2.
Summary of significant accounting policies (cont’d)
2.21 Leases (cont’d)
(ii) As lessor
Leases where the Group retains substantially all the risk and rewards of ownership of the asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set
out in Note 2.22(iii). Contingent rents are recognised as revenue in the period in which they are earned.
2.22 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be
reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received
or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its
revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal
in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised:
(i)
Contract revenue
Revenue from contract services is recognised by reference to the stage of completion when it can be measured reliably.
The stage of completion is determined based on professional surveys of work performed.
Where the outcome cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised
that are recoverable.
(ii) Sales of completed development properties and development properties under construction
Revenue from sales of completed development properties and development properties under construction is recognised
when the significant risks and rewards of ownership of the real estate have been transferred to the buyer (i.e. revenue
is recognised using the completed contract method). If, however, the legal terms of the contract are such that the
construction represents the continuous transfer of work in progress to the purchaser, the percentage of completion
method of revenue recognition is applied and revenue is recognised as work progresses.
In Singapore context, INT FRS 115 Agreements for the Construction of Real Estate includes an accompanying note on
application of INT FRS 115 in Singapore which requires the percentage of completion method of revenue recognition to
be applied to the sale of private residential properties in Singapore prior to completion of the properties that are regulated
under the Singapore Housing Developers (Control and Licensing) Act (Chapter 130) and uses the standard form of sale
and purchase agreements (SPAs) prescribed in the Housing Developers Rules. The accompanying note to INT FRS 115
does not address the accounting treatment for other SPAs, including SPAs with a Deferred Payment Scheme feature in
Singapore.
In the case whereby the percentage of completion method is used, the percentage of work completed is measured based
on the costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred. The
costs incurred will be based on surveys/certifications of work performed as construction progresses.
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
Hock Lian Seng Holdings Limited
Annual report 2014
62
