|
|
3.14 |
Revenue recognition |
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Company assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The specific recognition criteria described below must also be met before revenue is recognized.
Sale of manufactured goods and distributed products
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.
SDI
The Company’s supply, delivery and installation services are closely interrelated in terms of their ultimate purpose or use and the customer is able to specify the major structural elements of the design. Revenue of SDI is accounted for using the percentage-of-completion method, based on the customer certification of the length of cable laid with respect to the estimated total length of cable under the contract in accordance with IAS 11.
When the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is made. Provision for losses is recognized in the period in which they become evident. On a quarterly basis, the Company reviews the budget and forecast whether a loss provision should be recorded.
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
|
|
3.14 |
Revenue recognition (continued) |
Revenue by significant category
|
|
|
2017 |
|
2016 |
|
2015 |
|
|||
|
|
|
US$’000 |
|
US$’000 |
|
US$’000 |
|
|||
|
Manufactured Products |
|
|
361,853 |
|
|
296,075 |
|
|
318,672 |
|
|
Distributed Products |
|
|
41,985 |
|
|
75,200 |
|
|
62,128 |
|
|
SDI |
|
|
21,377 |
|
|
13,290 |
|
|
8,832 |
|
|
Total Revenue |
|
|
425,215 |
|
|
384,565 |
|
|
389,632 |
|
Onerous operating contracts
Onerous contract is a type of contract in which the costs of meeting the obligations under the contract are higher than the economic benefits received under the contract.
The Company has contracts to supply products that cost more to produce than originally determined in the contracts due to a rise in raw material costs. The Company established the unavoidable costs of meeting the obligations under the contract as a liability for the contractual responsibilities. The liability has been calculated based on the difference between the copper price on the London Metal Exchange (the “LME”) at reporting date and the prices determined in the contracts, if the difference exceeds the profit of the originally contact, which it then recognizes in financial statements as an other operating expense and accrued liability.
Movement of provision for onerous operating contracts during the financial year is set out below:
|
|
|
2017 |
|
|
|
|
|
US$’000 |
|
|
|
Beginning of financial year |
|
|
250 |
|
|
Recognized |
|
|
522 |
|
|
Reversed |
|
|
(246 |
) |
|
Exchange differences |
|
|
29 |
|
|
End of financial year |
|
|
555 |
|
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
|
|
3.14 |
Revenue recognition (continued) |
Bill and hold transaction
The Company recognizes revenue from sales of goods under bill and hold arrangements when they have yet to be delivered, since delivery is delayed at the buyer’s request and the buyer takes title and accepts the billing and that the usual terms of payment apply.
Moreover, the inventory is on hand, clearly identified and ready for delivery to the buyer at the time the revenue is recognized and it is highly probable that delivery will be made.
Sales of goods under bill and hold arrangements are the invoiced value, excluding value added tax after deducting discounts and allowances.
Rebates
Based on IAS 18, the amount of revenue arising on a transaction is usually determined by agreement between the entity and the buyer or user of the asset. It is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity. Consequently, where an entity provides sales incentives to a customer when entering into a contract these are usually treated as rebates and will be included in the measurement of (i.e. deducted from) revenue when the goods are delivered or services provided.
Provisions for rebates based on attainment of sales targets are estimated and accrued as each of the underlying sales transactions is recognized.
Provision for rebate should only be recorded when there is a contractually formal signed rebate contract exists.
At interim dates, if no reliable estimate can be made, the revenue recognized on the transaction should not exceed the consideration that would be received if the maximum rebates were taken. Therefore, the Company assumes that the customers will achieve the necessary sales volume target to earn the maximum rebate. The provisions are subject to continuous review and adjustment as appropriate based on the most recent information available to management.
As of the balance sheet date, the Company recalculates and adjusts the provision for rebate based on the actual sales.
Interest income
For all financial assets measured at amortized cost, interest income is recorded using EIR. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement.
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
|
|
3.14 |
Revenue recognition (continued) |
Rental income
Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in other operating income due to its operating nature.
Dividends
Dividend revenue is recognized when the Company’s right to receive the payment is established, which is generally when shareholders approve the dividend.