YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

1. | CORPORATE INFORMATION AND GROUP REORGANISATION
1.1 | Corporate information

YCP Holdings (Global) Limited (the “Company”) was incorporated as a limited liability company domiciled in Singapore on 5 March 2021.

The registered office of the Company is located at 5 Temasek Boulevard, #11-02, Suntec Tower Five, Singapore, 038985. In the opinion of the directors, the Company’s immediate and ultimate holding company is YCP Holdings Limited, a company incorporated in Hong Kong.

The principal activities of the Company are those of investment holding and provision of management services to group companies.

The Company’s subsidiaries were involved in the following principal activities:

・provision of management and advisory services;

・development, production and sale of natural and organic products;

・operation of veterinary hospital and pet care business;

・operation of restaurants and franchise system in the food and beverage industry;

・production, sale and distribution of food products;

・trading and manufacturing of Japanese-style desserts and confectionary products;

・provision of Japanese-style early education services; and

・trading of fertility check-up kit and provision of related internet marketing service.

The Company was incorporated for the purpose of acquiring the existing operating group of subsidiaries as detailed below, pursuant to the Reorganisation Exercise as disclosed in Note 1.2.

Particulars of principal subsidiaries are as follows:

Name | Place of incorporation/ registration and operations | Issued ordinary/ registered share capital |  | Principal activities
Percentage of equity attributable to the Company
Direct | Indirect
YCP Solidiance, Inc. | Japan | JPY 29,800,000 | – | 100 | Provision of management and advisory services
YCP Solidiance Limited | Hong Kong | US$918,000 (2019: US$400,000) | – | 100 | Provision of management and advisory services
YCP Solidiance (Shanghai) Limited | The People's Republic of China ("PRC")/ Mainland China | Renminbi (“RMB”) 400,000 | – | 100 | Provision of management and advisory services

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

1. | CORPORATE INFORMATION AND GROUP REORGANISATION (continued)
1.1 | Corporate information (continued)

Name | Place of incorporation/ registration and operations | Issued ordinary/ registered share capital | Percentage of equity attributable to the Company | Principal activities
Direct | Indirect
YCP Solidiance Pte. Ltd. | Singapore | SGD638,469 | 100 | – | Provision of management and advisory services
YCP Solidiance, Co., Ltd | Thailand | Baht5,000,000 | – | 100 | Provision of management and advisory services
YCP Solidiance FZ LLC | United Arab Emirates | Arab Emirate Dirham (“AED”) 1,000 | – | 100 | Provision of management and advisory services
YCP Solidiance Limited | United States of America | US$200,000 | – | 100 | Provision of management and advisory services
SOLIA, Inc. (formerly known as "N&O Life, Inc.") | Japan | JPY10,000,000 | 100 | – | Development, production and sale of natural and organic products
YCP Lifemate, Inc. | Japan | JPY30,000,000 | 100 | – | Operation of veterinary hospital and pet care business
Lifemate Veterinary Hospital Group, Inc. | Japan | JPY15,000,000 | – | 100 | Operation of veterinary hospital
Ecoro Guard Limited (“Ecoroguard”) | Japan | JPY3,000,000 | – | 100 (2019: Nil) | Operation of veterinary hospital
Koinu Step Inc. | Japan | JPY20,000,000 | – | 100 | Operation of pet care business
YCP Education Singapore Pte. Ltd. | Singapore | SGD130,000 | 100 | – | Provision of Japanese-style
YCP Dining Singapore Pte. Ltd. | Singapore | SGD672,060 | 100 | – | Operation of restaurants and franchise system in the food and beverage industry
Go Food Service Pte. Ltd. ("Go Food")# | Singapore | SGD450,000 | 100 | – | Production, sale and distribution of food products

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

1. | CORPORATE INFORMATION AND GROUP REORGANISATION (continued)
1.1 | Corporate information (continued)

Name | Place of incorporation/ registration and operations | Issued ordinary/ registered share capital | Percentage of equity attributable to the Company | Principal activities
Direct | Indirect
J-Foods Hong Kong Limited ("J-Foods") | Hong Kong | HK$100,000 (2019: Nil) | 100 (2019: Nil) | – | Operation of restaurants and franchise system in the food and beverage industry
Aoyama Sweets Factory Limited | Hong Kong | US$300,000 | 100 | – | Investment holding
Aoyama Sweets Factory (Thailand) Co., Ltd. | Thailand | Baht5,000,000 | – | 100 | Trading and manufacturing of Japanese-style desserts
YCP RLA Trading Inc. | Japan | JPY35,000,000 | 55 | – | Trading and production of Japanese-style confectionery products

# The Group entered into several agreements with the non-controlling shareholder to obtain present access to entire returns of Go Food. Accordingly, in the opinion of the directors, Go Food is a wholly-owned subsidiary of the Group.

During the financial year ended 31 December 2020, the Group acquired 100% equity interest in J-Foods and Ecoroguard with considerations in the form of cash amounted to JPY60,000,000 (equivalent to US$553,083) and JPY189,000,000 (equivalent to US$1,825,736), respectively. Further details of the acquisitions are included in Note 33 to the financial statements.

During the financial year ended 31 December 2020, the Group disposed of YCP Education Limited, YCP Solidiance Pty. Ltd., F-Treatment, Inc. and a pet care hospital, at considerations of HK$3,000 (equivalent to US$387), SGD5 (equivalent to US$4), JPY44,400,000 (equivalent to US$428,904) and JPY20,000,000 (equivalent to US$193,200), respectively. Further details of the disposals are included in Note 34 to the financial statements.

During the financial year ended 31 December 2019, the Group disposed of SOMOS English Academy Ltd., YCP Shanghai Inc. and its wholly-owned subsidiary, Rainbow Bird, Inc., Technomic Asia (Shanghai) Inc., BreederOne Inc. and a pet care hospital, at considerations of JPY33,750,000 (equivalent to US$308,080), RMB1 (equivalent to US$-), US$5,000, JPY5,000,000 (equivalent to US$45,641) and JPY10,000,000 (equivalent to US$91,282), respectively. Further details of the disposals are included in Note 34 to the financial statements.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

1. | CORPORATE INFORMATION AND GROUP REORGANISATION (continued)
1.2 | The Reorganisation Exercise

Prior to the incorporation of the Company and the completion of the reorganisation exercise (the “Reorganisation Exercise”), the operating activities of the Group were carried out by YCP Holdings Limited and its subsidiaries.

