McConnell Dowell 2019 Annual Review

58 McConnell Dowell Group 1. Accounting policies (continued) The details and quantitative impact of the changes in the accounting policy are disclosed below in Impact of adopting the new standards on the statement of financial position. Year ended 30 June 2019 The following accounting policy was effective for periods on and after 1 July 2018, in accordance with AASB 15. Construction Contracts Revenue from construction contracts is recognised when the outcome of the construction contract can be measured reliably, by reference to satisfaction of the performance obligation(s) over a period of time. The Group has concluded that it is the principal in its construction contract revenue arrangements, because it typically controls the delivery of construction contracts over a period of time. Where a loss is anticipated on any particular contract, provision is made immediately in full for the estimated final contract loss. When the outcome of a construction contract cannot be estimated reliably (principally during early stages of a contract), contract revenue is recognised only to the extent of costs incurred that are expected to be recoverable. Where contract costs incurred to date plus recognised earnings, less recognised losses exceed progress billings, the surplus is reflected as amounts due from customers for contract work, described herein as work in progress. For contracts where progress billings exceed contract costs incurred to date plus recognised profits, less recognised losses, the surplus is reflected as amounts due to customers for contract work, described herein as progress billings in advance. Amounts received before the related work is performed are included as a liability in the consolidated statement of financial position, as amounts received in advance under the amounts due from / (to) contract customers. Amounts billed for work performed but not collected from customers are included as contract receivables. Variations in contract work, claims and incentive payments are included as part of contract revenue as follows: Claims impact on transaction price Claims are subject to a high level of uncertainty. Various claims are submitted by the Group to their customers. Under AASB 15 revenue from claims is required to be accounted for as variable consideration and claims are included in revenue only when it is highly probable that revenue will not be reversed in the future. Variations to a contract Revenue related to variations is recognised when it can be reliably measured and it is highly probable that revenue will not be reversed in the future. Variable consideration If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Revenue is measured at the consideration at which the Group is expected to be entitled, excluding discounts, rebates, and GST/VAT. Significant financing component Generally, the Group receives short-term advances from its customers. Using the practical expedient in AASB 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less. Warranties and defect periods Generally, construction and services contracts include defect and warranty periods following completion of the project. These obligations are not deemed to be separate performance obligations and therefore estimated and included in the total costs of the contracts. Where required, amounts are recognised accordingly in line with AASB 137: Provisions, Contingent Liabilities and Contingent Assets. Sale of Goods Revenue from sale of goods is recognised when control of the goods are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably. The Group has concluded that it is the principal in its revenue arrangements, because it typically controls the goods before transferring them to the customer. Year ended 30 June 2018 Before the adoption of AASB 15 on 1 July 2018, the following accounting policy was effective for all periods ending before 30 June 2018: Revenue is recognised to the extent that it is probable that the economic benefits associated with a transaction will Notes to the annual financial statements (continued) for the year ended 30 June 2019 Financial Statements 2019