ENRA Group Berhad Annual Report 2019

158 ENRA GROUP BERHAD ∞ Annual Report 2019 page Notes to the Financial Statement 31 March 2019 45. ADOPTION OF NEWMFRSs AND AMENDMENTS TO MFRSs (cont’d) 45.2 Explanation of transition to MFRSs (cont’d) Notes to the reconciliations (cont’d) (ii) Adoption of MFRS 15 Revenue from Contracts with Customers MFRS 15 replaces MFRS 118 Revenue , MFRS 111 Construction Contracts and related interpretations. (a) Accounting for separate performance obligations arising from the sale of goods and services The application of MFRS 15 resulted in the identification of various separate performance obligations which previously had been bundled. The performance obligation is separated if the performance obligation is capable of being distinct and if they are distinct within the context of the contract. In the context of sale of properties by a property developer, among the performance obligations to be identified separately are goods, common facilities, free maintenance fees, legal and stamp duties paid on behalf of house buyers. Revenue will then be allocated to the respective performance obligations and recognised when controls in relation to the performance obligations have been transferred. This could affect the timing of the recognition of revenue going forward. (b) Determining the transaction price In determining the transaction price, theGroup assesses the estimated transaction price based on themost likely amount, constrained up to the amount that is highly probable that would not reverse in the future. (c) Timing of recognition for the sales of development properties Revenue from property development is recognised as and when the control of the asset is transferred to the customer and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the customer. Control of the asset may transfer over time or at a point in time. For properties sold in accordance with the Housing Development (Control and Licensing) Act 1966 (“HDA”), control of the asset is transferred over time as the Group’s performance 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. Therefore revenue from sale of properties under the HDA, without a secured financing arrangement is recognised at a point in time if it is not probable that the Group will collect the consideration of the sale of the property to which it is entitled. Sale of properties that is not governed under the HDA, will be assessed on a contract by contract basis, to establish the Group’s enforceable right to payment for performance completed to date. (d) Accounting for incremental costs of obtaining a contract The Group’s existing accounting policy is to expense off costs in obtaining a contract, which mainly include legal fees and sales commissions, to obtain the contracts. Under MFRS 15, these costs are recognised as an asset as the Group expects to recover those costs. These capitalised costs will then be amortised over the duration of the contract. (e) Presentation of contract assets and contract liabilities MFRS 15 requires separate presentation of contract assets and contract liabilities in the balance sheet. This will result in some reclassifications as of 1 April 2018, which are currently included in other balance sheet line items. Contract assets identified are mainly the right to consideration for goods or services transferred to the customers. In the case of property development and construction contracts, contract asset is the excess of cumulative revenue earned over cumulative billings to-date whilst contract liability is the obligation to transfer goods or services to the customers for which the Group has received the consideration or have billed the customers.