435,984 | | | | 435,984 | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | | | Carrying
amount | | | Total
contractual undiscounted
cash flow | | | Within 1
year or on
demand | | | | | Million | | | Million | | | Million | | | | | | Accounts payable | | | 250,838 | | | | 250,838 | | | | 250,838 | | Bills payable | | | 1,206 | | | | 1,206 | | | | 1,206 | | Accrued expenses and other payables | | | 180,950 | | | | 180,950 | | | | 180,950 | | Amount due to ultimate holding company | | | 5,563 | | | | 5,563 | | | | 5,563 | | Interest-bearing borrowings | | | 4,998 | | | | 5,185 | | | | 5,185 | | | | | | | | | | | | | | | | | | 443,555 | | | | 443,742 | | | | 443,742 | | | | | | | | | | | | | | |
| 36 | FINANCIAL RISK MANAGEMENT AND FAIR VALUES (CONTINUED) |
The Group consistently monitors the current and potential fluctuation of interest rates in managing the interest rate risk on a reasonable level. As of December 31, 2017,2019, the Group did not have any interest-bearing borrowings at variable rates, but had RMB8,611,000,000RMB21,637 million of short-term bank deposits placed by CMCC (2016: RMB5,552,000,000 and RMB5,000,000,000 of bonds (note 29))(2018: RMB10,873 million), which waswere at fixed rate and expose the Group to fair value interest rate risk. The Group determines the amount of its fixed rate borrowings depending on the prevailing market condition. Management does not expect fair value interest rate risk to be high as the interest involved will not be significant. As of December 31, 2017,2019, total cash and bank balances of the Group amounted to RMB407,202,000,000 (2016: RMB430,435,000,000)RMB317,166 million (2018: RMB361,567 million), and interest-bearing receivables amounted to RMB13,650,000,000 (2016: RMB62,235,000,000)RMB18,914 million (2018: RMB24,260 million) and WMPs amounted to RMB103,328 million (2018: RMB76,425 million). The interest and other income generated by the assets mentioned above for 20172019 was RMB15,883,000,000 (2016: RMB16,005,000,000; 2015: RMB15,852,000,000)RMB14,408 million (2018: RMB15,885 million; 2017: RMB15,883 million) and the average interest rate was 3.13% (2016: 3.44%3.17% (2018: 3.33%; 2015: 3.75%2017: 3.13%). Assuming the total cash and bank balances, and interest-bearing receivables and WMPs are stable in the coming year and interest rate increases/decreases by 100 basis points, the profit for the year and total equity would approximately increase/decrease by RMB3,182,000,000 (2016: RMB3,695,000,000; 2015: RMB3,531,000,000)RMB3,334 million (2018: RMB3,480 million; 2017: RMB3,182 million). The Group has foreign currency risk as certain cash and deposits with banks are denominated in foreign currencies, principally US dollars and Hong Kong dollars.dollars that is different from the functional currency of the respective group entities. As the amount of the Group’s foreign currency cash and deposits with banks represented 2.5% (2016: 1.2%3.5% (2018: 3.3%) of the total cash and deposits with banks and predominantly all of the business operations of the Group are transacted in RMB, the Group does not expect the appreciation or depreciation of the RMB against foreign currency will materially affect the Group’s financial position and result of operations. AllThe carrying amount of the financial instruments are carried at amountsamortized cost are not materially different from their respective fair values at the balance sheet dates.dates due to the short-terms or repayable on demand nature.
