3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
3.6 Work in progress
Work-in-progress comprises uncompleted contracts.
When the outcome of such contracts can be estimated reliably and it is probable that the contract will be profitable, contract
revenue is recognised over the period of the contract by reference to the stage of completion. Contract costs are recognised
as expenses by reference to the stage of completion of the contract activity at the end of the reporting period. When it is
probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
The stage of completion is assessed by reference to the contract costs incurred up to the end of the reporting period as a
percentage of total estimated costs for each contract. Costs include cost of direct materials, direct labour and other costs
incurred in connection with the project.
Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining
the stage of completion.
Work-in-progress is measured at cost plus attributable profit recognised to date, net of progress billings and allowances for
foreseeable losses recognised, and is presented in the balance sheet as work-in-progress (as an asset) or as excess of progress
billings over work-in-progress (as a liability), as applicable. The Group reports the net contract position for each contract as
either an asset or a liability.
3.7 Financial assets
Non-derivative financial assets
A financial asset is recognised if the Group becomes a party to the contractual provisions of the asset. Financial assets are
derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers
the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset.
Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits
itself to purchase or sell the asset.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
The Group classifies its non-derivative financial assets as loans and receivables.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Loans and receivables are recognised initially at fair value plus, for financial assets not at fair value through profit
or loss, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are subsequently
measured at amortised cost using the effective interest method, less any impairment losses.
Loans and receivables comprise trade and other receivables and cash and cash equivalents.
Cash and cash equivalents comprise cash balances and bank deposits. For the purpose of the consolidated statement of cash
flows, pledged deposits are excluded.
69
TELECHOICE INTERNATIONAL LIMITED
2015 ANNUAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
