Fraser & Neave Holdings Bhd Annual Report 2019

WWW . F N . C O M . M Y 162 F R A S E R & N E A V E H O L D I N G S B H D NOTES TO THE FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (N) PROVISIONS A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (O) CONTRACT LIABILITIES A contract liability is stated at cost and represents the obligation of the Group to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customers. Contract liabilities also include trade incentives yet to be paid to customers. (i) Sale of goods with variable consideration Some contracts for the sale of goods provide customers with trade incentives. Before adopting MFRS 15, Revenue from Contracts with Customers , the Group recognised revenue from the sale of goods measured at the fair value of the consideration received or receivable, net of returns and sales returns. If revenue could not be reliably measured, the Group deferred recognition of revenue until the uncertainty was resolved. Under MFRS 15, sales incentive give rise to variable consideration. Trade Incentives Before adoption of MFRS 15, the Group provides incentives to certain customers based on the achievement of the performance criteria stated in the signed incentive guide. Incentives are credited to the customer’s account and available for purchase of products. Trade incentive not settled as at the end of a financial year was accounted for as part of trade and other payables in the statement of financial position. Under MFRS 15, trade incentives give rise to variable consideration. To estimate the variable consideration for the expected future incentives, the Group applies the maximum achievement criteria of set targets. The sales thresholds contained in the signed incentive guide primarily drive the selected method that best predicts the amount of variable consideration. The Group then applies the requirements on constraining estimates of variable consideration and recognises a liability for the expected future incentives. (ii) Advances received from customers Certain customers pay purchase consideration to the Group before the transfer of goods to the customer. Before the adoption of MFRS 15, the Group presented these advances as part of trade and other payables in the statement of financial position and no interest was accrued on the advances received. Under MFRS 15, the Group concluded that contract liability should be recognised for amount received as advances from customer for which goods are yet to be transferred. (P) REVENUE AND OTHER INCOME (i) Revenue Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group recognises revenue when (or as) it transfers control over a product or service to customer. An asset is transferred when (or as) the customer obtains control of the asset. The Group transfers control of a good or service at a point in time unless one of the following overtime criteria is met: – the customer simultaneously receives and consumes the benefits provided as the Group performs; – the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or – the Group’s performance does not create an asset with an alternative use and the Group has an enforceable right to payment for performance completed to date. (ii) Rental income Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as reduction of rental income, over the term of the lease on a straight-line basis. Rental income from sub-leased property is recognised as other income.