Right-of-use Assets and Lease Liabilities

12 Months Ended

Dec. 31, 2024

Right-of-use Assets and Lease Liabilities [Abstract]

RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

11. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

Our operating leases primarily consist of leases of office premises and showrooms. The recognition of whether a contract arrangement contains a lease is made by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all the economic benefits from and has the ability to direct the use of the asset.

Operating lease assets and liabilities are included in the items of operating lease right-of-use assets, net, operating lease liabilities, current portion, and operating lease liabilities, non-current portion on the consolidated balance sheets.

We adopted ASU No. 2016-02 and related standards (collectively ASC 842, Leases), which replaced previous lease accounting guidance, on January 1, 2020, using the modified retrospective method of adoption. We elected the transition method expedient which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, prior periods have not been restated. In addition, adoption of the new standard resulted in the recording of right-of-use assets and associated lease liabilities of approximately HKD541,625 and HKD541,625, respectively, as of January 1, 2020.

Supplemental balance sheet information related to operating leases was as follows:

	As of December 31,
	2023		2024		2024
	HKD		HKD		US$
Operating lease:
Operating lease right-of-use assets		23,884,854		42,491,805		5,470,320
Current operating lease obligation		708,829		3,890,482		500,854
Non-current operating lease obligation		23,176,025		38,601,323		4,969,466
Total operating lease obligation		23,884,854		42,491,805		5,470,320

Operating lease expense for the year ended December 31, 2022, 2023 and 2024 was HKD2,580,711, HKD3,271,053 and HKD3,866,322 (US$497,744), respectively.

The undiscounted future minimum lease payment schedule as follows:

For the years ending December 31,	HKD			US$
2025		7,073,089			910,577
2026		7,308,606			940,897
2027		7,501,149			965,685
2028		7,752,154			997,999
2029 or after		28,133,028			3,621,796
Total lease payments		57,768,026			7,436,954
Less: imputed interest		(15,276,221	)		(1,966,634	)
Total operating lease liabilities		42,491,805			5,470,320

Other supplemental information about the Company’s operating lease as of:

	As of December 31, 2023			As of December 31, 2024
Weighted average discount rate		7.91	%		7.71	%
Weighted average remaining lease term (years)		9.0			6.1

Our right-of-use assets and relevant lease liabilities originated from our rented premises for office premises in Hong Kong and retail shops in the UK.