INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 21 Leases (cont'd)
(a) The Group and the Company as lessee (cont'd)
Subsequent to the initial recognition, the right-of-use assets are measured at cost less any accumulated depreciation and accumulated impairment losses, and adjusted for any remeasurement of the lease liability.
Depreciation is computed on a straight-line basis over the estimated useful lives of the right- of-use assets. The state-owned lands are amortised over their lease terms of 99 years.
If the lease transfers ownership of the underlying asset to the Group and the Company by the end of the lease term or if the cost of the right-of-use asset reflects that the Group and the Company will exercise a purchase option, the Group and the Company depreciate the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group and the Company depreciate the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the Group's and the Company's incremental borrowing rate. Subsequent to the initial recognition, the Group and the Company measure the lease liability by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect lease payments made, and remeasuring the carrying amount to reflect any reassessment or lease modifications.
(b) The Group and the Company as lessor
The Group and the Company classified its leases as either operating lease or finance lease. Leases where the Group and the Company retain substantially all the risks and rewards of ownership of the leased assets are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.
If the Group and Company transfer substantially all the risks and rewards incidental to ownership of the leased assets, leases are classified as finance leases and are capitalised at an amount equal to the net investment in the lease.
2.22 Revenue and other income recognition
The Group and the Company recognise revenue from contracts with customers based on the five- step model as set out below:
(i) Identify contract with a customer. A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria that must be met.
(ii) Identify performance obligations in the contract. A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.
(iii) Determine the transaction price. The transaction price is the amount of consideration to which the Group and the Company expect to be entitled in exchange for transfering promised goods or services to a customer, excluding amounts collected on behalf of third parties.
(iv) Allocate the transaction price to the performance obligations in the contract. For a contract that has more than one performance obligation, the Group and the Company allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Group and the Company expect to be entitled in exchange for satisfying each performance obligation.
(v) Recognise revenue when (or as) the Group and the Company satisfy a performance obligation.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.22 Revenue and other income recognition (cont'd)
The Group and the Company satisfy a performance obligation and recognise revenue over time if the Group's and the Company's performance:
(i) Do not create an asset with an alternative use to the Group and the Company and have an enforceable right to payment for performance completed to-date; or
(ii) Create or enhance an asset that the customer controls as the asset is created or enhanced; or
(iii) Provide benefits that the customer simultaneously receives and consumes as the Group and the Company perform.
For performance obligations where any one of the above conditions is not met, revenue is recognised at the point in time at which the performance obligation is satisfied.
The Group and the Company have generally concluded that it is the principal in its revenue arrangements, except for the procurement services below, because it typically controls the goods or services before transferring them to the customer.
Revenue is measured at the amount of consideration to which the Group and the Company expect to be entitled in exchange for transferring promised goods or services.
The following describes the performance obligation in contracts with customers:
(i) Revenue
(a) Sale of goods
The Group and the Company contract with its customers for sales of oil palm related products. Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally upon the transfer of significant risks and rewards of ownership of the goods to the customer. Payment is generally due up to 30 days from transfer of risks and rewards. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
(b) Delivery service
The Group and the Company provide delivery services that are bundled together with the sale of goods to a customer. The delivery services can be obtained from other providers and do not significantly customise or modify the goods sold.
Contracts for bundled sales of goods and delivery services are comprised of two performance obligations because the promises to transfer goods and provide delivery services are capable of being distinct and separately identifiable. Accordingly, the Group and the Company allocate the transaction price based on the relative stand- alone selling prices of the goods and delivery services.
The Group and the Company recognise revenue from delivery services over time, using an input method to measure progress towards complete satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Group and the Company. Payment is generally due up to 30 days from delivery.
(c) Rendering of services
Revenue from services rendered is recognised net of taxes and discounts as and when the services are performed.
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.22 Revenue and other income recognition (cont'd) (i) Revenue (cont'd)
(d) Sales of properties
Contracts with customers may include multiple promises to customers and therefore accounted for as separate performance obligations. In this case, the transaction price will be allocated to each performance obligation based on the stand-alone selling prices. When these are not directly observable, they are estimated based on the percentage of completion method. The percentage of completion is determined by the proportion of property development costs incurred for work performed to date over the estimated cost for the respective development projects.
The revenue from property development is measured at the fixed transaction price agreed under the sale and purchase agreement.
Revenue from property development is recognised as and when the control of the asset is transferred to the customer and it is probable that the Group and the Company will collect the consideration to which they will be entitled in exchange for the asset that will be transferred to the customer. Depending on the terms of the contract and the laws that apply to the contract, control of the asset may transfer over time or at a point in time.
This is generally established when:
(i) the promised properties are specifically identified by its plot, lot and parcel number and its attributes (such as its size and location) in the sale and purchase agreements and the attached layout plan and the purchasers could enforce its rights to the promised properties if the Group and the Company seek to sell the unit to another purchaser. The contractual restriction on the Group’s and the Company’s ability to direct the promised properties for another use is substantive and the promised properties sold to the purchasers do not have an alternative use to the Group and the Company; and
(ii) the Group and the Company have the right to payment for performance completed to date and is entitled to continue to transfer to the customer the development units promised and has the rights to complete the construction of the properties and enforce its rights to full payment.
(iii) If control of the asset transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the asset.
The Group and the Company recognise revenue over time using the percentage of completion method using input method which is based on the actual cost incurred to date on the property development project as compared to the total estimated cost for the respective development projects.
The Group and the Company recognise sales at a point in time for the sale of completed properties, when the control of the properties has been transferred to the purchasers, being when the properties have been completed and delivered to the customers and it is probable that the Group and the Company will collect the considerations to which it will be entitled to in exchange for the assets sold.
(e) Revenue from hotel operations
Revenue from rental of hotel rooms, sale of food and beverage and other related income are recognised on an accrual basis.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.22 Revenue and other income recognition (cont'd) (i) Revenue (cont'd)
(f) Revenue from golf club and resort operations
Revenue from club operations consists of monthly subscription fees, golf, sports and other facilities. Where there are more than one performance obligations, the transaction price will be allocated to each of the separate performance obligations. When these are not directly observerable, they are estimated based on expected cost plus margin.
Revenue from club activities excluding membership fees are recognised when the services are rendered.
The payment of the transaction price is due immediately upon delivery of the services. Subscription fees are recognised as income on an accrual basis.
Revenue from rental of resort room, sale of food and beverage and other related income are recognised on accrual basis.
(g) Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
(h) Rental income
Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.
(ii) Other income
(a) Interest income
Interest income is recognised using the effective interest method.
(b) Management fees
Management fees are recognised when services are rendered.
2.23 Taxation
(a) Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S ( c o n t ’ d )
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)