The Group’s capital expenditure contracted for as of December 31 but not provided in the consolidated financial statements were as follows: | | | | 2017 | | | 2016 | | | | | | | | | Million | | | Million | | | 2019 | | | 2018 | | | | | Million | | | Million | | Land and buildings | | | 10,950 | | | | 8,788 | | | | 7,430 | | | | 9,327 | | Telecommunications equipment | | | 32,112 | | | | 26,147 | | | Telecommunications equipment and others | | | | 34,463 | | | | 44,174 | | | | | | | | | | | | | | | | | | | 41,893 | | | | 53,501 | | | | | 43,062 | | | | 34,935 | | | | | | | | | | | | | | | |
| | (b) | Operating lease commitments |
The total future minimum lease payments undernon-cancellable operating leases as of December 31 are as follows:
| | | | | | | | | | | | | | | | | | | | Land and
buildings | | | Leased lines and network
assets | | | Others | | | Total | | | | | Million | | | Million | | | Million | | | Million | | | | | | | As of December 31, 2017 | | | | | | | | | | | | | | | | | Within one year | | | 10,344 | | | | 46,730 | | | | 1,023 | | | | 58,097 | | After one year but within five years | | | 20,372 | | | | 112,465 | | | | 961 | | | | 133,798 | | After five years | | | 4,831 | | | | 1,183 | | | | 58 | | | | 6,072 | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,547 | | | | 160,378 | | | | 2,042 | | | | 197,967 | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | | | | | | | | | | | | | | | | | Within one year | | | 9,222 | | | | 40,078 | | | | 1,184 | | | | 50,484 | | After one year but within five years | | | 18,182 | | | | 119,628 | | | | 812 | | | | 138,622 | | After five years | | | 4,810 | | | | 860 | | | | 45 | | | | 5,715 | | | | | | | | | | | | | | | | | | | | | | | | | | | 32,214 | | | | 160,566 | | | | 2,041 | | | | 194,821 | | | | | | | | | | | | | | | | | | |
The Group leases certain land and buildings, leased lines and network assets, motor vehicles, computer and other office equipmentequipment. From January 1, 2019, in accordance with IFRS 16, the Group has recognizedright-of-use assets for these leases, except for short-term leases, leases oflow-value assets, variable payment leases which are recorded in profit or loss as incurred and contracts reassessed as service arrangements, see note 3(d) and note 16 for further information. The portfolio of the majority short-term leases which were committed by the Group as of December 31, 2019 was similar to the portfolio of short-term leases which were recorded in the profit or loss as incurred during 2019. Therefore, there is no need to disclose short-term lease commitments separately. The total future minimum lease payments undernon-cancellable operating leases.leases as of December 31, 2018 were as follows: | | | | | | | | | | | | | | | | | | | | Land and
buildings | | | Leased lines
and network
assets | | | Others | | | Total | | | | | Million | | | Million | | | Million | | | Million | | As of December 31, 2018 | | | | | | | | | | | | | | | | | Within one year | | | 10,067 | | | | 44,867 | | | | 1,402 | | | | 56,336 | | After one year but within five years | | | 24,843 | | | | 123,088 | | | | 1,324 | | | | 149,255 | | After five years | | | 11,165 | | | | 3,464 | | | | 81 | | | | 14,710 | | | | | | | | | | | | | | | | | | | | | | 46,075 | | | | 171,419 | | | | 2,807 | | | | 220,301 | | | | | | | | | | | | | | | | | | |
| | (c) | Investment commitments |
The Group has an investment commitment to a joint venture (see note 19)21). | 38 | POST BALANCE SHEET EVENT |
After the balance sheet date, the Board of Directors proposed a final dividend for the year ended December 31, 2017.2019. Further details are disclosed in note 34(b)(i). On January 23, 2020, the Company announced that it had resolved to propose the adoption of the share option scheme (the “Scheme”) to further improve the governance structure of the Company and to effectively attract, motivate and retain the core backbone employees of the Company, which has been approved by the State-owned Assets Supervision and Administration Commission of the State Council (the “SASAC”), and is still subject to the obtaining of the approval from the shareholders of the Company. As of the approval date of the consolidated financial statements, the Company has not granted any share options under the Scheme. The Group’s 4G and 5G networks are expected to co-exist for a long time in 2020 and beyond, and the technologies in relation to its 4G wireless assets (mainly comprising base station main equipment, base station extension equipment and antenna feed lines) are relatively stable and have not experienced any major upgrade since investment in such assets. After the Group’s assessment of the actual state of use of its 4G wireless assets, the Company has resolved to adjust the depreciable life of the Group’s 4G wireless assets from 5 years to 7 years with effect from January 1, 2020. The adjusted depreciable life of the Group’s 4G wireless assets is the same as the depreciable life of its 5G wireless assets, which the Company considers to be a more reasonable reflection of the expected useful life of such type of assets. The aforesaid changes in accounting estimates will be made using the prospective application method with no need for any retrospective adjustment, and hence the Group’s financial reports for 2019 and earlier years will not be affected. According to the Company’s static calculation based on currently available information, the aforesaid changes are expected to impact the Group’s depreciation by a decrease of approximately RMB18.3 billion for the year ending December 31, 2020. After the outbreak of the coronavirus disease (“COVID-19 outbreak”) in early 2020, a series of precautionary and control measures have been implemented across the country. The pandemic has impacted the business development and operating results of the Group to some extent, and the Group will pay close attention to the development of the COVID-19 outbreak and continuously evaluate its impact on the financial position and operating results of the Group. | 39 | ACCOUNTING ESTIMATES AND JUDGEMENTS |
