Page 56 - Inegrated Annual Report 2020-Eng

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 31 DECEMBER 2020

Contract revenue

Contract revenue comprises revenue from execution of contracts relating to dredging activities and associated
land reclamation works. Contract revenue includes the initial amount agreed in the contract plus any variations
in contract work, and incentive payments, to the extent that it is probable that they will result in revenue, they
can be measured reliably and will be approved by the customers. Claims are recognised when negotiations have
reached an advanced stage such that it is probable that the customer will accept the claim and the amount can
be measured reliably. Contract revenue also includes revenue from securing the award of significant projects for
dredging and reclamation works. These amounts are recognised when all significant service obligations arising
from the related services have been discharged.

If the outcome of a contract can be estimated reliably, contract revenue is recognised in the consolidated
statement of profit or loss in proportion to the stage of completion of the contract. Based on the method that
most reliably measures the actual work performed on each contract, the stage of completion is determined either
on the basis of surveys of work performed or in the proportion of the contract costs incurred for work performed
to date as compared to the estimated total contract costs. Losses on contracts are assessed on an individual
contract basis and a provision is recorded for the full amount of any anticipated losses, including losses relating
to future work on a contract, in the period in which the loss is first foreseen.

In case of contracts, where revenue is recognised on the basis of surveys of work performed, revenue is
measured by applying contractual rates, or the minimum recoverable rates expected, to the actual quantities
dredged or the related works performed. Revenue is adjusted subsequently based on final customer approval if
rates approved are different from those originally used.

When the outcome of a contract cannot be estimated reliably, revenue is recognised only to the extent of
contract costs incurred that it is probable will be recoverable; and contract costs should be recognised as an
expense in the period in which they are incurred.
Significant financing component

Generally, the Group receives short-term advances from its customers. Using the practical expedient in IFRS
15, the Group does not adjust the promised amount of consideration for the effects of a significant financing
component if it expects, at contract inception, that the period between the transfer of the promised good or
service to the customer and when the customer pays for that good or service will be one year or less.

Cost to obtain and costs to fulfill a contract
The Group applied the practical expedient to immediately expense contract acquisition costs when the asset
that would have resulted from capitalising such costs would have been amortised within one year or less. The
Group does not incur any costs to obtain a contract and costs to fulfil a contract that are eligible for capitalisation.

Finance income

Finance income comprises interest income on bank deposits. Interest income is recognised as it accrues in the
consolidated statement of profit or loss.

Finance costs

Finance costs comprise interest expense on borrowings. Borrowing costs that are not directly attributable to
the acquisition, construction or production of a qualifying asset are recognised in the consolidated statement of
profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

56 2020 Integrated Annual Report