2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont’d.) (u) Revenue and other income recognition (cont’d.) (i) Revenue from contracts with customers (cont’d.) (a) Construction contract, marine repair and vessel conversion (cont’d.) In determining the appropriate method for measuring progress, the Group shall consider the method that best depicts the Group’s performance in transferring control of goods or services promised to a customer. Contract assets represent the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer when that right is conditioned on something other than the passage of time. Contract assets are subjected to impairment in accordance to MFRS 9: Financial Instruments. The contract assets of the Group comprise of amounts due from customers on contracts. Contract liabilities represent the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration from the customer. The contract liabilities of the Group comprise of amounts due to customers on contracts. (b) Voyage and lightering income The Group’s contracts for voyage charters consist of a single performance obligation to provide the charterer with an integrated transportation service within a specified time period. The consideration in the contract (or “freight”) is determined either on a variable rate related to the cargo (e.g. cargo weight) or on a lump-sum basis. In addition, a voyage charter agreement usually includes a “laytime and demurrage” clause. If the laytime is exceeded, the charterer is responsible to pay the carrier specified damages, which may include liquidated damages called demurrage. Voyage and lightering income is recognised on percentage of completion basis, calculated on a voyage loading-to-discharge basis. The revenue is recognised evenly over the period from a ship’s departure from its cargo loading point to its next discharge point, at time when the revenue is determinable for the specified load and discharge point and collectability is reasonably assured. (c) Other shipping related income and non-shipping income Income from services rendered is recognised net of service taxes and discounts as and when the services are performed. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont’d.) (u) Revenue and other income recognition (cont’d.) (ii) Charter income Time charter and bareboat charter hire income as well as that of other services rendered are accounted for as a lease income on a straight-line basis over the firm period of the contract, as service is performed. Non-lease component of the time charter income is not separately disclosed as the pattern of revenue recognition for lease and non-lease components are the same and the lease and non-lease components are treated as a combined unit of account, classified as an operating lease. Revenue and voyage expenses of ships operating in pool arrangements are pooled and the resulting net pool revenues, calculated on a time charter equivalent basis, are allocated to the pool participants according to the number of days a ship operates in the pool with weighting adjustments made to reflect differing capacity and performance capabilities. The net pool revenues generated are recorded as charter hire income on an accrual basis. (iii) Finance income on lease receivables Finance income on lease receivables is recognised according to the effective interest rate method so as to provide constant periodic rate of return on the net investment. (iv) Interest income Interest income is recognised on an accrual basis using the EIR method. (v) Dividend income Dividend income is recognised when the Group’s and the Corporation’s right to receive payment is established. (v) Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, subject only to terms that are usual and customary. Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable MFRS. Then, on initial classification as held for sale, non-current assets are measured in accordance with MFRS 5: Non-Current Assets Held for Sale and Discontinued Operations that is, at the lower of carrying amount and fair value less costs to sell. Any differences are included in the income statement. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 334 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 335 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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