3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (o) Revenue recognition (continued) (i) Revenue from contracts with customers (continued) • Sales with a right of return When the customer has a right to return the goods within a given period, the Group is obliged to refund the purchase price. Revenue is adjusted for the expected value of the returns and cost of sales are adjusted for the value of the corresponding goods expected to be returned. A refund liability for the expected refunds to customers is recognised as adjustment to revenue and correspondingly in trade and other payables. At the same time, the Group has a right to recover the goods from the customer where the customer exercises his right of return and recognises a refund asset and a corresponding adjustment to cost of sales the refund asset is measured by reference to the former carrying amount of the product. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level using the expected value method. Because the number of goods returned has been steady for years, management assessed that it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date. • Revenue from rendering services Revenue from rendering services including management fees are recognised when the services are performed by reference to completion of the specific services. Transportation services performed after the transfer of control of sales of goods from the sugar operation to customers are regarded as a separate performance obligation and recognised over time depending on the terms of the contract. • Receivables, contract asset and contract liabilities A receivable is recognised when the goods are delivered or services are rendered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. • Contract cost During the previous financial year, the Group has elected the practical expedient to recognise incremental contract cost of obtaining contract with period of less than one year as an expense when incurred. (ii) Revenue from other sources Specific revenue recognition criteria for other revenue and income earned by the Company are as follows: (a) Rental income - recognised on a straight-line basis over the lease terms. (b) Finance income - recognised using effective interest method. Finance income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance). (c) Dividend income Dividend income from investments are recognised in profit or loss when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. Dividends that clearly represents a recovery of part of the cost of an investment is recognised in other comprehensive income if it relates to an investment in equity instruments measured at FVOCI. NOTESTOTHE FINANCIAL STATEMENTS FORTHE FINANCIALYEAR ENDED 31 DECEMBER 2021 SUSTAINABILITY JOURNEY HOWWE ARE GOVERNED FINANCIAL STATEMENTS ADDITIONAL INFORMATION 301
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