NewWorld Development Company Limited
FINANCIAL SECTION
122
3 PRINCIPAL ACCOUNTING POLICIES
(continued)
(m) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated on the weighted average
basis. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling
expenses.
(n) Contracts in progress
Contracts in progress comprise contract cost incurred, plus recognised profits (less recognised losses) less
progress billing. Cost comprises materials, direct labour and overheads attributable to bringing the work in
progress to its present condition.
Variations in contract works, claims and incentive payments are included in contract revenue to the extent that
may have been agreed with the customer and are capable of being reliably measured.
The Group uses the “percentage-of-completion method” to determine the appropriate amount to recognise in
a given period. The stage of completion is measured by reference to the contract costs incurred up to the end
of the reporting period as a percentage of total estimated costs for each contract. Costs incurred in the year
in connection with future activity on a contract are excluded from contract costs in determining the stage of
completion.
The Group presents the net contract position for each contract as an asset, the gross amount due from
customers for contract works, for all contracts in progress for which costs incurred plus recognised profits
(less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are
included under current assets.
The Group presents the net contract position for each contract as a liability, the gross amount due to
customers for contract works, for all contracts in progress for progress billings exceed costs incurred plus
recognised profits (less recognised losses).
(o) Trade and other debtors
Trade and other debtors are amounts due from customers for merchandise sold or services performed in
the ordinary course of business. If collection of trade and other debtors is expected in one year or less (or
in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are
presented as non-current assets.
Trade and other debtors are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method, less provision for impairment.
(p) Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held
at call with banks, other short-term highly liquid investments with original maturities of three months or less
and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities in the consolidated
statement of financial position.
