2018 UEM Edgenta Annual Report

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.2 First time adoption of Malaysian Financial Reporting Standards (“MFRS”) (cont’d.) MFRS 15 Revenue from contracts with customers MFRS 15 Revenue from Contracts with Customers establishes a five-step model that will apply to revenue arising from contracts with customers. MFRS 15 supersedes FRS 118 Revenue, FRS 111 Construction Contracts and the related interpretations under FRS. The core principle of MFRS 15 is that an entity should recognise revenue which depicts the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under MFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. MFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures. The effect of adopting MFRS 15 of the Group is as follows: Statement of financial position: As previously Effects of Restated stated under FRS MFRS 15 under MFRS Note RM’000 RM’000 RM’000 At 1 January 2017 Current assets Trade and other receivables a 1,226,917 (354,458) 872,459 Contract assets a – 354,458 354,458 Current liabilities Trade and other payables a 831,862 (81,869) 749,993 Contract liabilities a – 81,869 81,869 At 31 December 2017 Current assets Trade and other receivables a 972,050 (261,563) 710,487 Contract assets a – 261,563 261,563 Current liabilities Trade and other payables a 720,275 (27,762) 692,513 Contract liabilities a – 27,762 27,762 Income statement For the year ended 31 December 2017 Revenue b 2,120,766 (8,177) 2,112,589 Cost of sales b (1,718,792) 8,177 (1,710,615) a) Prior to the adoption of MFRS 15, revenue recognised from consultancy services, infrastructure services, facilities management services and retro fitting works was based on the percentage of completion method, calculated by reference to the proportion of costs incurred to date against the total expected costs for the contracts. When revenue recognised exceed billings made to date, the balance is classified as accrued billings under trade and other receivables. When billings are made in advance, it is classified as advance billings under trade and other payables. Under MFRS 15, accrued billing represents a right to consideration in exchange for services transferred to the customer known as contract asset while advance billing represents an obligation to transfer services to the customer for which consideration has been received known as contract liability. b) Prior to the adoption of MFRS 15, deductions imposed by the customers on revenue from healthcare services were recorded as an expense as part of the cost of sales. Under MFRS 15, such deductions represent a variable consideration which is to be deducted against the revenue. Financial Review Stakeholder Information AGM Information 157 Governance Review of Sustainability Activities