New World Development Company Limited
124
Financial Section
3 Principal Accounting Policies
(continued)
(k) Properties for/under development
Properties for/under development comprise leasehold land and land use rights, development expenditure and
borrowing costs capitalised, and are carried at the lower of cost and net realisable value. Properties under
development included in the current assets are expected to be realised in, or is intended for sale in the Group’s
normal operating cycle.
(l) Properties held for sale
Properties held for sale are initially measured at the carrying amount of the property at the date of reclassification
from properties under development. Subsequently, properties held for sale are carried at the lower of cost and net
realisable value. Net realisable value is determined by reference to management estimates based on prevailing
market conditions.
(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.
(q) Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
(r) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less
(or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
