Page 116 - S P Setia Annual Report 2016
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114   S P Setia Berhad Group
                Annual Report 2016

          Notes To The Financial Statements

          For The Financial Year Ended 31 December 2016

              (c)   Significant accounting judgements and estimates (cont’d.)

                   (ii)   Key sources of estimation uncertainty (cont’d.)

                       Revenue recognition of property development activities and construction contracts

                       The  Group  recognises  certain  property  development  activities  and  construction  contracts  based  on the  percentage
                       of completion method. The stage of completion of the property development activities and construction contracts is
                       measured in accordance with the accounting policies set out in Notes 1(l) and 1(m) below.
                       Significant judgement is required in determining the percentage of completion, the extent of the development project and
                       contract costs incurred, the estimated total revenue and total costs and the recoverability of the development project and
                       contract. In making these judgements, management relies on past experience and the work of specialists.

                       Provision for affordable housing

                       The Group recognises a provision for affordable housing as required under FRSIC Consensus 17 Development of Affordable
                       Housing. The provision for affordable housing represents the shortfall between the cost of constructing affordable housing
                       and the economic benefits expected to be received from the purchasers of affordable housing in the development of
                       affordable housing on involuntary basis. This provision is capitalised in the form of common costs for development of
                       premium housing based on the master and building plans approved.

                       In determining the provision for affordable housing, judgements and assumptions are made by the Group on the structure
                       and construction costs in constructing the affordable housing. In making those judgements, the Group evaluates the
                       provisions based on past experience and by relying on the work of specialists.

                       The carrying amount of the Group’s provision for affordable housing as at 31 December 2016 is disclosed in Note 26 to the
                       financial statements.

              (d)   Subsidiary companies

                   In the Company’s separate financial statements, investments in subsidiary companies are stated at cost less impairment losses.
                   Impairment losses are charged to profit or loss.
                   On disposal, the difference between the net disposal proceeds and the carrying amount of the subsidiary company disposed off
                   is taken to profit or loss.

              (e)   Basis of consolidation

                   The consolidated financial statements incorporate the financial statements of the Company and of all its subsidiary companies
                   made up to the end of the financial year. The consolidated financial statements are prepared using uniform accounting policies
                   for like transactions in similar circumstances.

                   The Group controls an investee if and only if the Group has all the followings:

                   (i)   power over the entity;
                   (ii)   exposure, or rights, to variable returns from its involvement with the entity; and
                   (iii)   the ability to use its power over the entity to affect the amount of the investor’s returns.

                   When the Company has less than a majority of the voting rights of an investee, the Company considers the following in assessing
                   whether or not the Company’s voting rights in an investee are sufficient to give it power over the investee:

                   (i)   the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of other vote holders;
                   (ii)   potential voting rights held by the Company, other vote holders or other parties;
                   (iii)   rights arising from other contractual arrangements; and
                   (iv)   any additional facts and circumstances that indicated that the Company has, or does not have, the current ability to direct the
                       relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meeting.
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