notes to the financial statements - Investor Relations

CWT Limited
72
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2011
3 SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
3.13 Revenue recognition (cont’d)
Contract revenue
When the outcome of the service contract can be estimated reliably, contract revenue and costs are recognised as income
and expense using the percentage of completion method, measured by reference to the contract activity. When it is probable
that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
When the outcome of a contract cannot be estimated reliably, contract costs are recognised as an expense in the period
in which they are incurred and revenue is recognised only to the extent of contract costs incurred that can probably be
recovered.
Construction contracts
As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognised
in the income statement in proportion to the stage of completion of the contract. The percentage of completion is measured
by reference to the percentage of costs incurred to date to the estimated total contract costs. Contract revenue includes the
initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it
is probable that they will result in revenue and can be measured reliably.
The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction
contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are
likely to be recoverable. An expected loss on a contract is recognised immediately in the income statement.
3.14 Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss in the period
in which the employees render their services.
Short-term employee benefits
All short-term employee benefits, including accumulated compensated absences, are recognised in profit or loss in the
period in which the employees render their services.
Pension obligations
The Group operates defined benefit pension schemes. The schemes are generally funded through payments from employees
and from the relevant Group companies. The assets of the plan are held in separately administered funds. The Group’s
defined benefit plans define an amount of pension benefit that an employee will receive on retirement, dependent on one or
more factors such as age, years of service and compensation. The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service
in the current and prior periods.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries
using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.