As part of the Reorganisation Exercise, the Company was incorporated in Singapore on 5 March 2021. Following the incorporation of the Company, all assets and liabilities including group management service business and its subsidiaries owned by YCP Holdings Limited, except for the derivative financial instruments (Note 25), other liabilities (Note 24) and employee share options (Note 32), were transferred to the Company. The objective of the Reorganisation Exercise was to establish the Company as the holding company of the subsidiaries now comprising the Group, in preparation for the proposed listing of the Company’s shares on the Mothers Board of the Tokyo Stock Exchange. The major steps of the Reorganisation Exercise involved the following:

(a) On 5 March 2021, the Company was incorporated as a public company limited by shares domiciled in Singapore with SGD1 share capital issue and allotted to YCP Holdings Limited.

(b) On 1 April 2021, the Company entered into a sale and purchase agreement with YCP Holdings Limited in relation to the acquisition of:

(i) the entire assets and liabilities including the group management service business owned by YCP Holdings Limited, except for the derivative financial instruments (Note 25), other liabilities (Note 24) and employee share options (Note 32); and

(ii) the entire share ownership of the subsidiaries, joint venture and associates owned by YCP Holdings Limited.

In consideration for the transfer of the above assets and liabilities, 15,881,275 shares with a total value of US$7,141,379 were allotted by the Company to YCP Holdings Limited. As a result, the Company became the holding company of the subsidiaries now comprising the Group.

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 | Basis of accounting and preparation

The combined financial statements have been prepared in accordance with Singapore Financial Reporting Standards (International) ("SFRS(I)") and International Financial Reporting Standards (“IFRS”). SFRS(I) comprise standards and interpretations that are equivalent to IFRS.

These combined financial statements for the year ended 31 December 2019 are the first the Group has prepared in accordance with SRFS(I) and IFRS. Refer to Note 2.2 for information on how the Group adopted SFRS(I) and IFRS.

All references to SFRS(I) and IFRS are subsequently referred to as IFRS in these financial statements unless otherwise specified.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 | Basis of accounting and preparation (continued)

The combined financial statements have been prepared under the historical cost basis except as disclosed in the accounting policies below.

The combined financial statements are presented in United States dollars ("US$"), unless otherwise stated.

As at 31 December 2020, the Group’s current liabilities exceeded its current assets by US$2,697,185 (2019: US$6,146,574). Consequently, the directors have given consideration to the future liquidity and operation of the Group in assessing whether the Group will have sufficient financial resources to continue as a going concern. The financial statements have been prepared on a going concern basis as the total other liabilities arising from the put options arrangement (Note 24) amounting to US$6,120,276 (2019: US$6,444,150) will not be acquired by the Company after the Reorganisation Exercise on 1 April 2021 as explained in Note 1.2(b).

2.2 | First-time adoption of IFRS

The combined financial statements, for the year ended 31 December 2020, are the first the Group has prepared in accordance with IFRS. For periods up to and including 31 December 2019, the Group prepared its financial statements in accordance with Hong Kong Financial Reporting Standards (Local GAAP).

Accordingly, the Group has prepared financial statements that comply with IFRS applicable as at 31 December 2020. In preparing the combined financial statements, the Group’s opening statement of financial position was prepared at 1 January 2019, the Group’s date of transition to IFRS. The note explains the principal adjustments made by the Group in restating its Local GAAP financial statements including the statement of financial position as at 1 January 2019.

Exemptions applied

IFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain requirements under IFRS.

The Group has applied the following exemptions:

・IFRS 3 Business Combinations has not been applied to either acquisitions of subsidiaries that are considered businesses under IFRS, or acquisitions in associates and joint ventures that occurred before 1 January 2019. Use of this exemption means that the Local GAAP carrying amounts of assets and liabilities, that are required to be recognised under IFRS, are their deemed cost at the date of acquisition. After the date of the acquisition, measurement is in accordance with IFRS. Assets and liabilities that do not qualify for recognition under IFRS are excluded from the opening IFRS statement statement of financial position. The Group did not recognise any assets or liabilities that were not recognised under the Local GAAP or exclude any previously recognised amounts as a result of IFRS recognition requirements.

IFRS 1 also requires that the Local GAAP carrying amount of goodwill must be used in the opening IFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecogntion of intangible assets). In accordance with IFRS 1, the Group has tested goodwill impairment at the date of transition to IFRS. There was no impairment recognised on goodwill at 1 January 2019.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 | First-time adoption of IFRS (continued)

・The Group has not applied IAS 21 The Effects of Changes in Foreign Exchange Rates retrospectively to fair value adjustments and goodwill from business combinations that occurred before the date of transition to IFRS. Such fair value adjustments and goodwill are treated as assets and liabilities of the parent rather than as assets and liabilities of the acquiree.

Therefore, those assets and liabilities are already expressed in the functional currency of the parent or are non-monetary foreign currency items and no further translation differences occur.

・The Group assessed all contracts existing at 1 January 2019 to determine whether a contract contains a lease based upon the conditions in place as at 1 January 2019.

・Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at 1 January 2019. Right-of-use assets were measured at the amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to the lease recognised in the statement of financial position immediately before 1 January 2019. The lease payments associated with leases for which the lease term ends within 12 months of the date of transition to IFRS and leases for which the underlying asset is of low value have been recognised as an expense on either a straight-line basis over the lease term or another systematic basis.

The effect of adoption of IFRS 16 as at 1 January 2019 was as follows:

| Increase/ (decrease)
| US$
Assets |
Right-of-use assets | 5,148,403
Property, plant and equipment | (73,134)
Deferred tax assets | 14,873
Liabilities |
Lease liabilities | 5,245,122
Finance lease payables | (84,217)
Retained profits | (70,763)

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 | First-time adoption of IFRS (continued)

・The Group has adopted the amendment to IFRS 16 Leases: COVID-19-Related Rent Concessions and has applied the practical expedient applicable in this amendment that is effective for annual periods beginning on or after 1 June 2020.

