ASC PTY LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —CONTINUED
For the year ended 30 June 2019
As explained in note 1(a)(ii) the Group has adopted a number of new accounting standards this year that have resulted in changes in accounting policies.
1. AASB 9 Financial Instruments
Accounting policy on impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired.
If there is evidence of impairment for any of the Group's financial assets carried at amortised cost, the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in profit or loss.
The Group measures the expected credit losses of its financial assets from the moment of its acquisition and throughout the life of the financial asset. Expected credit losses are a probability-weighted estimate of credit losses. A credit loss is the difference between the cash flows that are due to the Group in accordance with the contract and the cash flows that the entity expects to receive discounted at the original effective interest rate.
If, in a subsequent period, the amount of the expected credit loss decreases and the decrease can be related objectively to an event occurring after the expected credit loss was recognised, the reversal of the previously recognised expected credit loss is recognised in profit or loss.
Accounting policy on recognition and de-recognition of financial assets
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets.
At initial recognition, the Group measures a financial asset at its fair value, less any expected credit losses, plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
2. AASB 15 Revenue from Contracts with Customers
Accounting policy on revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described below.
Rendering of services
Revenue from services rendered is recognised in proportion to the stage of completion of the transaction. The stage of completion is measured either by the cost of work completed and estimated total costs at the completion of the contract, or by surveys of work performed, whichever method is more appropriate, depending on the nature of the contract. Where the outcome of a contract cannot be reliably estimated, revenue is only recognised to the extent of the contract costs incurred and where it is probable that the contract costs will be recoverable. Revenue for incentives is recognised when all criteria relating to the earning of the incentives have been met.
Revenue from secondment is recognised when the labour services have been provided and the secondment charging criteria of the relevant arrangements have been met.
Revenue is recognised when control of a good or service transfers to the customer and is measured as the amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and services.
Revenue is recognised depending on the type of contract as described below.
Target Cost Estimate contract
Revenue is traded on the cost as it is incurred while profit is based on a performance score against the contract and pain/gain formula based on cost. As the contract progresses and the profit estimates are refined, so is the value of the profit to be traded. If the outcome of the pain/gain calculation cannot be reliably estimated until late in the contract, no pain/gain is recognised until it is capable of reliable estimation.
Cost reimbursable contract
If costs are reimbursed progressively as it is incurred with no exposure to risk, revenue and profit is traded on the cost as it is incurred.
Fixed price contract
Revenue is recognised progressively as costs are incurred using the proportion of actual cost incurred over total contract cost as the measure of performance.
Survey and Quote contract
If the value of work performed is provided progressively to the customer, revenue and profit is to be recognised on the cost as it is incurred. If the customer is obliged to make payment on completion and delivery, revenue recognition will be deferred until the end of the contract.
The extent of services to be provided under a contract is assessed to determine the number of deliverables and the period over which the deliverables are completed. The cost of delivery is determined for each deliverable with revenue and profit being recognised progressively over the period in which the deliverables are satisfied.
Accounting policy on contract balance
Contract work in progress is measured at cost, plus profit accrued to date based on the value of work completed, less contract billings due and less provision for foreseeable losses. Estimated costs at completion include allowances which recognise the inherent risks associated with a long term contract of this nature. Provision for the total loss on a contract is made as soon as a loss is identified.
Contract costs include all costs directly related to specific contracts and those which can be attributed to contract activity. Such costs include administration overhead costs which are directly related to the contract.
Tendering costs on contracts are expensed as incurred.
Contract billings due and receivable to balance date are recorded on the basis of claims approved, and claims submitted for approval in relation to contract costs incurred by the Group.
Progress billings received in advance of the performance of contract activities are deferred and included in the measurement of work in progress.
Where the outcome of a contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred and where it is probable that the contract costs will be recoverable.
The timing of revenue recognition, billings and cash collections result in billed accounts receivable, unbilled receivables (contract assets) and customer deposits and advances (contract liabilities) on the statement of financial position.
Billing occurs subsequent to revenue recognition, resulting in contract assets. Amounts are billed as work in progress in accordance with agreed-upon contractual terms at periodic intervals or upon achievement of contractual milestones.
Advances received, progress billings received in advance of the performance of contract activities and labour over recoveries are recognised as contract liabilities.