96
Baker Technology LimitedAnnual Report 2014
2.
Summaryof significant accountingpolicies (cont’d)
2.19
Construction contracts and revenue
(a)
Construction contracts
The Group principally operates fixed price contracts. Contract revenue and contract costs are
recognised as revenue and expenses respectively by reference to the stage of completion of the
contract activity at the endof the reportingperiod (the percentage of completionmethod), when
theoutcomeof a construction contract canbeestimated reliably.
When theoutcomeof a construction contract cannot beestimated reliably (principallyduringearly
stages of a contract), contract revenue is recognised only to the extent of contract costs incurred
that are likely tobe recoverableandcontract costsare recognisedasexpense in theperiod inwhich
theyare incurred.
Anexpected loss on the construction contract is recognised as anexpense immediatelywhen it is
probable that total contract costswill exceed total contract revenue.
In applying the percentage of completion method, revenue recognised corresponds to the total
contractrevenue (asdefinedbelow)multipliedbytheactualcompletionratebasedontheproportion
of total contract costs (asdefinedbelow) incurred todate to theestimated costs to complete.
Contract revenue – Contract revenue corresponds to the initial amount of revenue agreed in the
contract and any variations in contract work, claims and incentive payments to the extent that it is
probable that theywill result in revenue; and they canbe reliablymeasured.
Contract costs –Contract costs include costs that relatedirectly to the specific contract and costs
that areattributable to contract activity ingeneral and canbeallocated to the contract.
Contracts in progress at the balance sheet date are recorded in the balance sheet at cost plus
attributable profit less recognised losses, net of progress billings and allowance for foreseeable
losses, and arepresented in thebalance sheet as “Gross amount due from customers for contract
work-in-progress” (asanasset) or as“Grossamountdue tocustomers for contractwork-in-progress
(as liabiitiy) as applicable.
Progress billings not yet paid by the customer are included in the balance sheet under “Trade
receivables”.Amounts receivedbeforeprogressbillingsare included in thebalancesheet, as“Trade
andother payables”.
NOTES TO THE
FINANCIAL STATEMENTS
For the financial year ended 31December 2014
