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132 Notes to the Financial Statements
3.13 Foreign currencies
Foreign currency transactions are translated into Pak Rupees at exchange rates prevailing on the date of transaction. Assets and liabilities
(monetary items) in foreign currencies are translated at the rates of exchange prevailing at the balance sheet date. Exchange gains and losses are
included in the profit and loss account currently.
3.14 Revenue recognition
Revenue from sale of goods are recognised when significant risks and rewards of ownership are transferred to the buyer. Service revenue is
recognised over the contractual period or as and when services are rendered to customers. Commission income is recognised on receipt of credit
note. Financial income is recognised as it accrues, using the effective mark-up rates.
Contract revenue and contract costs relating to long-term construction contracts are recognised as revenue and expenses respectively by reference
to stage of completion of contract activity at the balance sheet date. Stage of completion of a contract is determined by applying ‘cost-to-cost
method’. Under cost-to-cost method, stage of completion of a contract is determined by reference to the proportion that contract cost incurred to
date bears to the total estimated contract cost. Contract revenue on construction contracts valuing less than Rs 10 million and duration upto six
months is recognised using completed contract method. When it is probable that contract costs will exceed total contract revenue, the expected
loss is recognised as an expense immediately. When the outcome of a construction contract can not be estimated reliably, revenue is recognised
only to the extent of contract costs incurred that it is probable will be recoverable.
Variations in contract work, claims and incentive payments are included in contract revenue to the extent that they have agreed with the customer
and are capable of being measured reliably.
In respect of certain sales contracts, the price differentials are accounted for in the year in which they are finally determined.
3.15 Financial assets and liabilities
All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given or received as appropriate. These
financial assets and liabilities are subsequently measured at fair value or amortised cost as the case may be. The Company derecognises the
financial assets and financial liabilities when it ceases to be a party to such contractual provisions of the instruments.
3.16 Derivative financial instruments
The Company uses derivative financial instruments to hedge its exposure to foreign exchange arising from operational activities. Any gain or loss
from re-measuring the hedging instrument at fair value is recognised in the profit and loss account.
3.17 Offsetting
Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is legally enforceable right to
set-off the recognised amount and the Company intends either to settle on a net basis, or to realise the assets and to settle the liabilities
simultaneously.
3.18 Dividends
Dividend is recognised as a liability in the period in which it is declared.
3.19 Share based payment transactions
The fair value of the amount payable to employees in respect of share appreciation rights and / or phantom stocks, which are settled in cash, is
recognised as an expense, with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to
payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as
salaries, wages and employment welfare expense in the profit and loss account.
3.20 Discontinued operations
A discontinued operation is a component of the Company's business that represents a separate major line of business or geographical area of
operations that has been disposed of or is held for sale. Classification as a discontinued operation occurs on disposal or when the operation meets
the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative profit and loss
account is restated as if the operation had been discontinued from the start of the comparative period.
Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than
through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal
group) are remeasured in accordance with the Company’s accounting policies. Thereafter generally the assets (or disposal group) are measured at
the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then
to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee
benefit assets, investment property and biological assets, which continue to be measured in accordance with the Company’s accounting policies.
Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains
are not recognised in excess of any cumulative impairment loss.