Wah Seong Corporation Berhad Annual Report 2018

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.23 Revenue recognition (continued) Accounting policies applied from 1 January 2018 (MFRS 15) (continued) (a) Revenue from contracts with customers (continued) (i) Contract revenue (continued) The progress towards complete satisfaction of the performance obligation is measured based on one of the following methods that best reflect the Group’s performance in satisfying the performance obligation: • direct measurements of the value transferred by the Group to the customer (eg. surveys of performance completed to date); or • the Group’s efforts or inputs to the satisfaction of the performance obligation (eg. by reference to cost incurred up to the end of the reporting period as a percentage of total estimated costs for complete satisfaction of the contract) (ii) Sales of goods The Group manufactures and sells a range of pipes for industrial use. The Group is also involved in the business of selling building materials, construction equipment, and power generators. Revenue from sales of goods are recognised at a point in time when control of the good is transferred to the customer upon delivery. Accounting policies applied until 31 December 2017 (MFRS 111 and MFRS 118) (a) Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use. When the outcome of a construction contract can be estimated reliably, 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 reporting date. The stage of completion of a construction contract is determined based on the proportion that the contract costs incurred for work performed to date bear to the estimated total costs for the contract. Costs incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to date when determining the stage of completion of a contract. Such costs are shown as amounts due from/(to) customers on construction contracts in the statement of financial position unless it is not probable that such contract costs are recoverable from the customers, in which case such costs are recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is only included in contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim. At the reporting date, the cumulative costs incurred plus recognised profit (less recognised loss) on each contract is compared against the progress billings. Where the cumulative costs incurred plus the recognised profits (less recognised losses) exceed progress billings, the balance is presented as ‘amount due from customers on contracts’ within current assets. Where progress billings exceed the cumulative costs incurred plus recognised profits (less recognised losses), the balance is presented as ‘amount due to customers on contracts’ within current liabilities. Progress billings not yet paid by customers and retentions by customers are included within ‘trade and other receivables’. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 WAH SEONG CORPORATION BERHAD 108