172 REDISCOVER | REBUILD | SUSTAIN Notes to the financial statements - 31 December 2015 2. Significant accounting policies (cont’d.) 2.3 Summary of significant accounting policies (cont’d.) (v) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Freight income Freight receivable and the relevant discharge costs of cargoes loaded onto ships up to the reporting date are accrued for in the financial statements, using the percentage of completion method. (ii) Charter income The results of ships employed on voyage charter and that of other services rendered are accounted for on a time accrual basis. Certain charter income is recognised on a straight-line basis over the firm period of the contract. (iii) Lightering income Income from lightering charges is recognised on percentage of completion of voyages, calculated on a discharge-to-discharge basis. The voyage revenue is recognised evenly over the period from a ship’s departure from its previous discharge point to its projected departure from its next discharge point. (iv) Other shipping related income Revenue from services rendered is recognised net of service taxes and discounts as and when the services are performed. (v) Finance income on lease receivables Finance income on lease receivables is recognised according to the effective interest rate method so as to provide constant periodic rate of return on the net investment. (vi) Construction contracts Revenue from construction contracts is accounted for in accordance with the policy set out in Note 2.3(f). (vii) Rental income Rental income from an investment property is recognised on a straight-line basis over the term of the lease. The aggregate cost of incentives provided to lessee is recognised as a reduction of rental income over the lease term on a straight-line basis.
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