KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
ANNUAL REPORT 2014
69
NOTES
TO THE FINANCIAL STATEMENTS
3
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
3.10 Provision
A provision is recognised if, as a result of past event, the Group has a present legal or a constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
3.11 Revenue recognition
(i)
Sale of goods
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value
of the consideration received or receivable, net of returns and allowances, trade discounts and
volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form
of an executed sales agreement, that the significant risks and rewards of ownership have been
transferred to the customer, recovery of the consideration is probable, the associated costs
and possible return of goods can be estimated reliably, there is no continuing management
involvement with the goods, and the amount of revenue can be measured reliably, then the
discount is recognised as a reduction of revenue as the sales are recognised.
The timing of the transfers of risks and rewards varies depending on the individual terms of the
contract of sale.
(ii) Chartering, towage and rental of equipment
Chartering, towage and equipment rental income are recognised on an accrual basis over the
period for which the vessels are chartered and the period of rental of equipment.
(iii) Rendering of services
Revenue from marine offshore support services and freight income is recognised upon
rendering of services.
(iv) Contract revenue
Revenue arising from shipbuilding and fabrication contracts is recognised in profit or loss in
accordance with the agreed stage of completion which is assessed by reference to survey of
work performed and agreement with customers or the proportion of contract costs incurred for
work performed to date to the estimated total contract costs, to the extent that it is probable
that the contracts will result in revenue that can be measured reliably. Contract revenue
includes the initial amount agreed in the contract plus any variations in contract work, claims
and incentive payments, to the extent that it is probable that they will result in revenue and can
be measured reliably. Contract expenses are recognised as incurred unless they create an
asset related to future contract activity.
When the outcome of a contract cannot be estimated reliably, revenue is recognised only to
the extent of contract costs incurred that are probable to be recoverable. An expected loss on a
contract is recognised immediately in profit or loss.
No revenue is recognised if there are significant uncertainties regarding recovery of the
consideration due and associated costs.