Key sources of estimation uncertainty Note 17 contains information about the assumptions relating to goodwill impairment, and note 35 contains information about the judgements on the lease classification of leasing ofTD-SCDMA network capacity and Leased Tower. Other keyKey sources of estimation uncertainty are as follows:
Impairment losses of accounts receivable The impairment loss for doubtfulallowance of accounts receivable is based on assumptions about risk of default and expected loss rates. The Group assesses these assumptions and selects the inputs to the impairment loss for doubtful accountscalculation, based upon evaluation ofon the recoverability of the accounts receivable and other receivablesGroup’s past history, existing market conditions as well as forward looking estimates at each balance sheet date. The estimates Amortization of contract cost Certain costs incurred to obtain contracts are baseddeferred and recognized as assets on the agingGroup’s consolidated balance sheets. Such assets should be amortized on a systematic basis consistent with the pattern of the accounts receivable and other receivables balances and the historicalwrite-off experience, net of recoveries. If the financial conditionstransfer of the customers weregoods or services to deteriorate, additional impairment may be required.which the asset relates. The Group determines the amortization periods for these assets as the expected duration of the customer contract, which is consistent with the recognition of revenue from the products and services to which the assets relate. The amortization period is updated if there is a significant change in the Group’s expected duration of the customer contract. Depreciation Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. The Group reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives and residual values are determined based on the Group’s historical experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.
| 39 | ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) |
Taxation The Group is subject to income taxes mainly in Mainland China and Hong Kong. Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. For temporary differences which give rise to deferred tax assets, the Group assesses the likelihood that the deferred tax assets could be recovered. Deferred tax assets are recognisedrecognized based on the Group’s estimates and assumptions that they will be recovered from taxable income arising from continuing operations in the foreseeable future. | 39 | ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) |
Impairment of property, plant and equipment, goodwill,right-of-use assets, other intangible assets and investments accounted for using the equity method The Group’s property, plant and equipment comprise a significant portion of the Group’s total assets. Changes in technology or industry conditions may cause the estimated period of use or the value of these assets to change. Property, plant and equipment,right-of-use assets, other intangible assets subject to amortization and investments accounted for using the equity method, are reviewed at least annually to determine whether there is any indication of impairment. The recoverable amount is estimated whenever events or changes in circumstances have indicated that their carrying amounts may not be recoverable. In addition, for goodwill and other intangible assets with indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment. The recoverable amount of an asset is the greater of its fair value less costs of disposal andvalue-in-use. VIU. In assessingvalue-in-use, VIU, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset, which requires significant judgement relating to level of revenue and amount of operating costs. The Group uses all readily available information in determining an amount that is a reasonable estimation of the recoverable amount, including estimates based on reasonable and supportable assumptions and projections of revenue and operating costs. Changes in these estimates could have a significant impact on the carrying value of the assets and could result in further impairment charge or reversal of impairment in future periods. Additional information for the impairment assessment of property, plant and equipment, goodwill and investments accounted for using the equity method is disclosed in notes 14, 1715, 19 and 19,21, respectively. Classification of leases
The Group has a number of lease arrangements. The Group follows the guidance of IAS 17 “Leases” to determine the classification of leases as operating leases versus finance leases. Significant judgements and assumptions are required in the assessment of the classification. The determination of classification depends on whether the lease transfers substantially all the risks and rewards of the assets to the Group. In particular, during the assessment, the management estimates (i) economic lives of lease assets, (ii) the discount rate used in the calculation of present value of minimum lease payments, and (iii) the fair value of the leased assets. Any future changes to these judgements or assumptions will affect the classification and hence the results of operation and financial position of the Group.