The standard allows the lessee to account for any COVID-19 related rent concessions received as a variable lease payment with the effect of the rent concession recognised directly in the combined statement of comprehensive income, rather than a lease modification, which generally requires a lessee to remeasure the lease liability by discounting the revised lease payments using a new discount rate under IFRS 16 Leases.

Estimates

・The estimates at 1 January 2019 and at 31 December 2019 are consistent with those made for the same dates in accordance with Local GAAP (after adjustments to reflect any differences in accounting policies). The estimates used by the Group to present these amounts in accordance with IFRS reflect conditions at 1 January 2019, the date of transition to IFRS and as at 31 December 2019.

2.3 | Standards issued but not yet effective

The Group has not adopted the following standards applicable to the Group that have been issued but not yet effective:

Description | Effective for annual periods beginning on or after
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16: Interest Rate Benchmark Reform – Phase 2 | 1 January 2021
Amendments to IFRS 3: Reference to Conceptual Framework | 1 January 2022
Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended Use | 1 January 2022
Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling a Contract | 1 January 2022
Annual Improvements to IFRS 2018-2020 | 1 January 2022
Amendments to IAS 1 Classification of Liabilities as Current or Non-current | 1 January 2023
Amendments to IFRS 17 Insurance Contracts | 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies | 1 January 2023
Amendments to IAS 8: Definition of Accounting Estimates | 1 January 2023
Amendments to IFRS 10 and IAS 28: Sale of Contribution of Assets between and Investor and its Associate or Joint Venture | Date to be determined

The directors expect that the adoption of the standards above will have no material impact on the financial statements in the year of initial application.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.4 | Basis of combination, business combinations and goodwill

Basis of combination

As disclosed in Note 2.1, prior to the incorporation of the Company in 2021 and the completion of the Reorganisation Exercise, the operating activities of the Group were carried out by YCP Holdings Limited and its subsidiaries. In substance, the Group is a continuation of YCP Holdings Limited and its subsidiaries. These combined financial statements of the Group are the consolidated financial statements of YCP Holdings Limited and its subsidiaries as at and for the financial years ended 31 December 2019 and 2020.

Capital reserve as presented in the combined financial statements represent the share capital of YCP Holdings Limited.

Pursuant to this:

・Assets, liabilities, reserves, revenue and expenses of combined entities are reflected at their existing amounts reported in the consolidated financial statements of YCP Holdings Limited;

・No amount is recognised for goodwill; and

・The retained profits recognised in the combined financial statements referred to the retained profits of YCP Holdings Limited and its subsidiaries.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree's identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

The Group determines that it has acquired a business when the acquired set of activities and assets includes an input and a substantive process that together significantly contribute to the ability to create outputs.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.4 | Basis of combination, business combinations and goodwill (continued)

Business combinations and goodwill (continued)

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group's previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 December. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

2.5 | Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company.

Changes in the Company's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 | Subsidiaries

A subsidiary is an investee that is controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

・Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

・Exposure, or rights, to variable returns from its involvement with the investee;

・The ability to use its power over the investee to affect its returns.

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

2.7 | Investment in associates and joint ventures

An associate is an entity in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The Group accounts for its investments in associates and joint ventures using the equity method from the date on which it becomes an associate or joint venture.

On acquisition of the investment, any excess of the cost of the investment over the Group's share of the net fair value of the investee's identifiable assets and liabilities is accounted for as goodwill and is included in the carrying amount of the investment. Any excess of the Group's share of the net fair value of the investee's identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity's share of the associate and joint venture's profit or loss in the period in which the investment is acquired.

Under the equity method, investment in associates and joint ventures is carried in the balance sheet at cost plus post-acquisition changes in the Group's share of net assets of the associates or joint ventures. The profit or loss reflects the share of results of the operations of the associates or joint ventures. Distributions received from associates and joint ventures reduce the carrying amount of the investment. Where there has been a change recognised in other comprehensive income by the joint ventures, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and joint ventures are eliminated to the extent of the interest in the associates and joint ventures.

When the Group's share of losses in an associate and joint venture equals or exceeds its interest in the associate or joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate and joint venture.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.7 | Investment in associates and joint ventures (continued)

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group's investment in associates and joint ventures. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate and joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognises the amount in profit or loss.

The financial statements of the associates and joint ventures are prepared as at the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

2.8 | Foreign currency

The Group's combined financial statements are presented in US$, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions and balances

Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

Combined financial statements

On consolidation, the assets and liabilities of foreign operations are translated into US$ at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is reclassified to profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.9 | Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets include:

－the cost of materials and direct labour;

－any other costs directly attributable to bringing the assets to a working condition for their intended use;

－when the Group has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and

－capitalised borrowing costs.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold improvements | Over the shorter of the lease terms and 20%
Machinery | 10% to 33%
Furniture and fixtures | 20% to 33%
Motor vehicles | 16% to 50%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 | Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value at the date of acquisition. Following initial acquisition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

Purchased patents and licenses

The purchased patents and licenses are stated at cost less any impairment losses and are amortised on the straight-line basis over their estimated useful lives of 10 years.

Trademarks

The purchased trademarks are stated at cost less any impairment losses and are amortised on the straight-line basis over their estimated useful lives of 10 years.

Software

The purchased software is stated at cost less any impairment losses and is amortised on the straight-line basis over their estimated useful lives of 5 years.

Internet domain name

The purchased internet domain name is stated at cost less any impairment losses. It has indefinite useful life as there is no foreseeable limit to the period over which the asset is expected to generate cash flows for the Group.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1 0 | Intangible assets (continued)

Customer relationships

The customer relationships acquired through a business combination are recognised initially at fair value at the acquisition date. Subsequently, this intangible asset is carried at cost less accumulated amortisation and impairment losses. Amortisation of customer relationships is calculated using the straight-line method over the estimated useful lives, which are determined to be 10 years.

2.11 | Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, deferred tax assets and financial assets), the asset's recoverable amount is estimated.

An asset's recoverable amount is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.12 | Financial instruments

(a) Financial assets

Initial recognition and measurement

Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.

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.

Trade receivables are measured at the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of a third party, if the trade receivables do not contain a significant financing component at initial recognition.

