Annual Report 2019

175 Transport International Holdings Limited 2019 Annual Report Notes to the Financial Statements 5 Profit before taxation (continued) 2019 2018 $’ 000 $’ 000 (d) Other items Amortisation of land lease premium* – 2,012 Depreciation – owned property, plant and equipment* 960,598 910,908 – right-of-use assets* 6,009 – Total minimum lease payments for lease previously classified as operating leases under HKAS 17* – 32,185 Write-down/(write-back) of spare parts and stores 725 (8,093) Provision for passenger reward (note a) 6,834 – Provision for toll exemption fund (note b) 195,782 – Auditors’ remuneration – audit services 4,203 4,111 – other services 884 1,210 Note a: Under the revised Modified Basket of Factors (“MBOF”) approach, which is the existing basis for the assessment of bus fare adjustment applications, 50% of any return on a franchised bus operator in a given year in excess of a prescribed triggering point of return on its average net interest in leasehold land and other property, plant and equipment is required to be set aside and accumulated in a balance of passenger reward, which would be available to relieve the pressure for future fare increases and to facilitate the offer of bus fare concessions. The prescribed triggering point of return for 2019 and 2018 was 8.7% and 9.7% per annum respectively. The balance of passenger reward of the Group as at 31 December 2019, included in accounts payable and accruals (note 24), was $12,375,000 (2018: $6,052,000). Note b: The HKSAR Government announced that with effect from 17 February 2019, all franchised buses are exempted from paying toll when using the Government tunnels and roads. However, each franchised bus operator is required to spend an equivalent amount of the toll saved to set up its own dedicated account known as the “Toll Exemption Fund” in which the fund will normally be used to lower the magnitude of future fare increases. In addition, any additional fare revenue resulting from the increase of the bus fare on the jointly operated routes with other franchised bus operators arising from a fare adjustment is required to be paid into the Toll Exemption Fund. The balance of Toll Exemption Fund of the Group as at 31 December 2019, included in accounts payable and accruals (note 24), was $196,354,000 (2018: $Nil). * The Group has initially applied HKFRS 16 using the modified retrospective approach and adjusted to the opening balances at 1 January 2019 to recognise right-of-use assets relating to leases which were previously classified as operating leases under HKAS 17. The depreciated carrying amount of the finance lease assets which were previously included in property, plant and equipment is also identified as a right-of- use asset. After initial recognition of right-of-use assets at 1 January 2019, the Group as a lessee is required to recognise the depreciation of right-of-use assets, instead of the previous policy of recognising rental expenses incurred under operating leases on a straight-line basis over the lease term. Under this approach, the comparative information is not restated. See note 1(c).