| 40 | POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS, INTERPRETATIONS AND DISCLOSURES ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED DECEMBER 31, 2017 2019 |
Up to the date of issue of these consolidated financial statements, the IASB has issued a number of amendments and new standards and interpretations which are not yet effective for the year ended December 31, 20172019 and which have not been adopted in these consolidated financial statements. Of these developments, the following relate to matters that may be relevant to the Group’s operations and financial statements: | | | | | | | | Effective for
accounting periods
beginning on or after | | | | IFRS 9 “Financial Instrument”17 “Insurance Contracts” | | | January 1, 20182021 | | IFRS 15 “Revenue from Contracts with Customers”Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”
| | | January 1, 20182020 | | Annual ImprovementAmendments to IFRSs 2014-2016 cycle*IFRS 3 “Business Combinations” - “Definition of a Business”
| | | January 1, 20182020 | | IFRIC – Int 22,
“Foreign Currency Transactions and Advance Consideration”Revised Conceptual Framework for Financial Reporting
| | | January 1, 2018 | | IFRS 16 “Leases”
| | | January 1, 2019 | | IFRIC – Int 23, “Uncertainty over Income Tax Treatments”
| | | January 1, 2019 | | Annual Improvement to IFRSs 2015-2017 cycle
| | | January 1, 20192020 | | Amendment to IFRS 10, “Consolidated Financial Statements”9 “Financial Instruments” and IFRS 7 “Financial Instruments: Disclosures”- interest rate benchmark reform | | | To be determinedJanuary 1, 2020 | | AmendmentAmendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associatesassociates and Joint Ventures”joint ventures”
| | | To be determined | |
| * | It included amendment to IFRS 12 which was effective on January 1, 2017 and does not have a material impact on the Group. |
40 | POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS, INTERPRETATIONS AND DISCLOSURES ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED DECEMBER 31, 2017 (CONTINUED) |
IFRS 9 “Financial Instruments”
The new standard addresses the classification, measurement and derecognition of financial assets and financial liabilities, and a new impairment model for financial assets.
The Group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new standard on January 1, 2018.
Management anticipates the application of IFRS 9 will affect the classification and measurement of the Group’savailable-for-sale investments and have an impact on amounts reported in respect of the Group’s wealth management products issued by banks and certain equity investments. The equity investments and the wealth management products issued by banks that were accounted for asavailable-for-sale financial assets and the short-term financial assets held by China Mobile Finance will be reclassified to financial assets at fair value through profit or loss. Related fair value changes will be transferred from the capital reserve to retained earnings on January 1, 2018. Subsequent changes of fair value will be recorded in profit or loss.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from IAS 39 “Financial Instruments: Recognition and Measurement” and have not been changed.
The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortized cost, contract assets under IFRS 15 “Revenue from Contracts with Customers”, trade debtors and certain other financial assets. Based on the assessments undertaken to date, the Group expects no material impact on the loss allowance for the aforementioned assets.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.
IFRS 9 is mandatory for financial years commencing on or after January 1, 2018. The Group adopted the IFRS 9 from January 1, 2018, with the practical expedients permitted under the standard. Comparatives for 2017 will not be restated.
