1
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c)
Changes in accounting policies (Continued)
HKFRS 15, Revenue from contracts with customers (Continued)
Timing of revenue recognition
Under HKFRS 15, revenue is recognised when the customer obtains control of the promised good or service in the contract. HKFRS 15 identifies the following three situations in which control of the promised good or service is regarded as being transferred over time:
When the customer simultaneously receives and consumes the benefits provided by the entity's performance, as the entity performs;
When the entity's performance creates or enhances an asset (for example work in progress) that the customer controls as the asset is created or enhanced;
When the entity's performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.
If the contract terms and the entity's activities do not fall into any of these 3 situations, then under HKFRS 15 the entity recognises revenue for the sale of that good or service at a single point in time, being when control has passed. Transfer of risks and rewards of ownership is only one of the indicators that is considered in determining when the transfer of control occurs.
The adoption of HKFRS 15 has an impact on when the Group recognises revenue from property sales.
The Group's property development activities are carried out in Hong Kong only. Taking into account the contract terms, the Group's business practice and the legal and regulatory environment of Hong Kong, the property sales contracts do not meet the criteria for recognising revenue over time and therefore revenue from property sales continues to be recognised at a point in time. Previously the Group recognised revenue from property sales upon the later of the signing of the sale and purchase agreement and the completion of the property development, which was taken to be the point in time when the risks and rewards of ownership of the property were transferred to the customer. Under the transfer-of-control approach in HKFRS 15, revenue from property sales is generally recognised when the legal assignment is completed, which is the point in time when the customer has the ability to direct the use of the property and obtain substantially all of the remaining benefits of the property.
The Group currently offers different payment schemes to customers, the transaction price and the amount of revenue from sale of properties will be adjusted when significant financing component exists in that contract. Stamp duty, sales commissions and other costs only incurred if the amount is obtained, if recoverable, are capitalised as contract costs and subsequently amortised when the related revenue is recognised.
The adoption of HKFRS 15 does not have a material impact on the recognition policy of the Group's other
revenue streams.
As a result of this change in policy, the Group has made adjustments as illustrated in tables (i), (ii) and (iii).
Hong Kong Ferry (Holdings) Company Limited Annual Report 2018
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