Notestothefinancialstatements
For the financial year ended31December 2015
2.
Summaryof significant accountingpolicies (cont’d)
2.18
Constructioncontractsand revenue
(a)
Constructioncontracts
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 end of the reportingperiod (thepercentage of completionmethod), when the outcome
of a construction contract canbeestimated reliably.
When theoutcomeof aconstructioncontract cannot beestimated reliably (principallyduringearlystagesof acontract), contract revenue is recognisedonly
to theextentof contract costs incurred thatare likely toberecoverableandcontract costsarerecognisedasexpense in theperiod inwhich theyare incurred.
An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract costs will exceed total
contract revenue.
Inapplying thepercentageof completionmethod, revenuerecognisedcorresponds to the total contract revenue (asdefinedbelow)multipliedby theactual
completion ratebasedon theproportionof total contract costs (asdefinedbelow) incurred todate to theestimated costs to complete.
Contract revenue–Contract revenue corresponds to the initial amount of revenueagreed in the contract andany variations in contractwork, claims and
incentivepayments to theextent that it isprobable 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 inprogress 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 are presented in the balance sheet as “Gross amount due from customers for contract work-in-
progress” (asanasset) or as “Grossamount due to customers for contractwork-in-progress (as liability) asapplicable.
Progressbillingsnot yet paidby the customer are included in thebalance sheet under “Tradeandother receivables”. Amounts receivedbeforeprogress
billingsare included in thebalance sheet, as “Tradeandother payables”.
2.
Summaryof significant accountingpolicies (cont’d)
2.18
Constructioncontractsand revenue (cont’d)
(b)
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured,
regardlessofwhen thepayment ismade. Revenue ismeasuredat the fair valueof consideration receivedor receivable, taking intoaccount contractually
defined termsof payment andexcluding taxesorduty. TheGroupassesses its revenuearrangements todetermine if it isactingasprincipal oragent. The
following specific recognition criteriamust alsobemet before revenue is recognised:
(i)
Salesof goods
Revenue fromsalesof goods is recognisedupon the transferof significant riskand rewardsof ownershipof thegoods to thecustomers, usuallyon
delivery of goods.
Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the considerationdue, associated costs or
thepossible returnof goods.
(ii)
Renderingof services
Revenue from rendering of services is recognised by reference to the stage of completion at the end of the reporting period. Where the contract
outcome cannot bemeasured reliably, revenue is recognised to theextent of theexpenses recognised that are recoverable.
(iii)
Interest income
Interest income is recognisedusing theeffective interestmethod.
(iv)
Dividend income
Dividend income is recognisedwhen theGroup’s right to receivepayment isestablished.
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BAKERTECHNOLOGYlimited
ANNUAL REPORT 2015
