2019 Annual Report (^111)
5 Accounting judgements and
estimates
(a) Accounting judgements
(i) Revenue recognition
Revenue is recognised when control of a
good or service is transferred to a customer
as disclosed in note 3(q). To determine the
satisfaction of performance obligations the
Group applies the following judgements:
■ Where revenue is recognised over time, the
Group primarily uses the output method
to measure progress; however, in a limited
number of business units, the input method
is adopted when the Group is unable
to reasonably measure the outcome of
a performance obligation. Judgements
applied when using the output method
include assessing progress and milestones
achieved and determining if that represents
the value of goods and/or services delivered
to the customer to date. Judgements
applied when using the input method
include determining if consumption of the
resources relative to the total expected
amount faithfully depicts the transfer of
control of goods and/or services promised
to the customer.
■ Where revenue is recognised at a point
in time, the Group assesses the transfer
of control by reference to the contractual
terms and the circumstance of the
arrangements including a consideration of
past business practice. These include having
a legal right to payment, title has passed,
the customer has the risks and rewards of
ownership, or the customer is using the
asset to generate value for themselves.
■ For sales to distribution channels,
judgement is also applied in determining
when the control of the goods is
transferred to distributors. These
judgements consider several external and
internal factors including, but not limited
to, market conditions, product life cycles,
distributor sales, competitive conditions
and the extent to which the Group has
continuing managerial involvement over the
goods after their delivery.
(ii) Contract modification
The Group applies judgements in determining
whether a contract modification should be
treated as a new contract or a prospective
change to an existing contract, or accounted
for through a cumulative catch-up adjustment
to revenue, by considering the nature of the
goods and services, and sales price data.
The Group judges a contract modification
as a separate contract when the increase in
contract scope is due to additional distinct
promised goods or services and the price
increases reflect the SSP of such goods or
services plus any appropriate adjustments.
Otherwise, a contract modification is judged
as a prospective change to an existing contract
when the remaining goods or services are
distinct from those transferred before the
date of the modification, or accounted for as
cumulative catch-up adjustment to the revenue
when the new or remaining goods or services
are not distinct from those transferred.
(b) Sources of estimation uncertainty
Key sources of estimation uncertainty are as
follows:
(i) Revenue recognition
To determine the transaction price and the
amounts allocated to performance obligations
the Group applies the following estimation:
■ Variable consideration is estimated using
the most likely amount or expected
value based on the nature of the specific
consideration and the analysis of relevant
contract terms, taking into consideration
historical, current and expected
information.
■ SSP is determined using observable
evidence of sales prices, where available.
In a number of cases statistical analysis
is used to identify the historical price a
product/service has been sold for as its SSP.
Where observable evidence is not available,
SSP is estimated using multiple inputs (see
note 3(q)(i)vii). SSP is monitored regularly
to ensure they remain appropriate.
coco
(coco)
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