NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
2.
Summary of significant accounting policies (cont’d)
2.13 Impairment of financial assets (cont’d)
(c) Available-for-sale financial assets (cont’d)
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria
as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss
measured as the difference between the amortised cost and the current fair value, less any impairment loss on that
investment previously recognised in profit or loss. Future interest income continues to be accrued based on the reduced
carrying amount of the asset, using the rate of interest to discount the future cash flows for the purpose of measuring
the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value
of a debt instrument increases and the increases can be objectively related to an event occurring after the impairment
loss was recognised in profit or loss, the impairment loss is reversed in profit or loss.
2.14 Construction contracts
The Group principally operates fixed price contracts. 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 end of the reporting period (the
percentage of completion method), when the outcome of a construction contract can be estimated reliably.
The outcome of a construction contract can be estimated reliably when:
i)
Total contract revenue can be measured reliably;
ii)
It is probable that the economic benefits associated with the contract will flow to the entity;
iii)
The costs to complete the contract and the stage of completion can be measured reliably; and
iv)
The contract costs attributable to the contract can be clearly identified and measured reliably so that actual costs incurred
can be compared with prior estimates.
When the outcome of a construction contract cannot be estimated reliably (principally during early stages of a contract), contract
revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable and contract costs are
recognised as expense in the period in which they are incurred.
An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract
costs will exceed total contract revenue.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and
incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.
Contract costs include costs that relate directly to the specific contract and costs that are attributable to contact activity in general
and can be allocated to the contract. Costs that related directly to a specific contract comprise: site labour costs (including site
supervision); cost of materials used in construction; depreciation of equipment used on the contract; cost of designs and technical
assistance that is directly related to the contract.
The stage of completion is measured by reference to professional surveys of work performed. In evaluating the stage of
completion, the Group relies on past experience and the work of specialists.
Hock Lian Seng Holdings Limited
Annual report 2014
57
