EXCEL FORCE MSC BERHAD Annual Report 2017

58 2. Basis of Preparation (cont’d) (a) Statement of compliance (cont’d) Standards issued but not yet effective (cont’d) MFRS 15 Revenue from Contracts with Customers MFRS 15 replaces MFRS 118 Revenue , MFRS 111 Construction Contracts and related IC Interpretations. The Group is in the process of assessing the impact of this Standard. The Standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the core principle by applying the following steps: (1) Identify the contract(s) with a customer; (2) Identify the performance obligation in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the contract; (5) Recognise revenue when the entity satisfies a performance obligation. The Group has assessed the effects of applying the new standard on the Group’s financial statements and has identified the following area that will be affected: (i) Revenue from sales of goods will be recognised when control of the products are transferred, being the point when the products are deliver to the customer. As the transfer of risk and rewards are generally coincides with the transfer of control at a point in time, the timing and amount of revenue recognised for the sales of goods under MFRS 15 is unlikely to be materially difference from the Group’s and the Company’s current practice. (ii) Revenue relating to services will be recognised in the accounting period in which the services are rendered. Revenue from contracts include multiple deliverables, such as system and equipment design, planning, installation and commissioning contracts. It is therefore accounted for as a separate performance obligation under MFRS 15. The transaction price will be allocated to each performance obligation based on the stand- alone selling price. Revenue relating to revenue from contract will be recognised over time based on the entity’s progress towards complete satisfaction of that performance obligation. If contracts include the installation of equipment, revenue for the equipment is recognised at a point in time when the equipment is delivered, the legal title has passed and the customer has accepted the equipment. The Group does not expect the revenue recognition for services under MFRS 15 to be materially different from its current practice. However, the Group and the Company anticipate more extensive disclosure will be required from the year of adoption in view of the requirements of MFRS 15 to provide information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group and the Company in the financial year ended 31 December 2018 when the Group and the Company adopt MFRS 15. The Group and the Company have not finalised the testing and assessment of controls over its new accounting system. The Group and the Company intend to adopt the standard using modified retrospective approach which means that the cumulative impact of the adoption will be recognised in retained earnings as of 1 January 2018 and that comparatives will not be restated. Notes To The Financial Statements 31 December 2017 (cont’d)