Notes to the Financial Statements Registration No. 200301030845 (633265-K) - 50 - 3. Significant Accounting Policies (Cont’d) (l) Construction contracts Construction contracts are contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. Cost incurred to fulfil the contracts, comprising cost of direct materials, direct labour, other direct costs, attributable overheads and payments to subcontractors are recognised as an asset and amortised over to profit or loss systematically to reflect the transfer of the contracted service to the customer. Revenue and profits for construction contracts are recognised over time when the customer simultaneously receives and consumes the benefits from the construction; the construction service create or enhance an asset or a combination of assets which the customer controls or the construction service does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. The Group measures the entity’s progress towards complete satisfaction of a performance obligation satisfied over time on the basis of direct measurements of the value transferred by the entity to the customer. Contract asset under current assets in the statements of financial position is the right to consideration for goods or services transferred to the customers where contract liability under current liabilities in the statements of financial position is the obligation to transfer goods or services to customers for which the Group has received the consideration or has billed the customers. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When there is objective evidence of impairment, the amount of impairment 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 assets. The Group presents as contract asset when the gross amount due from customers for contract work in progress for which costs incurred plus recognised profits (less recognised losses) exceed contract liabilities. Contract liabilities not yet paid by customers and retention monies are included within receivables and contract assets. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which contract liabilities exceed costs exceed costs incurred plus recognised profits (less recognised losses). 128 DESTINI BERHAD ANNUAL REPORT 2022
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