Notes to the Financial Statements for the Financial Year Ended 30 September 2024 MKH BERHAD ANNUAL REPORT 2024 Laying The Foundation of Excellence Where People Matter Guided by Leadership, Inspired by People Delivering Value That Matters to People PG. 196 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT’D) (q) Inventories (Cont’d) (iii) Materials and goods Inventories are valued at the lower of cost and net realisable value. The cost of inventories is based on the specific identification, first-in first-out and weighted average principles, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (r) Contract assets and contract liabilities Contract asset is the right to consideration for goods or services transferred to the customers. The Group’s contract asset is the excess of cumulative revenue earned over the billings to-date. Where there is objective evidence of impairment, the amount of impairment losses is determined by comparing the contract asset’s carrying amount and the present value of estimated future cash flows to be generated by the contract asset. Contract asset is reclassified to trade receivables at the point at which invoices have been billed to customers. Contract liability is the obligation to transfer goods or services to customers for which the Group has received the consideration or has billed the customers. The Group’s contract liability is the excess of the billings to-date over the cumulative revenue earned. Contract liability is recognised as revenue when the Group fulfills its obligation under the contracts. (s) Contract costs assets The Group recognises the incremental costs of obtaining a contract with a customer, which are expected to be recovered, as an asset. The incremental costs of obtaining a contract are costs incur to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. These contract costs assets are initially measured at cost and amortised on a systematic basis that is consistent with the pattern of revenue recognition to which the asset relates. An impairment loss is recognised in profit or loss when the carrying amount of the contract cost asset exceeds the expected revenue less expected costs that will be incurred. (t) Impairment of non-financial assets The carrying amounts of assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
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