Wah Seong Corporation Berhad Annual Report 2018

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.22 Financial guarantee contracts (continued) Accounting policies applied until 31 December 2017 Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation. The fair value of financial guarantee contracts is the estimated amount that would be payable to the holder for assuming the obligations. 2.23 Revenue recognition Revenue is recognised when it is probable that economic benefits will flow to the Group and the Company and when they can be measured reliably. Revenue is measured at the fair value of consideration received or receivable. Accounting policies applied from 1 January 2018 (MFRS 15) (a) Revenue from contracts with customers Revenue from contracts with customers is recognised by reference to each distinct performance obligation in the contract with customer. Revenue from contracts with customers is measured at its transaction price, being the amount of consideration which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, net of goods and service tax, returns, rebates and discounts. Transaction price is allocated to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract. Depending on the substance of the contract, revenue is recognised when the performance obligation is satisfied, which may be at a point in time or over time. Contract asset is the right to consideration for goods or services transferred to the customers. Where the cumulative revenue earned exceed progress billings, the balance is presented as ‘contract assets’ within current assets. Contract liability is the obligation to transfer goods or services to customer for which the Group has received the consideration or has billed the customer. Where progress billings exceed the cumulative revenue earned, the balance is presented as ‘contract liabilities’ within current liabilities. Specific revenue recognition criteria for each of the Group’s activities are as described below: (i) Contract revenue Contract revenue with customers include contracts relating to pipe coating, manufacturing of boilers and steam turbines as well as engineering and fabrication services. These contracts may include multiple performance obligations as they are not highly integrated. Hence, the transaction price will be allocated to each performance obligation based on the standalone selling price. Where the contracts are highly integrated, they are recognised as a single performance obligation. Revenue is recognised progressively based on the progress towards complete satisfaction of the performance obligation. Revenue are recognised over time when control of the asset is transferred over time when the Group’s performance: • creates and enhances an asset that the customer controls as the services are being performed; or • does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 ANNUAL REPORT 2018 107