40 | POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS, INTERPRETATIONS AND DISCLOSURES ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED DECEMBER 31, 2017 (CONTINUED) |
IFRS 15 “Revenue from Contracts with Customers”
IFRS 15 replaces IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognized when control of a good or service transfers to a customer. IFRS 15 specifies how and when the Group will recognize revenue as well as requiring the Group to provide users of financial statements with more informative and relevant disclosures. The Group has finished analysis on the impact of the new standard on the Group’s financial statements and has identified areas which will be affected as follows.
IFRS 15 requires the identification of the distinct deliverables in contracts with customers that qualify as separate “performance obligations” and the allocation of the transaction price receivables from customers to each “performance obligation” on relative stand-alone selling price basis. Upon the completion of the principal or agent analysis under the new standard, the Group will allocate the total consideration to each “performance obligation”, including telecommunications services, handsets and customer point rewards and other promotional goods or services. The current accounting policy for telecommunications services, handsets, customer points rewards is disclosed in note 2(r), and promotional items are accounted for as selling expenses under the existing treatment.
IFRS 15 requires customer acquisition cost to be capitalized as an asset and amortized on a systematic basis consistent with the pattern of the transfer of the goods or services to which the asset relates. The Group considers that certain types of sales commissions will be capitalized and amortized on a straight-line basis over the period under the new standards. The change will impact on the timing of the expense recognition.
The Group has assessed the static impact on the Group’s consolidated financial statements for the year ended December 31, 2017 if IFRS 15 was applied, and the Group expected the operating revenue would decrease by approximately 2.2% while the revenue from telecommunications services would decrease by approximately 3.2% in 2017. However, the adoption of IFRS 15 is not expected to have a significant impact on profit from operations in the long-term.
IFRS 15 is mandatory for financial years commencing on or after January 1, 2018. The standard permits either a full retrospective or a modified retrospective approach for the adoption. The Group has finished the upgrade of the accounting systems and the processes of the business, and adopted the IFRS 15 from January 1, 2018 with modified retrospective approach.
40 | POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS, INTERPRETATIONS AND DISCLOSURES ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED DECEMBER 31, 2017 (CONTINUED) |
IFRS 16 “Leases”
IFRS 16 will result in almost all leases being recognized on the balance sheets, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short-term andlow-value leases. This accounting treatment is significantly different from the lessee accounting for leases that are classified as operating leases under the predecessor standard, IAS 17. The accounting for lessors will not significantly change.
Upon preliminary evaluation, given that the Group leases certain telecommunications facilities for time periods longer than a year, the application of IFRS 16 “Leases” in 2019 is expected to have impact on the Group’s consolidated financial statements to certain extent because present values of lease liabilities and leased assets will be recorded on the balance sheets when the standard is applied. Accordingly, the Group expects a corresponding increase in its assets and liabilities. In addition, related operating lease expenses will be reclassified as depreciation and finance costs.
IFRS 16 is mandatory for financial years commencing on or after January 1, 2019. At this stage, the Group does not intend to adopt the standard before its effective date.