Subsequent measurement

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the contractual cash flow characteristics of the asset. The three measurement categories for classification of debt instruments are:

(i) Financial assets at amortised cost (debt instruments)

Financial assets that are held for the collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

(ii) Financial assets at amortised cost (debt instruments) Financial assets designated at fair value through other comprehensive income (FVOCI)

Financial assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Financial assets measured at FVOCI are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses and interest calculated using the effective interest method which are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.12 | Financial instruments (continued)

(a) Financial assets (continued)

Subsequent measurement (continued)

(iii) Financial assets at fair value through profit or loss

Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt instrument that is subsequently measured at FVPL and is not part of a hedging relationship is recognised in profit or loss in the period in which it arises.

Investment in equity instruments

This category includes equity investments which the Group had not irrevocably elected to classify at fair value through other comprehensive income. Dividends on equity investments classified as financial assets at fair value profit or loss are also recognised as other income in profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably. For investments in equity instruments which the Group has not elected to present subsequent changes in fair value in other comprehensive income, changes in fair value are recognised in profit or loss.

Derecognition of financial assets

A financial asset is de-recognised where the contractual right to receive cash flows from the asset has expired. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income for debt instruments is recognised in profit or loss.

(b) Financial liabilities

Initial recognition and measurement

Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.

The Group's financial liabilities include trade payables, other payables and certain accruals, interest-bearing bank and other borrowings, lease liabilities, an amount due to a director and other liabilities.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.12 | Financial instruments (continued)

(b) Financial liabilities (continued)

Subsequent measurement

After initial recognition, financial liabilities not at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised, and through the amortisation process.

Derivatives financial instruments

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in fair value of derivatives are taken directly to profit or loss.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the combined statement of financial position if there is a currently enforceable legal rights to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

2.13 | Impairment of financial assets

The Group recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.13 | Impairment of financial assets (continued)

General approach (continued)

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

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Debt investments at fair value through other comprehensive income and financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.

Stage 1 – Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs

Stage 2 – Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3 – Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Simplified approach

For trade receivables and contract assets that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

2.14 | Leases

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

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.14 | Leases (continued)

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

(a) Right-of-use assets

Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:

Buildings | 5 years
Machinery | 3 to 10 years
Office equipments | 3 to 5 years

If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

The right-of-use assets are also subject to impairment. Refer to section 2.12 Impairment of non-financial assets.

(b) Lease liabilities

Lease liabilities are recognised at the commencement date of the lease at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying asset.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.14 | Leases (continued)

Group as a lessee (continued)

(c) Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). When the Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalise the lease on a lease-by-lease basis.

Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

2.15 | Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on first-in, first-out basis and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower of cost and net realisable value.

2.16 | Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group's cash management.

2.17 | Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.18 | Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

2.19 | Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. The grant is recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate. Grants related to income may be presented as a credit in profit or loss, either separately or under heading such as “Other income”. Alternatively, they are deducted in reporting the related expenses.

2.20 | Revenue

Revenue from contract with customers

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception. When the contract contains a financing component which provides the Group with a significant financial benefit for more than one year, revenue recognised under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

(a) Management services - Management fee income

Revenue from the provision of management services is recognised over the scheduled period on a straight-line basis because the customer simultaneously receives and consumes the benefits provided by the Group.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.20 | Revenue (continued)

(b) Management services - Advisory fee income

Revenue from the provision of advisory services is recognised either (i) point in time when control of the promised good or service is transferred to the customer, generally on delivery of the advisory reports; or (ii) [over time, using output method, based on direct measurements of the value of the services transferred to the customer to date, relative to the remaining services promised under the contract, depending if the contract has relevant terms that entitle the Group with enforceable right to payment for performance completed to date.]

(c) Food and beverage income

Revenue from food and beverage is recognised at the point in time when control of the promised good or service is transferred to the customer at the respective retail shop.

(d) Personal care income

Revenue from the sale of food products is recognised at a point in time when control of the asset is transferred to the customer, generally on delivery of the personal care products.

(e) Pet care service income

Revenue from pet care service is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligations, as the customer simultaneously receives and consumes the benefits provided by the Group.

(f) Education service income

Revenue from education service is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligations, as the customer simultaneously receives and consumes the benefits provided by the Group.

(g) Other strategic investment sales - Internet media income

Revenue from internet media income is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligations, as the customer simultaneously receives and consumes the benefits provided by the Group.

(h) Other income – interest income

Interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.21 | Contract assets and liabilities

Contract assets

A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. Contract assets are subject to impairment assessment, details of which are included in the accounting policies for impairment of financial assets.

Contract liabilities

A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).

2.22 | Employee benefits

(a) Defined contribution plans

Pension scheme – Singapore

Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defined contribution plans and are charged as an expenses as they fall due.

Pension scheme – Japan

Employees in Japan are required to be covered under the National Pension System in accordance with the Japan law. Contributions to the pension funds by the Group are calculated as a percentage of employees' basic salaries. The retirement benefit plan cost charged to profit or loss represents contributions payable by the Group to the pension funds.

Pension scheme – Hong Kong

The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for all of its employees. Contributions are made based on a percentage of the employees’ basic salaries and are charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.22 | Employee benefits (continued)

(b) Defined benefit plans

The Group provides provisions for employee service entitlements in order to meet the minimum benefits required to be paid to qualified employees, as required under the Indonesia Labour Law No.13/2003. The said provisions, which are unfunded, are estimated using the projected unit credit actuarial valuation method.

Remeasurements arising from the defined benefit liability comprising of actuarial gains and losses, are recognised immediately in the combined statement of financial position with a corresponding debit or credit to retained profits through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss at the earlier of:

・the date of the plan amendment or curtailment; and

・the date that the Group recognises restructuring-related costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability. The Group recognises the following changes in the net defined benefit liabilities under "Administrative expenses" in the combined statement of profit or loss:

・service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

・net interest expense or income.

2.23 | Share-based payments

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group's operations. Employees (including directors) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments ("equity-settled transactions").

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, further details of which are given in Note 32 to the financial statements.

The cost of equity-settled transactions is recognised in employee benefit expense, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the statement of profit or loss for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.23 | Share-based payments (continued)

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

For awards that do not ultimately vest because non-market performance and/or service conditions have not been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payments, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

2.24 | Taxes

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

(a) Current income tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.24 | Taxes (continued)

(b) Deferred tax

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

・when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

・in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

・when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

・in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.24 | Taxes (continued)

(b) Deferred tax (continued)

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(c) Sales tax

Expenses and assets are recognised net of the amount of sales tax except:

・When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

・When receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authorities are included as part of receivables or payables in the statement of financial position.

