NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 3 MATERIAL ACCOUNTING POLICY INFORMATION (CONT’D) 3.15 Revenue recognition (cont’d) (i) Development properties for sale (cont’d) Under certain payment schemes, the time when payments are made by the buyer and the transfer of control of the property to the buyer do not coincide and where the difference between the timing of receipt of the payments and the satisfaction of a performance obligation is 12 months or more, the Group adjusts the transaction price with its customer and recognises a financing component. In adjusting for the financing component, the Group uses a discount rate that would reflect that of a separate financing transaction between the Group and its customer at contract inception. A finance income or finance expense will be recognised depending on the arrangement. The Group has elected to apply the practical expedient not to adjust the transaction price for the existence of significant financing component when the period between the transfer of control of goods or services to a customer and the payment date is 12 months or less. Revenue is measured at the transaction price agreed under the contract entered into with customers. Estimates of revenues, costs or extent of progress towards completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in the profit or loss in the period in which the circumstances that give rise to the revision become known by management. The customer is invoiced based on a payment schedule which is typically triggered upon achievement of specified construction milestones. If the value of the goods transferred by the Group exceeds the payments, a contract asset is recognised. If the payments exceed the value of the goods transferred, a contract liability is recognised. The accounting policy for contract assets and contract liabilities is set out in note 3.9. (ii) Rental income Rental income (net of any lease incentives) is recognised on a straight-line basis over the lease term. Contingent rentals, which include gross turnover rental, are recognised as income in the accounting period in which it is earned and the amount can be reliably measured. (iii) Hotel income Revenue from hotel operations comprises mainly room revenue and revenue from food and beverages sales. Room revenue is recognised over the period of stay of the hotel guests. Revenue from food and beverages sales is recognised when food and beverages are delivered to the customer. (iv) Management services, consultancy services and laundry services Management and consultancy fees and laundry services are recognised at the point when such services are rendered. (v) Dividends Dividend income is recognised in profit or loss when the shareholder’s right to receive payment is established. 3 MATERIAL ACCOUNTING POLICY INFORMATION (CONT’D) 3.16 Government grants Government grants are initially recognised as deferred income at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the same periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable. 3.17 Finance income and costs The Group’s finance income and costs include: • interest income on amounts owing by associates and joint ventures and funds invested; • interest expense on borrowings, amounts owing to fellow subsidiaries and joint ventures, financial derivatives and lease liabilities; • amortisation of transaction costs on borrowings capitalised; • the fair value gains or losses on financial derivatives; • the net gains or losses on financial assets at FVTPL; • the foreign currency gains or losses on financial assets and financial liabilities; and • unwinding of discount on non-current liabilities. Interest income or expense is recognised under the effective interest method. The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to: • the gross carrying amount of the financial asset; or • the amortised cost of the financial liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. FINANCIALS FINANCIALS ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED 157 156
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