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48 GoodLand Group Limited
2 Signifcant Accounting Policies (cont’d)
(k) Construction Contracts
Construction contracts are stated at the lower of cost plus attributable proft less anticipated losses and
progress billings, and net realisable value. Cost comprises material costs, direct labour, borrowing costs
and relevant overheads. Provision for total anticipated losses on construction contracts is recognised in the
fnancial statements when the loss is foreseeable.
Provision for liquidated damages for late completion of projects are made where there is a contractual
obligation and written notice is received from customers, and where in management’s opinion an extension
of time is unlikely to be granted.
At the balance sheet date, the aggregated costs incurred with the addition of recognised proft (less
recognised loss) on each contract is compared against the progress billings. Where such costs exceed the
progress billings amount, the balance is presented as due from customers on construction contracts within
‘trade and other receivables’. Where the progress billings amount exceeds costs incurred plus recognised
profts (less recognised losses), the balance is presented as due to customers on construction contracts
within ‘trade and other payables’.
Progress billings which are not paid by customers and retentions are classifed as ‘trade and other
receivables’. Whereas advances received are classifed as ‘trade and other payables’.
(l) Loans and Receivables
Loans and receivables are non-derivative fnancial assets with fxed or determinable payments that are not
quoted in an active market. Loans and receivables are presented as ‘trade and other receivables’ and
‘cash and cash equivalents’ on the balance sheet.
Trade and Other Receivables
Trade and other receivables, which are normally settled within 30 to 90 days, are recognised initially at
fair value and subsequently at amortised cost using the effective interest method, less allowance for
impairment.
An allowance for impairment of receivables is established when there is objective evidence that the Group
will not be able to collect all amounts due according to the original terms of the receivables. The amount
of the allowance is the difference between the asset’s carrying amount and the present value of estimated
future cash fows, discounted at the original effective interest rate. When the asset becomes uncollectible,
it is written off against the allowance account.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and at bank and short-term deposits with fnancial
institutions that are readily convertible to a known amount of cash and are subject to an insignifcant
risk of changes in values. For the purposes of the consolidated statement of cash fows, cash and cash
equivalents are shown net of restricted bank deposits and bank overdraft.
(m) Trade and Other Payables
Trade and other payables, which are normally settled within 30 to 90 days, are initially measured at fair
value and subsequently at amortised cost using the effective interest method.
(n) Borrowings
Borrowing costs incurred to fnance the development of properties and property, plant and equipment are
capitalised for the period of time that is required to complete and prepare the asset for its intended use. The
amount of borrowing cost capitalised on that asset is the actual borrowing costs incurred during the period
less any investment income on the temporary investment of those borrowings. Other borrowing costs are
recognised on a time-proportion basis in proft or loss using the effective interest method.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost. Any differences between the proceeds (net of transaction costs) and the
redemption value is recognised in proft or loss over the period of the borrowings using the effective interest
method.
Notes to the Financial Statements
30 September 2012