FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 168 FGV HOLDINGS BERHAD EXAMINED OUR NUMBERS 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The principal accounting policies applied in the preparation of financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (continued) (t) Revenue recognition (continued) (i) Revenue from contracts with customers (continued) Quality claims The Group’s obligation to provide quality claims against off-spec goods under the Group’s standard contractual terms is recognised as a provision. Receivables, contract asset and contract liabilities A receivable is recognised when the goods are delivered or services are rendered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Contract asset is the right to consideration in exchange for goods or services that the Group has transferred to the customers. A contract asset is recognised when the services rendered by the Group exceed the amount already billed. Contract liability is the Group’s obligation to transfer goods or services to customers. A contract liability is recognised when the Group has received the sales consideration in advance or billings or payments by the customers exceed the services rendered by the Group. Contract cost During the year, the Group has elected the practical expedient to recognise contract cost incurred related to contracts with period of less than one year as an expense when incurred. (ii) Revenue from other sources Specific revenue recognition criteria for other revenue and income earned by the Group and Company are as follows: (a) Rental income Rental income is recognised on a straight-line basis over the lease terms. (b) Finance income Finance income is recognised using effective interest method. Finance income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).