KUB Malaysia Berhad Annual Report 2021

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 3.6 Revenue (cont’d) (c) Information and communications technology (‘ICT’) division The Group’s revenue from ICT division is principally from the supply, construction and maintenance of information technology and telecommunication equipment and infrastructure. (i) Sale of equipment and parts Each sale of goods represents a single performance obligation of which its revenue will be recognised when control of the goods has been transferred to the customer, being at the point in time when the goods are delivered to the customer. (ii) Construction of equipment and infrastructure The contracts for construction of equipment and ICT related infrastructure comprise of multiple deliverables which includes significant integration service and are therefore recognised as a single performance obligation. Revenue is recognised progressively over time based on the percentage of completion by using the cost-to-cost method (‘input method’), based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. The Directors consider that this input method is an appropriate measure of the progress towards complete satisfaction of these performance obligations under MFRS 15. The Group becomes entitled to invoice customers for construction of equipment and infrastructure based on achieving a series of performance-related milestones after a certification of performance is obtained from the customer. Full provision is made for any foreseeable losses which is offset against revenue. There is no significant financing component in construction contracts with customers as the period between the recognition of revenue under the percentage of completion and the milestone payment is generally less than one year. (iii) Maintenance services Maintenance revenue is recognised at the point in time when the required works are completed. (d) Construction transmission lines and substations The Group constructs transmission lines and substations under long-term contracts with customers. This have been identified as a single performance obligation. The revenue from these construction contracts are recognised over time as the customer controls the projects during the course of construction by the Group. The Group considers the input method as an appropriate measure of the progress towards complete satisfaction of these performance obligations under MFRS 15. Variable consideration arises from potential liquidated ascertained damages (‘LAD’) which is estimated based on most likely method, are continuously assessed by the Group. There is no significant financing component in construction contracts with customers as the period between the recognition of revenue under the percentage of completion and the milestone payment is generally less than one year. The Group becomes entitled to invoice customers for construction transmission lines and substations based on achieving a series of performance-related milestones. When a particular milestone is reached, the customer is sent a relevant statement of work which later is verified and signed by the customers for an invoice for the related milestone payment. The Group will previously has recognised a contract asset for any work performed. Any amount previously recognised as a contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer. If the milestone payment exceeds the revenue recognised to date under the cost-to-cost method, then the Group recognises a contract liability for the difference. The Group has specifically considered MFRS 15’s guidance on contract combinations, contract modifications arising from variation orders, variable consideration, principal versus agent consideration and the assessment of whether there is a significant financing component in the contracts. NOTES TO THE FINANCIAL STATEMENTS 68 KUB MALAYSIA BERHAD