Page 122 - S P Setia Annual Report 2016

 

 

 

 

 

Page 122 - S P Setia Annual Report 2016
P. 122

120   S P Setia Berhad Group
                Annual Report 2016




          Notes To The Financial Statements

          For The Financial Year Ended 31 December 2016

          1.   SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)
              (l)   Development properties (cont’d.)

                   (ii)   Property Development Costs (cont’d.)

                       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.

                       When there is a financial assistance given by authority, the amount will be deducted against the property development costs.

                   (iii)   Development rights

                       Development rights represent the rights to additional density over and above the maximum permissible density for the
                       Group’s development projects within the island of Penang, granted pursuant to a BOT agreement for the construction and
                       refurbishment of the subterranean Penang International Convention & Exhibition Centre (“SPICE”) and complementary
                       retail, food and beverage outlets and offices.

                       Development rights are recognised to the extent that the Group has performed the construction services for the BOT
                       agreement.  Development  rights  are  initially  measured  at  cost,  which  is represented  by  the allocated  fair  value  of  the
                       construction services rendered.
                       Development rights recognised are included as part of the cost of the land held for property development or the property
                       development costs of the Group, based on the allocation of the expected utilisation of the development rights for the
                       planned property development projects of the Group.

              (m)  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 the 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).
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