cover rationale - ChartNexus

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Construction contract (continued)
The Group uses the percentage of completion method to determine the appropriate
amount of revenue and costs to recognise in a given period; the stage of completion is
measured by reference to the proportion that contract costs incurred for work performed
to date to the estimated total costs for the contract. When it is probable that total
contract costs will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
No profit is recognised where contract works is in its initial stage or has not reached a
stage of completion where it is possible to determine the financial outcome of the
contract with reasonable accuracy.
The aggregate of the costs incurred and the profit/loss recognised on each contract is
compared against the progress billings up to the end of the financial year. Where costs
incurred and recognised profit (less recognised losses) exceed progress billings, the
balance is shown as 'Amounts due from customers on contracts' under trade and other
receivables. Conversely, where progress billings exceed costs incurred and recognised
profit, the balance is shown as 'Amounts due to customers on contracts' under trade and
other payables.
(r) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation
as a result of past events, when it is probable that an outflow of resources will be
required to settle the obligation, and when a reliable estimate of the amount can be
made.
Retirement benefits - defined benefit plan
The Group provides for unfunded retirement benefits to eligible employees that have
been in the service of the Group for a continuous period of at least ten (10) years. The
cost of retirement benefits is calculated based on actuarial valuation using the Projected
Unit Credit Method and determined by a qualified actuary on the basis of a triennial
valuation. The most recent valuation was as at 31 August 2002.
Under the Projected Unit Credit Method, the current service cost is calculated as the
present value of benefits that will accrue in the next twelve months following the
valuation date (by reference to the number of employees providing the service in that
financial year and projected final salaries).
Present value of defined benefit obligation is the present value of all benefits payable in
the future in respect of service completed or accrued as at the valuation date based on
projected final salaries.
Other provisions
The Group provides for estimated liability on projects still under progress/guarantee
period at the balance sheet date. This provision is calculated based on contract
agreements/past histories.
The Group also recognises the estimated concession fees that is payable to the
Government of Malaysia and Express Rail Link Sdn. Bhd. at the balance sheet date in
relation to the concession to operate, manage and maintain the Kuala Lumpur central
railway station by a subsidiary. The provision is calculated based on the effective date as
stated in the Concession Agreement.
Laporan Tahunan 2002 Annual Report
NOTES TO THE FINANCIAL STATEMENTS 31 AUGUST 2002 (CONTINUED)
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