PRG Holdings Berhad Annual Report 2018

6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the management of the Group and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have a material impact to the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. (a) Recognition of property development revenue, costs estimates and profit recognition Property development revenue, property development costs and the profit recognition thereof involve significant judgements in determining the satisfaction of performance obligations, transaction price allocation and costs in applying the input method to recognise revenue over time. The Group identifies performance obligations that are distinct and material, which is judgmental in the context of contract. Transaction prices were determined based on estimated margins prior to its allocation to the identified performance obligation. The Group also estimated total contract costs in applying the input method to recognise revenue over time. In estimating the total costs to complete, the Group considers the completeness and accuracy of its costs estimation, including its obligations to contract variations, claims and cost contingencies. The total costs to complete including sub- contractors’ costs can vary with market conditions and may also be incorrectly forecasted due to unforeseen events during development. (b) Recoverability of trade receivables The determination of whether trade receivables are recoverable involves significant management judgement in determining the probability of default by trade receivables, appropriate forward looking information and significant increase in credit risk. 107 PRG HOLD I NGS BERHAD notes to the financial statements 31 December 2018 (continued)