Management is assessing the impact of the restsuch new standards and amendments to standards and will adopt the relevant standards and amendments to standards in the subsequent periods as required. | 41 | CONDENSED FINANCIAL INFORMATION OF THE COMPANY |
| | (a) | Condensed statements of comprehensive income |
| | | | 2017 | | | 2016 | | | 2015 | | | | | | | | | | | Million | | | Million | | | Million | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | Dividend income | | | 111,490 | | | | 49,080 | | | | 43,848 | | | | 53,475 | | | | 60,044 | | | | 111,490 | | | Operating expenses | | | (77 | ) | | | (71 | ) | | | (77 | ) | | | (70 | ) | | | (67 | ) | | | (77 | ) | | Interest income | | | 23 | | | | 11 | | | | 25 | | | | Other (losses)/gains | | | (87 | ) | | | 57 | | | | 61 | | | | Interest and other income | | | | 38 | | | | 41 | | | | 23 | | Other gains/(losses) | | | | 77 | | | | 250 | | | | (87 | ) | Finance costs | | | (2 | ) | | | (3 | ) | | | (3 | ) | | | — | | | | — | | | | (2 | ) | | | | | | | | | | | | | | | | | | | | | Profit before taxation | | | 111,347 | | | | 49,074 | | | | 43,854 | | | | 53,520 | | | | 60,268 | | | | 111,347 | | | Taxation | | | (14 | ) | | | (1 | ) | | | — | | | | (9 | ) | | | — | | | | (14 | ) | | | | | | | | | | | | | | | | | | | | | PROFIT FOR THE YEAR | | | 111,333 | | | | 49,073 | | | | 43,854 | | | | 53,511 | | | | 60,268 | | | | 111,333 | | | Other comprehensive income for the year | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | TOTAL COMPREHENSIVE INCOME FOR THE YEAR | | | 111,333 | | | | 49,073 | | | | 43,854 | | | | 53,511 | | | | 60,268 | | | | 111,333 | | | | | | | | | | | | | | | | | | | | |
| 41 | CONDENSED FINANCIAL INFORMATION OF THE COMPANY (CONTINUED) |
| | (b) | Condensed balance sheets |
| | | | As of
December 31,
2017 | | | As of
December 31,
2016 | | | As of | | | As of | | | | | Million | | | Million | | | December 31, 2019 | | | December 31, 2018 | | | | | Million | | | Million | | Non-current assets | | | 490,256 | | | | 487,290 | | | | 492,759 | | | | 491,748 | | | Current assets | | | 2,718 | | | | 2,144 | | | | 2,262 | | | | 2,614 | | | Current liabilities | | | 3,658 | | | | 5,415 | | | | 5,121 | | | | 4,708 | | | Non-current liabilities | | | — | | | | — | | | | — | | | | — | | | NET ASSETS | | | 489,316 | | | | 484,019 | | | | 489,900 | | | | 489,654 | | | | | | | | | | | | | | | | | | TOTAL EQUITY | | | 489,316 | | | | 484,019 | | | | 489,900 | | | | 489,654 | | | | | | | | | | | | | | |
In the Company’s balance sheets, an investment in a subsidiary is stated at cost less impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable. | | (c) | Condensed statements of cash flows |
| | | | 2017 | | | 2016 | | | 2015 | | | 2019 | | | 2018 | | | 2017 | | | | | Million | | | Million | | | Million | | | Million | | | Million | | | Million | | | Net cash used in operating activities | | | (72 | ) | | | (69 | ) | | | (78 | ) | | | | | | | | | | | | | Net cash (used)/generated from operating activities | | | | (156 | ) | | | 2 | | | | (72 | ) | | | | | | | | | | | | Net cash generated from investing activities | | | 28,840 | | | | 12,900 | | | | 9,760 | | | | 14,778 | | | | 15,792 | | | | 28,840 | | | | | | | | | | | | | | | | | | | | | | Net cash used in financing activities | | | (28,913 | ) | | | (12,813 | ) | | | (11,964 | ) | | | (14,532 | ) | | | (16,331 | ) | | | (28,913 | ) | | | | | | | | | | | | | | | | | | | | | Net increase/(decrease) in cash and cash equivalents | | | (145 | ) | | | 18 | | | | (2,282 | ) | | | 90 | | | | (537 | ) | | | (145 | ) | | Cash and cash equivalents at beginning of year | | | 796 | | | | 753 | | | | 3,030 | | | | 245 | | | | 554 | | | | 796 | | | Effect of changes in foreign exchange rate | | | (97 | ) | | | 25 | | | | 5 | | | | (25 | ) | | | 228 | | | | (97 | ) | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at end of year | | | 554 | | | | 796 | | | | 753 | | | | 310 | | | | 245 | | | | 554 | | | | | | | | | | | | | | | | | | | | |
F-91F-107
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