2.25 | Contingencies

A contingent liability is:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or

(b) a present obligation that arises from past events but is not recognised because:

(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the statement of financial position of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.26 | Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s CEO (the chief operating decision maker) and senior management to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Group’s CEO and senior management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

3. | SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of the Group's combined financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

3.1 | Judgements made in applying accounting policies

In the process of applying the Group's accounting policies, management is of the opinion that there is no significant judgement made in applying accounting policies.

3.2 | Key sources of estimation uncertainty

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

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2020 was US$11,758,830 (2019: US$10,305,073). Further details are given in Note 13.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

3. | SIGNIFICANT ACCOUNTING ESTIMATES (continued)
3.2 | Key sources of estimation uncertainty (continued)

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

The Group assesses whether there are any indicators of impairment for property, plant and equipment and right-of-use assets at the end of each reporting period. An impairment exists when the carrying value of an asset or a cash-generating unit (“CGU”) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. Management has used the value-in-use method to assess recoverable amounts of the CGU. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of property, plant and equipment and right-of-use assets at 31 December 2020 was US$1,409,912 (2019: US$636,408) and US$4,764,215 (2019: US$4,753,622) respectively. Further details are given in Note 12.

Deferred tax assets

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The amount of unrecognised tax losses at 31 December 2020 was US$3,087,189 (2019: US$4,525,691). Further details are contained in Note 29 to the financial statements.

Leases – Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental borrowing rate ("IBR") to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group "would have to pay", which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary's functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary's stand-alone credit rating).

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

3. | SIGNIFICANT ACCOUNTING ESTIMATES (continued)
3.2 | Key sources of estimation uncertainty (continued)

Provision for expected credit losses on trade receivables

The Group uses a provision matrix to calculate ECLs for trade and other receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by customer type and rating).

The provision matrix is initially based on the Group's historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic products) are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At each reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

The assessment of the correlation among historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and forecast economic conditions. The Group's historical credit loss experience and forecast of economic conditions may also not be representative of customer's actual default in the future. The information about the ECLs on the Group's trade receivables is disclosed in Note 19 to the financial statements.

4. | OPERATING SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services and has four reportable operating segments as follows:

(a) management service segment which engaged in the provision of management and advisory services;

(b) personal care segment which engaged in the development, production and sales of material and organic products;

(c) pet care segment which engaged in the operation of veterinary hospital and pet care business; and

(d) strategic investment segment principally comprises of operations in food and beverage industry, education services, trading of fertility check-up kit and provision of related internet marketing service.

Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/loss, which is a measure of adjusted profit/loss before tax. The adjusted operating profit is measured consistently with the Group's operating profit except that fair value gain on derivative financial instruments, loss on derecognition of derivative financial instrument, finance income, finance costs, share of profits and losses of associates and corporate and unallocated expenses are excluded from such measurement.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

4. | OPERATING SEGMENT INFORMATION (continued)

Segment assets exclude investments in associates, derivative financial instruments and corporate and unallocated assets as these assets are managed on a group basis.

Segment liabilities exclude other liabilities and corporate and unallocated liabilities as these liabilities are managed on a group basis.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

2020

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segment revenue |  |  |  |  |
Revenue from external customers | 32,436,346 | 15,946,922 | 3,839,344 | 6,689,761 | 58,912,373
Intersegment revenue | 1,618,339 | 47,664 | 1,187 | 398,333 | 2,065,523
| 34,054,685 | 15,994,586 | 3,840,531 | 7,088,094 | 60,977,896
Reconciliation: |  |  |  |  |
Elimination of intersegment revenue |  |  |  |  | (2,065,523)
Total revenue |  |  |  |  | 58,912,373

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

4. | OPERATING SEGMENT INFORMATION (continued)

2020 (continued)

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segment results before non-cash items | 11,828,266 | 625,005 | 393,678 | 1,627,220 | 14,474,169
Non-cash items |  |  |  |  |
Reversal of impairment of trade receivables | 40,202 | – | – | – | 40,202
Impairment of property, plant and equipment | – | – | – | (76,064) | (76,064)
Impairment of other intangible assets | – | – | – | (16,369) | (16,369)
Impairment of right-of-use assets | – | – | – | (63,538) | (63,538)
Write-off of inventories | – | (59,486) | – | – | (59,486)
Depreciation | (2,366,437) | (60,213) | (241,183) | (2,638,773) | (5,306,606)
Amortisation | (202,113) | (52,510) | (3,362) | (26,832) | (284,817)
(Loss)/gain on disposal of property, plant and equipment | (7,023) | – | 749 | 2,163 | (4,111)
Loss on disposal of other intangible assets | (16,943) | (14,885) | – | – | (31,828)
Fair value gain on an equity investment at fair value through profit or loss | – | – | – | 827,976 | 827,976
Gain on termination of leases | 27,097 | 38 | 1,571 | 2,436 | 31,142
Gain on bargain purchase | – | – | – | 1,590,312 | 1,590,312
Gain on disposal of subsidiaries and businesses | 4 | – | 85,133 | 381,400 | 466,537
Defined benefit expenses | (92,379) | – | – | – | (92,379)
Share option expenses | (17,479) | – | – | – | (17,479)
Segment results | 9,193,195 | 437,949 | 236,586 | 1,609,931 | 11,477,661
Fair value gain on derivative financial instruments |  |  |  |  | 18,769
Corporate and unallocated expenses |  |  |  |  | (3,278,103)
Operating profit |  |  |  |  | 8,218,327
Finance income |  |  |  |  | 2,443
Finance costs |  |  |  |  | (732,305)
Share of profits and losses of associates |  |  |  |  | (219,476)
Profit before tax |  |  |  |  | 7,268,989

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

4. | OPERATING SEGMENT INFORMATION (continued)

2020 (continued)

