Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
HKFRS 15.116(c)
HKAS 1.61
HKFRS 15.116(a)
HKFRS 15.117
Financial statements for the year ended 31 December 2023
Made-to-order electronic products
The group typically receives a 10% deposit on acceptance of the order (see note 1(aa)(i)(a)). The
remainder of the consideration is payable ratably as and when the products are delivered, or in
full if the customer cancels the contract. When a contract results in revenue being recognised in
excess of the amount the group has the right to invoice to the customer, a contract asset is
recognised.
The amount of revenue recognised during the year from performance obligations satisfied (or partially
satisfied) in previous periods is $1,538,000 (2022: $1,083,000), mainly due to the changes in estimate
of the stage of completion of certain construction contracts.
The amount of contract assets expected to be recovered after more than one year is $730,000 (2022:
$512,000), all of which relates to retentions. All of the other contracts assets are expected to be
recovered within one year202.
(b)
Contract liabilities
Contract liabilities
Construction contracts
2023
2022207
$'000
$'000
- Billings in advance of performance
3,605
1,039
Made-to-order manufacturing arrangements
- Billings in advance of performance
438
567
Property development
- Forward sales deposits and instalments
received
9,184
5,567
13,227
7,173
Typical payment terms which impact on the amount of contract liabilities recognised are as follows:
Construction contracts and made-to-order manufacturing arrangements
When the group receives a deposit before the production activity commences this will give rise to
contract liabilities at the start of a contract, until the revenue recognised on the project exceeds
the amount of the deposit. The group typically receives a 10% deposit on acceptance of
manufacturing orders (see note 1(aa)(i)(a)) and 20% deposit on all the group's construction
contracts starting from 2023 before work commences (see note 1(aa)(i)(c)). In previous periods the
amount of the deposit, if any, was negotiated on a case by case basis with customers.
Property development
The group receives 10% of the contract value as a deposit from customers when they sign the sale
and purchase agreement. This deposit is recognised as a contract liability until the properties are
completed and legally assigned to the customer. The rest of the consideration is typically paid
when legal assignment is completed.
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Retention assets are by definition only recognised when the entity has assessed that it is entitled to the consideration and that any
remaining uncertainty surrounding this amount is sufficiently low, such that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur (as per paragraph 56 of HKFRS 15). However, HKFRS 15 does not give
specific guidance on whether a right to the retention payment should be presented as a receivable or a contract asset.
In this illustration, HK Listco has presented the amount as a contract asset until the relevant inspection is passed. This indicates that
HK Listco regards retentions as still being subject to conditions other than solely the passage of time. This presentation is consistent
with the guidance found in Example 27 (paragraphs IE141 to IE142) of the Illustrative Examples that accompany HKFRS 15, which
explains that a contract does not contain a significant financing component simply because a retention clause results in deferred
payment, as the contract requires the amount to be retained for reasons other than the provision of finance.
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