for the year ended 31 December 2016
NOTES TO THE
FINANCIAL STATEMENTS
Annual Report 2016
-
98
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2.
Summaryofsignificantaccountingpolicies (cont’d)
2.17
Construction contracts and revenue
(a)
Construction contracts
TheGroupprincipallyoperatesfixedpricecontracts.Contract revenueandcontractcostsarerecognised
as revenue and expenses respectively by reference to the stage of completion of the contract activity
at the end of the reporting period (the percentage of completion method), when the outcome of a
construction contract can be estimated reliably.
When the outcome of a construction contract cannot be estimated reliably (principally during early
stages of a contract), contract revenue is recognised only to the extent of contract costs incurred that
are likely to be recoverable and contract costs are recognised as expense in the period inwhich they
are incurred.
An expected loss on the construction contract is recognised as an expense immediately when it is
probable that total contract costswill exceed total contract revenue.
Inapplying thepercentageof completionmethod, revenue recognisedcorresponds to the total contract
revenue (as defined below) multiplied by the actual completion rate based on the proportion of total
contract costs (as defined below) incurred to date to the estimated costs to complete.
Contract revenue–Contract revenuecorresponds to the initial amountof revenueagreed in thecontract
andanyvariations incontractwork, claims and incentivepayments to theextent that it isprobable that
theywill result in revenue; and they can be reliablymeasured.
Contract costs –Contract costs include costs that relate directly to the specific contract and costs that
are attributable to contract activity in general and can be allocated to the contract.
Contracts inprogressat thebalance sheet dateare recorded in thebalance sheet at cost plusattributable
profit less recognised losses, net of progress billings and allowance for foreseeable losses, and are
presented in the balance sheet as “Gross amount due from customers for contract work-in-progress”
(as an asset) or as “Gross amount due to customers for contract work-in-progress (as liability) as
applicable.
Progressbillingsnot yet paidby thecustomer are included in thebalance sheet under “Tradeandother
receivables”.Amounts received before progress billings are included in the balance sheet, as “Trade
and other payables”.