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segment assets | 26,060,508 | 4,314,366 | 6,141,630 | 15,309,071 | 51,825,575
Reconciliation: |  |  |  |  |
Elimination of intersegment assets |  |  |  |  | (280,857)
Investments in associates |  |  |  |  | 283,117
Corporate and other unallocated assets |  |  |  |  | 2,664,726
Total assets |  |  |  |  | 54,492,561
Segment liabilities | 17,428,867 | 4,170,134 | 4,965,811 | 4,169,403 | 30,734,215
Reconciliation: |  |  |  |  |
Other liabilities |  |  |  |  | 6,120,276
Elimination of intersegment liabilities |  |  |  |  | (280,857)
Corporate and unallocated liabilities |  |  |  |  | 2,857,627
Total liabilities |  |  |  |  | 39,431,261
Other segment information |  |  |  |  |
Capital expenditure # | 267,644 | 20,029 | 8,074 | 1,350,874 | 1,646,621

# Capital expenditure consists of additions of property, plant and equipment and other intangible assets including assets from the acquisition of subsidiaries.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

4. | OPERATING SEGMENT INFORMATION (continued)

2019

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segment revenue |  |  |  |  |
Revenue from external customers | 30,545,433 | 11,329,517 | 3,957,835 | 4,769,228 | 50,602,013
Intersegment revenue | 4,091,507 | 75,504 | 4,585 | 383,192 | 4,554,788
| 34,636,940 | 11,405,021 | 3,962,420 | 5,152,420 | 55,156,801
Reconciliation: |  |  |  |  |
Elimination of intersegment revenue |  |  |  |  | (4,554,788)
Total revenue |  |  |  |  | 50,602,013
Segment results before non-cash items | 7,866,449 | (798,729) | 304,045 | 209,872 | 7,581,637
Non-cash items |  |  |  |  |
Impairment of goodwill | – | – | – | (58,013) | (58,013)
Impairment of trade receivables | (133,152) | – | (11,616) | (75,251) | (220,019)
Impairment of other intangible assets | – | – | – | (24,630) | (24,630)
Depreciation | (1,999,247) | (59,118) | (196,338) | (921,518) | (3,176,221)
Amortisation | (205,221) | (50,037) | (4,346) | (46,925) | (306,529)
Fair value gain on an equity investment at fair value through profit or loss | – | – | – | 1,128,624 | 1,128,624
(Loss)/gain on disposal of subsidiaries and businesses | (64,191) | – | 89,331 | 484,701 | 509,841
Segment results | 5,464,638 | (907,884) | 181,076 | 696,860 | 5,434,690
Loss on derecognition of derivative financial instruments |  |  |  |  | (1,093,151)
Fair value gain on derivative financial instruments |  |  |  |  | 100,193
Corporate and unallocated expenses |  |  |  |  | (2,938,388)
Operating profit |  |  |  |  | 1,503,344
Finance income |  |  |  |  | 5,087
Finance costs |  |  |  |  | (1,124,916)
Share of profits and losses of associates |  |  |  |  | 77,470
Profit before tax |  |  |  |  | 460,985

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

4. | OPERATING SEGMENT INFORMATION (continued)

2019 (continued)

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segment assets | 25,388,708 | 3,244,432 | 4,251,578 | 11,748,233 | 44,632,951
Reconciliation: |  |  |  |  |
Elimination of intersegment assets |  |  |  |  | (154,477)
Investments in associates |  |  |  |  | 527,200
Derivative financial instruments |  |  |  |  | 1,117,217
Corporate and other unallocated assets |  |  |  |  | 1,646,640
Total assets |  |  |  |  | 47,769,531
Segment liabilities | 19,797,554 | 3,501,562 | 2,739,239 | 2,208,189 | 28,246,544
Reconciliation: |  |  |  |  |
Other liabilities |  |  |  |  | 6,444,150
Elimination of intersegment liabilities |  |  |  |  | (154,477)
Corporate and unallocated liabilities |  |  |  |  | 4,679,023
Total liabilities |  |  |  |  | 39,215,240
Other segment information |  |  |  |  |
Capital expenditure # | 181,356 | 63,934 | 79,818 | 133,761 | 458,869

# Capital expenditure consists of additions of property, plant and equipment and other intangible assets.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

4. | OPERATING SEGMENT INFORMATION (continued)

Geographical information

(a) | Revenue from external customers

| 2020 | 2019
| US$ | US$
Japan | 37,220,689 | 31,792,399
Greater China | 9,485,139 | 5,708,869
Southeast Asia | 9,531,422 | 9,623,424
North America | 1,046,873 | 1,116,933
Europe | 282,930 | 424,563
Middle east | 1,329,768 | 1,868,195
India | 15,552 | 67,630
| 58,912,373 | 50,602,013

The revenue information above is based on the locations of the legal entities which earned the revenue.

(b) | Non-current assets

| 2020 | 2019
| US$ | US$
Japan | 6,272,121 | 5,819,287
Greater China | 3,132,630 | 1,208,352
Southeast Asia | 10,338,766 | 11,132,008
Middle east | 18,443 | 55,922
India | – | 5,959
| 19,761,960 | 18,221,528

The non-current asset information above is based on the locations of assets and excludes financial assets and deferred tax assets.

Information about a major customer

During the year 31 December 2020, no revenue from transactions with a single external customer amounted to 10% or more of the Group's total revenue (2019: Nil).

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

5. | REVENUE, OTHER INCOME AND GAINS

Revenue from contracts with customers

(a) | Disaggregated revenue information

For the year ended 31 December 2020

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segments |  |  |  |  |
Types of goods or services |  |  |  |  |
Management services | 18,811,206 | – | – | – | 18,811,206
Advisory services | 13,625,140 | – | – | – | 13,625,140
Personal care | – | 15,946,922 | – | – | 15,946,922
Pet care | – | – | 3,839,344 | – | 3,839,344
Food and beverage | – | – | – | 6,475,730 | 6,475,730
Education | – | – | – | 15,204 | 15,204
Others | – | – | – | 198,827 | 198,827
| 32,436,346 | 15,946,922 | 3,839,344 | 6,689,761 | 58,912,373
Geographical markets |  |  |  |  |
Japan | 16,964,808 | 15,852,405 | 3,839,344 | 564,132 | 37,220,689
Greater China | 6,297,208 | 4,672 | – | 3,183,259 | 9,485,139
Southeast Asia | 6,499,207 | 89,845 | – | 2,942,370 | 9,531,422
North America | 1,046,873 | – | – | – | 1,046,873
Europe | 282,930 | – | – | – | 282,930
Middle east | 1,329,768 | – | – | – | 1,329,768
India | 15,552 | – | – | – | 15,552
| 32,436,346 | 15,946,922 | 3,839,344 | 6,689,761 | 58,912,373
Timing of revenue recognition |  |  |  |  |
Services transferred over time | 26,184,805 | – | 3,839,344 | 15,204 | 30,039,353
Goods and services transferred at a point in time | 6,251,541 | 15,946,922 | – | 6,674,557 | 28,873,020
| 32,436,346 | 15,946,922 | 3,839,344 | 6,689,761 | 58,912,373

