Page 112 - S P Setia Annual Report 2013
P. 112

110 | Financial Statements S P SETIA BERHAD GROUP Annual Report 2013



1. SiGniFicant accOUntinG POlicieS (cOnt’D)

(o) long term construction contracts
The Group’s long term construction contracts are all fxed price contracts and where their outcome can be reasonably estimated,
revenue is recognised on the percentage of completion method. The stage of completion is determined by the proportion that costs
incurred to-date bear to estimated total costs, and for this purpose, only those costs that refect actual contract work performed are
included as costs incurred.

Where the outcome of a long term construction contract cannot be reasonably estimated, revenue is recognised only to the extent of
contract costs incurred that are expected to be recoverable. At the same time, all contract costs incurred are recognised as an expense
in the period in which they are incurred.

Costs that relate directly to a contract and which are incurred in securing the contract are also included as part of contract costs if they
can be separately identifed and measured reliably and it is probable that the contract will be secured.

When it is probable that total costs will exceed total revenue, the foreseeable loss is immediately recognised in proft or loss irrespective
of whether contract work has commenced or not, or of the stage of completion of contract activity, or of the amounts of profts
expected to arise on other unrelated contracts.
On the statement of fnancial position, contracts in progress are refected either as gross amounts due from or due to customers, where
a gross amount due from customers is the surplus of (i) costs incurred plus profts recognised under the percentage of completion
method over (ii) recognised foreseeable losses plus progress billings. A gross amount due to customers is the surplus of (ii) over (i).

(p) inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis. In the case of
fnished goods and work-in-progress, cost comprises materials, direct labour, other direct charges and an appropriate proportion of
factory overheads.

In the case of completed houses held for sale, cost is determined based on specifc identifcation method.

Net realisable value represents the estimated selling price in the ordinary course of business, less selling and distribution costs and all
other estimated cost to completion.

(q) Financial instruments

A fnancial instrument is any contract that gives rise to both a fnancial asset of one enterprise and a fnancial liability or equity
instrument of another enterprise.

(i) Initial recognition and measurement

A fnancial instrument is recognised in the fnancial statements when the Company or any of its subsidiaries becomes a party to
the contractual provisions of the instrument.

A fnancial instrument is recognised initially, at its fair value plus, in the case of a fnancial instrument not at fair value through proft
or loss, transaction costs that are directly attributable to the acquisition or issue of the fnancial instrument.

(ii) Financial instrument categories and subsequent measurement

Financial assets
Financial assets are classifed as either fnancial assets at fair value through proft or loss, loans and receivables, held-to-maturity
investments or AFS fnancial assets, as appropriate. Management determines the classifcation of the fnancial assets upon initial
recognition as set out below. The Group and the Company only have fnancial assets categorised as loans and receivables.
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