Kimlun Corporation Berhad Annual Report 2017

Kimlun Corporation Berhad 86 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (cont’d) 2. Summary of significant accounting policies (cont’d) 2.30 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group and of the Company. 3. Significant accounting judgements and estimates The preparation of the Group’s and of the Company’s financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. 3.1 Judgements made in applying accounting policies There are no critical judgements made by the management in the process of applying the Group’s and the Company’s accounting policies that have significant effect on the amounts recognised in the financial statements. 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below: (a) Useful lives of plant and equipment The cost of plant and equipment of the Group is depreciated on a straight-line basis over the assets’ estimated economic useful lives. Management estimates the useful lives of these plant and equipment to be between 3 to 30 years. These are common life expectancies applied in the industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore, future depreciation charges could be revised. The carrying amount of the Group’s plant and equipment at the reporting date is disclosed in Note 12. (b) Revenue recognition (i) Construction and property development revenue The Group recognises construction and property development revenues and expenses in the statements of comprehensive income by using the stage of completion method. The stage of completion is determined by the proportion that construction and property development cost incurred for work performed to date bear to the estimated total construction and property development costs. Significant judgement is required in determining the stage of completion, the extent of the construction and property development cost incurred, the estimated total construction and property development revenue and costs, as well as the recoverability of the construction and property development projects. In making the judgement, the Group evaluates based on past experience and internal budgeting. (ii) Contract manufacturing revenue The Group recognises revenues in the statements of comprehensive income based on progress claims to main contractors pursuant to the terms and conditions of the supply agreement. Significant judgement is required in determining the point of revenue recognition pursuant to the terms of the supply agreements. In making the judgement, the Group evaluates based on the interpretation of the respective terms and conditions of each supply agreement.