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

5. | REVENUE, OTHER INCOME AND GAINS (continued)

Revenue from contracts with customers (continued)

(a) | Disaggregated revenue information (continued)

For the year ended 31 December 2019

| Management service | Personal care | Pet care | Strategic investments | Total
| US$ | US$ | US$ | US$ | US$
Segments |  |  |  |  |
Types of goods or services |  |  |  |  |
Management services | 21,968,957 | – | – | – | 21,968,957
Advisory services | 8,576,476 | – | – | – | 8,576,476
Personal care | – | 11,329,517 | – | – | 11,329,517
Pet care | – | – | 3,957,835 | – | 3,957,835
Food and beverage | – | – | – | 3,853,715 | 3,853,715
Education | – | – | – | 628,066 | 628,066
Others | – | – | – | 287,447 | 287,447
| 30,545,433 | 11,329,517 | 3,957,835 | 4,769,228 | 50,602,013
Geographical markets |  |  |  |  |
Japan | 15,892,772 | 11,218,350 | 3,957,835 | 723,442 | 31,792,399
Greater China | 5,612,686 | – | – | 96,183 | 5,708,869
Southeast Asia | 5,562,654 | 111,167 | – | 3,949,603 | 9,623,424
North America | 1,116,933 | – | – | – | 1,116,933
Europe | 424,563 | – | – | – | 424,563
Middle east | 1,868,195 | – | – | – | 1,868,195
India | 67,630 | – | – | – | 67,630
| 30,545,433 | 11,329,517 | 3,957,835 | 4,769,228 | 50,602,013
Timing of revenue recognition |  |  |  |  |
Services transferred over time | 21,968,957 | – | 3,957,835 | 915,513 | 26,842,305
Goods and services transferred at a point in time | 8,576,476 | 11,329,517 | – | 3,853,715 | 23,759,708
| 30,545,433 | 11,329,517 | 3,957,835 | 4,769,228 | 50,602,013

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

5. | REVENUE, OTHER INCOME AND GAINS (continued)

Revenue from contracts with customers (continued)

(a) | Disaggregated revenue information (continued)

The following table shows the amounts of revenue recognised in the current reporting period that was included in contract liabilities at the beginning of the reporting period and recognised from performance obligations satisfied in previous periods:

| 2020 | 2019
| US$ | US$
Revenue recognised that was included in contract liabilities at the beginning of the reporting period: |  |
Advisory fee income | 365,871 | 108,912

(b) | Performance obligations

Information about the Group’s performance obligations is summarised below:

Management services- Management fee income

The performance obligation is satisfied over time as services are rendered and short-term advances are normally required before rendering the services. Management service contracts are for periods of one year or less, or are billed based on the time incurred.

Management services- Advisory fee income

The performance obligation is satisfied either (i) upon delivery of the advisory reports and payment is generally due within 30 days from delivery; or (ii) overtime as services are rendered and payment is generally due within 30 days from the date of billing.

Food and beverage income

The performance obligation is satisfied when the catering services have been provided to customers. The Group's trading terms with its customers are mainly on cash and credit card settlement. The credit period is generally less than one month.

Sale of personal care products

The performance obligation is satisfied upon delivery of the personal care products and payment is generally due within 30 days from delivery.

Pet care service income

The performance obligation is generally satisfied over time as services are provided and payment is generally due when the services have been rendered.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

5. | REVENUE, OTHER INCOME AND GAINS (continued)

Revenue from contracts with customers (continued)

(b) | Performance obligations (continued)

Education service income

The performance obligation is generally satisfied over time as services are provided and payment is generally due when the services have been rendered.

Other strategic investment sales- Internet media fee income

The performance obligation is generally satisfied over time as services are provided and payment is generally due when the services have been rendered.

Transaction price allocated to remaining performance obligation

The aggregate amount of transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations as at 31 December 2020 is US$698,571. This amount has not included the following:

・Performance obligations for which the Group has applied practical expedient not to disclose information about its remaining obligations if:

－The performance obligation is part of a contract that has an original expected duration for one year or less, or

－The Group recognizes revenue in the amount to which the Group has a right to invoice customers in amounts that correspond directly with the value to the customer of the Group’s performance completed to fate.

The Group expects to recognise US$1,488,737 as revenue relating to the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations as at 31 December 2020 in the financial year 2021.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

5. | REVENUE, OTHER INCOME AND GAINS (continued)

Other income and gains

| 2020 | 2019
| US$ | US$
Fair value gain on an equity investment at fair value through profit on loss | 827,976 | 1,128,624
Fair value gain on derivative financial instruments (Note 25) | 18,769 | 100,193
Gain on bargain purchase (Note 33) | 1,590,312 | –
Gain on disposal of a subsidiaries and businesses (Note 34) | 466,537 | 509,841
Government grants # | 218,023 | –
Others | – | 28,047
| 3,121,617 | 1,766,705

# Government grants mainly pertain to the Anti-epidemic Fund - Catering Business (Social Distancing) Subsidy Scheme operated by the Food and Environmental Hygiene Department (FEHD) in Hong Kong. This is an one-off subsidy provided to eligible licence holders of the premises in operation including general restaurants, light refreshment restaurants, marine restaurants and factory canteens according to the approved floor area of the licensed premises

