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Financial
Statements
& Others
136
Gamuda Berhad (29579-T)
Annual Report 2013
2. Summary of significant accounting policies (cont’d.)
2.13 Land held for property development and property development costs (cont’d.)
ii. Property development costs
Property development costs comprise all costs that are directly attributable to development activities or
that can be allocated on a reasonable basis to such activities.
When the financial outcome of a development activity can be reliably estimated, property development
revenue and expenses are recognised in profit or loss by using the stage of completion method. The
stage of completion is determined by the proportion that property development costs incurred for work
performed to date bear to the estimated total property development costs.
Where the financial outcome of a development activity cannot be reliably estimated, property
development revenue is recognised only to the extent of property development costs incurred that is
probable will be recoverable, and property development costs on properties sold are recognised as an
expense in the period in which they are incurred.
Any expected loss on a development project, including costs to be incurred over the defects liability
period, is recognised as an expense immediately.
Property development costs not recognised as an expense are recognised as an asset, which is
measured at the lower of cost and net realisable value.
The excess of revenue recognised in profit or loss over billings to purchasers is classified as accrued
billings within trade receivables and the excess of billings to purchasers over revenue recognised in
profit or loss is classified as progress billings within trade payables.
2.14 Construction contracts
Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs
are recognised as revenue and expenses respectively by using the stage of completion method. The stage of
completion is measured by reference to the proportion of contract costs incurred for work performed to date
to the estimated total contract costs.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised
to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognised as
expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised
as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract
work, claims and incentive payments to the extent that it is probable that they will result in revenue and they
are capable of being reliably measured.
When the total of costs incurred on construction contracts plus recognised profits (less recognised losses)
exceeds progress billings, the balance is classified as amount due from customers on contracts. When
progress billings exceed costs incurred on construction contracts plus recognised profits (less recognised
losses), the balance is classified as amount due to customers on contracts.
Notes to the Financial Statements
31 July 2013