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126 | S P SETIA BERHAD GROUP | Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 October 2014

V. FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(m) Development properties (cont’d)

Land on which development has commenced and is expected to be completed within the normal operating cycle is included in

property development costs. Property development costs comprise all costs that are directly attributable to development activities

or that can be allocated on a reasonable basis to such activities.

Where the outcome of a development 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. In

applying this method of determining stage of completion, only those costs that reflect actual development work performed are

included as costs incurred.

For certain overseas development projects, revenue will be recognised upon the transfer of significant risks and rewards of

ownership, which generally coincides with the time the development units are delivered to the purchasers.

Where the outcome of a development cannot be reasonably estimated, revenue is recognised to the extent of property development

costs incurred that is probable will be recoverable, and the property development costs on the development units sold shall be

recognised as an expense in the period in which they are incurred.

When it is probable that total costs will exceed total revenue, the foreseeable loss is immediately recognised in profit or loss

irrespective of whether development work has commenced or not, or of the stage of completion of development activity, or of the

amounts of profits expected to arise on other unrelated development projects.

The excess of revenue recognised in profit or loss over the billings to purchasers of properties is recognised as accrued billings

under current assets.

The excess of billings to purchasers of properties over revenue recognised in profit or loss is recognised as progress billings under

current liabilities.

(n) Long term construction contracts

The Group’s long term construction contracts are all fixed 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 reflect 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 identified 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 profit 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 profits expected to arise on other unrelated contracts.

On the statement of financial position, contracts in progress are reflected 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 profits 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).