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

6. | PROFIT/(LOSS) BEFORE TAX

The Group's profit/(loss) before tax is arrived at after charging/(crediting):

| 2020 | 2019
| US$ | US$
Cost of inventories sold | 6,627,142 | 4,745,749
Cost of services provided | 3,011,229 | 3,134,057
Employee benefit expenses (including directors’ remuneration (Note 9)):* |  |
Wages and salaries | 21,283,497 | 19,913,834
Pension scheme contributions | 1,685,575 | 1,680,480
Defined benefit expense (Note 30) | 92,379 | –
Equity-settled share option expenses (Note 32) | 17,479 | –
| 23,078,930 | 21,594,314
Depreciation: |  |
Property, plant and equipment (Note 12) | 726,365 | 381,898
Right-of-use assets (Note 12) | 4,580,241 | 2,794,323
| 5,306,606 | 3,176,221
Auditor's remuneration | 1,027,656 | 779,325
Expenses relating to short-term leases | 263,090 | 373,199
Foreign exchange differences, net | 133,516 | 35,081
Loss on disposal property, plant and equipment | 4,111 | 168,665
(Gain)/loss on termination of leases | (31,142) | 2,716
Loss on disposal of other intangible assets | 31,828 | 24,117
Impairment of goodwill (Note 13) | – | 58,013
Impairment of property, plant and equipment (Note 12) | 76,064 | –
Impairment of other intangible assets (Note 14) | 16,369 | 24,630
Impairment of right-of-use assets (Note 12) | 63,538 | –
Write-off of inventories | 59,486 | –
Amortisation of other intangible assets (Note 14) | 284,817 | 306,529
(Reversal of)/provision for impairment of trade receivables (Note 19) | (40,202) | 220,019
Gain on bargain purchase (Note 34) | (1,590,312) | –
Gain on disposal of subsidiaries and businesses (Note 34) | (466,537) | (509,841)
Fair value gain on an equity investment at fair value through profit or loss | (827,976) | (1,128,624)
Fair value gain on derivative financial instruments (Note 25) | (18,769) | (100,193)
Loss on derecognition of derivative financial instruments (Note 25a) | – | 1,093,151

* Employee benefit expenses included in “Cost of sales” and "Administrative expenses" in the combined statement of profit or loss and other comprehensive income amounted to US$6,367,317 (2019: US$5,962,435) and US$16,711,613 (2019: US$15,631,879), respectively.

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

7. | FINANCE INCOME

| 2020 | 2019
| US$ | US$
Bank interest income | 2,443 | 5,087

8. | FINANCE COSTS

An analysis of finance costs is as follows:

| 2020 | 2019
| US$ | US$
Interest on interest-bearing bank and other borrowings | 369,026 | 590,831
Interest on lease liabilities (Note 27) | 147,840 | 113,785
Interest on other liabilities (Note 24) | 215,439 | 420,300
| 732,305 | 1,124,916

9. | DIRECTORS’ REMUNERATION

| 2020 | 2019
| US$ | US$
Fees | 81,068 | 33,974
Other emoluments: |  |
Salaries, allowances and benefits in kind | 625,140 | 254,113
Equity-settled share option expenses | 94 | –
| 706,302 | 288,087

10. | INCOME TAX

| 2020 | 2019
| US$ | US$
Statement of profit or loss and other comprehensive income: |  |
Current income tax |  |
- Charge for the year | 1,749,665 | 1,059,682
- Overprovision in prior years | (14,138) | (9,005)
Deferred tax |  |
- Origination and reversal of temporary differences | (766,546) | 632,058
Total tax charge for the year | 968,981 | 1,682,735

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

10. | INCOME TAX (continued)

Relationship between tax expense and accounting profit

A reconciliation of the tax expense applicable to profit before tax at the statutory rates for the countries in which YCP Holdings Limited and the majority of its subsidiaries are domiciled to the tax expense at the effective tax rate is as follows:

| 2020 | 2019
| US$ | % | US$ | %
Profit before tax | 7,268,989 |  | 460,985 |
Tax at the statutory tax rate | 1,199,383 | 16.5 | 76,063 | 16.5
Effect of tax rates in foreign jurisdictions | 626,728 | 8.8 | 204,069 | 44.3
Tax effects of: |  |  |  |
Income not subject to tax | (593,273) | (8.3) | (270,347) | (58.6)
Expenses not deductible for tax | 36,883 | 0.5 | 470,456 | 102.1
Overprovision in prior years | (14,138) | (0.2) | (9,005) | (2.0)
Profits and losses attributable to associates | 36,214 | 0.5 | (12,783) | (2.8)
Tax losses utilised from previous periods | (225,551) | (3.2) | – | –
Deferred tax recognised in respect of previous periods | (369,862) | (5.2) | – | –
Tax losses not recognised | 221,610 | 3.1 | 1,063,667 | 230.7
Effect of withholding tax | 96,210 | 1.4 | 176,281 | 38.2
Others | (45,223) | (0.6) | (15,666) | (3.4)
Tax expense at the Group's effective rate | 968,981 | 13.3 | 1,682,735 | 365.0

For the financial year ended 31 December 2020, there is no share of tax attributable to associates included in "Share of profits and losses of associates" in the combined statement of profit or loss and other comprehensive income (2019: US$57,020).

Hong Kong profits tax has been provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits arising in Hong Kong during the year, except for YCP Holdings Limited which is a qualifying entity under the two-tiered profits tax rates regime. The first HK$2,000,000 (equivalent to US$257,921) (2019: HK$2,000,000 (equivalent to US$256,869)) of assessable profits is taxed at 8.25% and the remaining assessable profits are taxed at 16.5%. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates (e.g. the rate of Japan at 35% and Singapore at 17%).

YCP Holdings (Global) Limited

Notes to Combined Financial Statements

For the financial years ended 31 December 2019 and 2020

11. EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic earnings/(loss) per share amounts is based on the profit/(loss) for the year attributable to ordinary equity holders of the YCP Holdings Limited, and the weighted average number of ordinary shares of 16,299,296 (2019: 16,401,000) in issue during the year.

For the year ended 31 December 2020 and 2019, no adjustment has been made to the basic earnings/(loss) per share amount presented as there were no potentially dilutive ordinary shares in issue.

|  | Group
|  | 2020 | 2019
Earnings/(loss) |  |  |
Profit/(loss) for the year attributable to equity holders of YCP Holdings Limited used in the computation of basic earnings/(loss) per share |  | 6,339,589 | (1,186,967)

|  | Number of shares
|  | 2020 | 2019
Shares |  |  |
Weighted average number of ordinary shares in issue during the year used in the basic and diluted earnings per share calculation |  | 16,299,296 | 16,401,000

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