2.b.11) Revenue recognition
General criteria
Revenue is recognized on sales of crude oil, refined products and natural gas, in each case, when title and risks are transferred to the customer following the conditions described below:
| • | The Group has transferred to the buyer the significant risks and rewards of ownership of the goods. |
| • | The Group does not retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. |
| • | The amount of revenue can be measured reliably. |
| • | It is probable that the economic benefits associated with the transaction will flow to the Group. |
| • | The costs incurred or to be incurred in respect of the transaction can be measured reliably. |
Revenue recognition related to Government incentive programs
Incentives for the additional injection of natural gas and for the production of crude oil granted by the Planning and Strategic Coordination Commission of the National Plan of Hydrocarbons Investment by Resolutions No. 1/2013 and No. 14/2015, respectively (see Note 30), fall within the scope of the IAS 20 “Accounting for Government grants and disclosure of government assistance”, because they constitute economic compensation for the companies committed to increasing their respective production. Incentives have been included in “Revenues” in the consolidated statement of comprehensive income.
Likewise, these regulations also apply to the temporary economic assistance by Metrogas (see Note 30), as enacted by the MINEM under Resolution No. 312-E/1016 and by the former Argentine Energy Secretariat under Resolution No. 263/2015, as its purpose is to fund the expenses and investments related to the normal operation of the natural gas distribution service through networks, while preserving the chain of payment to natural gas producers until the Tariff Review is concluded. The incentives have been included in the item “Other net operating results” in the consolidated statement of comprehensive income.
In addition, Argentine tax authorities provide a tax incentive for investment in capital goods, computers and telecommunications for domestic manufacturers through a fiscal bond, provided that manufacturers have industrial establishments located in Argentina, a requirement that is satisfied by the controlled company AESA. The Group recognizes such incentive when the formal requirements established by Decrees No. 379/2001, 1551/2001, its amendments and regulations are satisfied, to the extent that there is reasonable certainty that the grants will be received. The bond received may be computed as a tax credit for the payment of national taxes (i.e., income tax, tax on minimum presumed income, value added tax and domestic taxes) and may be transferred to third parties only one time. The incentives have been included in the item “Other net operating results” in the consolidated statement of comprehensive income.
Recognition of this income is made at its fair value when there is a reasonable certainty that incentives will be received and that regulatory requirements related therewith have been fulfilled.
Recognition of revenues and costs associated with construction contracts method
Revenues and costs related to construction activities performed by AESA are accounted for in the consolidated statement of comprehensive income for the year using the percentage of completion method, considering the final contribution margin estimated for each project at the date of issuance of the financial statements, which arises from technical studies on sales and total estimated costs for each of them, as well as their physical progress.
The adjustments in contract values, changes in estimated costs and anticipated losses on contracts in progress are reflected in earnings in the year when they become evident.
The table below details information related to the construction contracts as of December 31, 2017, 2016 and 2015:
| Contracts in progress | ||||||||||||||||
| Revenues for the year |
Costs incurred plus accumulated recognized profits |
Advances received | Retentions | |||||||||||||
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2017 |
710 | 1,398 | 61 | — | ||||||||||||
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2016 |
778 | 1,236 | — | — | ||||||||||||
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2015 |
455 | 577 | — | — | ||||||||||||
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