Annual Report 2008 Sustainable design & engineering - Grontmij

Notes to the consolidated financial statements
Provisions
General
A provision is recognised in the balance sheet when the Group has a legal or constructive obligation, that can be measured reliably, as a result of
a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market estimates of the time value of money and,
where necessary, of the specific risk pertaining to the liability.
Aftercare liabilities
At the moment an obligation arises in regard to aftercare liabilities, a provision is recognised for the present value of the total amount of
the future liabilities.
Revenue
The major part of the Group’s revenue relates to contracts for services in the areas of design, consultancy, project management, engineering and
contracting.
Revenue from services based on fixed-price contracts is recognised in profit or loss pro rata of the services rendered on the reporting date in
proportion to the total of the contracted services; the stage of completion is assessed on the reporting date by reference to surveys of actual
work performed. Revenue from services based on cost plus contracts is recognised in profit or loss pro rata of the time spent and based on
the contractual net hourly rates.
Contract revenue include the initial amount agreed upon plus any variations in contract work, claims and incentive payments to the extent that it
is probable they will result in revenue and can be measured reliably. An expected loss on any contract is recognised immediately in profit or loss.
Costs incurred in the period prior to securing a signed contract are recognised directly in profit or loss.
Revenue from contract work relates to assignments for the construction of assets. Revenue from contract work and the relating expenses are
recognised in profit or loss in proportion to the stage of completion of the contract on the reporting date; the stage of completion is determined
based on the technical completeness proportionate to the project as a whole. An expected loss on any contract is recognised immediately in
profit or loss. Costs incurred in the period prior to securing a signed contract are recognised directly in profit or loss.
Other operating income
Other operating income concerns income not related to the Group’s core activities such as gains on the sale of property, plant and equipment.
Third party project expenses
Third party project expenses represent the total costs of services and materials which relate directly to contracts carried out for the Group’s
customers.
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part of the total lease expenses.
Finance income and expense
Finance income comprises interest income on cash at banks and from loans and receivables (including available-for-sale financial assets), positive
changes in the fair value of financial assets at fair value through profit or loss and net foreign currency gains. Interest income is recognised in
the income statement as it accrues, using the effective interest method.
Finance expense comprises the interest due on loans and borrowings, interest added to provisions, negative changes in the fair value of financial
assets at fair value through profit or loss, impairment losses on financial assets and net foreign currency losses.
All finance expenses are calculated using the effective interest method. Currency exchange gains and losses are recognised in profit or loss on
a net basis.
GRONTMIJ | ANNUAL REPORT 2008 83