92
COSCO Corporation (Singapore) Limited
Annual Report 2015
NOTES TO THE
FINANCIAL STATEMENTS
For the financial year ended 31 December 2015
Financial Statements
2.
Significant accounting policies
(continued)
2.6 Borrowing costs
Borrowing costs are recognised in profit or loss using the effective interest method except for those
costs that are directly attributable to borrowings acquired specifically for the construction of motor
vessels, docks and quays. The actual borrowing costs incurred during the construction period less any
investment income on temporary investments of these borrowings, are capitalised in the cost of the
docks and quays.
2.7 Construction contracts
When the outcome of a construction contract can be estimated reliably, contract revenue and contract
costs are recognised as revenue and expenses respectively by reference to the stage of completion of
the contract activity at the balance sheet date (“percentage-of-completion method”). When the outcome
of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of
contract costs incurred that are likely to be recoverable. When it is probable that total contract costs will
exceed total contract revenue, the expected loss is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the
contract work and claims that can be measured reliably. A variation or a claim is recognised as contract
revenue when it is probable that the customer will approve the variation or negotiations have reached an
advanced stage such that it is probable that the customer will accept the claim.
The stage of completion is measured by reference to the completion of a physical proportion of the
contract work. Costs incurred during the financial year in connection with future activity on a contract
are excluded from costs incurred to date when determining the stage of completion of a contract. Such
costs are shown as “construction contract work-in-progress” on the balance sheet unless it is not
probable that such contract costs are recoverable from the customers, in which case, such costs are
recognised as an expense immediately.
At the balance sheet date, the cumulative costs incurred plus recognised profits (less recognised losses)
on each contract is compared against the progress billings. Where the cumulative costs incurred plus
the recognised profits (less recognised losses) exceed progress billings, the balance is presented as
due from customers on construction contracts within “trade and other receivables”. Where progress
billings exceed cumulative costs incurred plus recognised profits (less recognised losses), the balance is
presented as due to customers on construction contracts within “trade and other payables”.
Progress billings not yet paid by customers and retentions by customers are included within “trade and
other receivables”. Advances received are included within “trade and other payables”.
2.8 Investment properties
Investment properties include those portions of office buildings that are held for long-term rental yields
and/or for capital appreciation.
Investment properties are initially recognised at cost and subsequently carried at cost less accumulated
depreciation and accumulated impairment losses. Depreciation is calculated using the straight-
line method to allocate the depreciable amounts over the estimated useful lives of 10 to 50 years.
The residual values, useful lives and depreciation method of investment properties are reviewed, and
adjusted as appropriate, at each balance sheet date. The effects of any revision are included in profit or
loss when the changes arise.
