New World Development Company Limited
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Financial Section
3 Principal Accounting Policies
(continued)
(v) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated
at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in the consolidated income statement or capitalised on the basis set out in note 3(y) over the period of the
borrowings using the effective interest method where appropriate.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting period.
(w) Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services
rendered in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates
and discounts, allowances for credit and other revenue reducing factors after eliminating sales within the Group.
Revenue is recognised when the amount can be reliably measured, it is probable that future economic benefits will
flow to the Group and specific criteria for each of the activities have been met. Estimates are based on historical
results, taking into consideration the type of customers, the type of transactions and the specifics of each
arrangement.
(i)
Rental
Rental is recognised in the consolidated income statement on a straight-line basis over the lease term.
(ii) Property sales
Sale of properties is recognised when the risks and rewards of the properties are passed to the purchasers.
Deposits and installments received on properties sold prior to their completion are included in current liabilities.
(iii) Construction revenue
Revenue from construction service contracts is recognised using the percentage of completion method when
the contracts have progressed to a stage where an outcome can be estimated reliably. Revenue from
construction service contracts is measured by reference to the proportion of costs incurred for work performed
to the end of the reporting period as compared to the estimated total costs to completion. Anticipated losses
on contracts are fully provided when it is probable that total contract costs will exceed total contract revenue.
When the outcome of construction service contract cannot be estimated reliably, contract revenue is
recognised only to the extent of contract costs incurred that are likely to be recoverable.
(iv) Service fees
Property management service fee and property letting agency fee are recognised when services are rendered.
(v) Infrastructure operations
Toll revenue from road and bridge operations, income from port operation, cargo, container handling and
storage are recognised when services are rendered.
(vi) Hotel operations
Revenue from hotel and restaurant operations is recognised upon provision of the services.
(vii) Department store operations
Sale of goods and merchandise is recognised upon delivery of goods.
Income from concessionaire sale is recognised upon the sale of goods and merchandise by the relevant stores.
(viii) Interest
Interest is recognised on a time proportion basis using the effective interest method. When a receivable is
impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash
flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount
as interest income. Interest income on impaired receivables is recognised using the original effective interest
rate.
(ix) Dividend
Dividend is recognised when the right to receive payment is established.