2019 UEM Edgenta Annual Report

178 179 UEM EDGENTA AT A GLANCE MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION Notes to the Financial Statements For the year ended 31 December 2019 Notes to the Financial Statements For the year ended 31 December 2019 UEM Edgenta Berhad Annual Report 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.4 Summary of significant accounting policies (cont’d.) (x) Income recognition (cont’d.) Revenue from contracts with customers (cont’d.) (iii) Infrastructure services The Group provides maintenance service and repair of civil, mechanical and electrical works on roads, infrastructure and expressways works. Revenue on infrastructure services are recognised over time, using an input method to measure progress towards complete satisfaction of the service, because customer simultaneously receives and consumes the benefits provided by the Group. Revenue is calculated as the proportion of total contract value which costs incurred to date to total expected costs for that contract. Revenue derived from variations on contracts are recognised only when they have been accepted by the customer. Full provision is made for losses on all contracts in the year in which they are first foreseen. Revenue for routine maintenance is recognised based on fixed sum contract while revenue for non routine maintenance is recognised based on schedule of rates agreed with customers. (iv) Property and Facility Solutions The Group provides various facilities management including infrastructure, building and ground maintenance to commercial customers. These services are provided on a time and material basis or as a fixed-priced contract, with contract terms generally ranging from one (1) year to three (3) years. Revenue from these services is recognised over time in the period the services are rendered. The Group also provides green technology and sustainability services in retro-fitting works of buildings followed by a period in which the Group maintains and services the infrastructure. In such contracts, revenue from the supply of retro-fitting equipment and installation works are recognised at the point in time when: (i) the control of the asset is transferred to the customer upon the acceptance of physical possession of the asset and successful testing and commissioning; and (ii) the significant risks and rewards of ownership of the asset is borne by the customer. Revenue from the maintenance and servicing of the infrastructure subsequent to the retro-fitting is recognised over time in the period the services are rendered. (v) Property development Revenue from sale of property development is recognised over time. Revenue from sale of completed property units is recognised at the point of time upon the control of the asset is transferred to the customer and it is probable that the Group will collect the consideration to which it entitled in exchange for the asset that will be transferred to the customer. (vi) Management fees Management fees for services provided to entities within the Group are recognised over time as services are rendered. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.4 Summary of significant accounting policies (cont’d.) (x) Income recognition (cont’d.) Other income recognition (i) Dividend income Dividend income is recognised when the Group’s right to receive payment is established. (ii) Rental income Rental income is recognised on a straight-line basis over the term of the lease. (iii) Interest income Interest income is recognised on an accrual basis using the effective interest method. (y) Contract balances Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs its obligation by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised. Contract assets are subject to impairment assessment based on the ECL model. Contract liabilities A contract liability is the obligation to transfer goods or services to a customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs the obligations under the contract. Contract fulfillment assets Contract fulfillment assets are divided into: (i) Cost that give rise to an asset; and (ii) Costs that are expensed as incurred. When determining the appropriate accounting treatment for such costs, the Group firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognised under MFRS 15. If other standards are not applicable to contract fulfillment costs, the Group applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) The costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) The costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.