MKH Annual Report 2018

101 MKH Berhad Annual Report 2018 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (Cont’d) (a) Statement of compliance (Cont’d) (iii) Malaysian Financial Reporting Standards (Cont’d) MFRS 15 Revenue from Contracts with Customers MFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. MFRS 15 will supersede the current revenue recognition guidance including MFRS 118 Revenue , MFRS 111 Construction Contracts and the related interpretation when it becomes e ective. The core principle of MFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition. Step 1 : Identify the contract(s) with a customer Step 2 : Identify the performance obligations in the contract Step 3 : Determine the transaction price Step 4 : Allocate the transaction price to the performance obligations in the contract Step 5 : Recognise revenue when (or as) the entity satisfies a performance obligation Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in MFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by MFRS 15. In June 2016, the MASB issued Clarifications to MFRS 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance. The directors have specifically considered MFRS 15’s guidance on contract modification arising from variation orders, identifying performance obligations, and the assessment of whether there is a significant financing component in the contracts, particularly taking into account the reason for the di erence in timing between the transfer of control of service to the customer and the timing of the related payments. The directors intend to use the full retrospective method of transition to MFRS 15. Apart from providing more extensive disclosures on the Group’s revenue transactions, the directors do not anticipate that the application of MFRS 15 will have a significant impact on the financial position and/or financial performance of the Group. Based on the preliminary assessment, the Group estimates that the impact of the revenue allocation to each recognition of revenue and associated costs to fulfil the contract will not be significantly di erent from that currently determined. MFRS 16 Leases MFRS 16 specifies how a MFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessees accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset as a low value. Lessors continue to classify leases as operating or finance, with MFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, MFRS 117. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2018