NOTES TO THE FINANCIAL STATEMENTS
FOR THE FInAncIAL yEAR EnDED 30 JunE 2016
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
g)
Construction contracts
The Group principally operates fixed price contracts. 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
(“percentage-of-completion method”). 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 recognised as 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.
Costs incurred during the financial year in connection with future activity on a contract are shown as
gross amount due from contract work-in-progress on 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.
The stage of completion is measured by reference to the professional’s certification of value of work
done to-date or by reference to surveys of work performed.
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 due from
customers for contract work-in-progress. Where progress billings exceed the cumulative costs incurred
plus recognised profits (less recognised losses), the balance is presented as due to customers for contract
work-in-progress.
Progress billings not yet paid by customers and retentions by customers are included within “trade and
other receivables”. Advances received are included within “trade and other payables”.
71
ISOTEAM LTD.
ANNUAL REPORT 2016
