Annual Report 2012 - IOI Group

3. ADOPTION OF NEW FRSs AND AMENDMENT TO FRSs (Continued)3.3 New Malaysian Financial Reporting Standards (‘MFRSs’) that have been issued, but not yet effective and not yetadopted, for annual periods beginning on or after 1 January 2014 (Continued)IC Interpretation 15 Agreements for the Construction of Real EstateThis Interpretation applies to the accounting for revenue and associated expenses by entities undertaking construction or realestate directly or via subcontractors. Within a single agreement, the entity may contract to deliver goods or services in additionto the construction of real estate. Such an agreement shall therefore, be split into separately identifiable components.An agreement for the construction of real estate shall be accounted for in accordance with MFRS 111 Construction Contractsif the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress. Accordingly, revenue shall be recognised by reference tothe stage of completion of the contract.An agreement for the construction of real estate in which buyers only have limited ability to influence the design of the realestate or to specify only minor variations to the basic designs is an agreement for the sale of goods in accordance with MFRS118 Revenue. Accordingly, revenue shall be recognised by reference to the criteria in paragraph 14 of MFRS 118 (e.g. transferof significant risks and rewards, no continuing managerial involvement nor effective control, reliable measurement, etc.).At the end of the reporting period, the Group recognised revenue and associated costs from the construction of real estateby reference to the stage of completion of the construction works. The Group will continue to assess the impact ofimplementing this Interpretation on the Group’s financial statements.4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS4.1 Changes in estimatesEstimates are continually evaluated and are based on historical experience and other factors, including expectations of futureevents that are believed to be reasonable under the circumstances. The Directors are of the opinion that there are no materialchanges in estimates during the financial year.4.2 Critical judgements made in applying accounting policiesThe following are the judgements made by management in the process of applying the Group’s accounting policies that havethe most significant effect on the amounts recognised in the financial statements.4.2.1 Classification between investment properties and property, plant and equipmentThe Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as aninvestment property. Investment property is a property held for capital appreciation or to earn rental or for both.Some properties comprise a portion that is held to earn rental or for capital appreciation and another portion that isheld for use in the production or supply of goods or services or for administrative purposes. If these portions could besold separately (or leased out separately under a finance lease), the Group would account for the portions separately.If the portions could not be sold separately, the property is an investment property only if an insignificant portion isheld for use in the production or supply of goods or services or for administrative purposes. Judgement is made onan individual property basis to determine whether ancillary services are so significant that a property does not qualifyas investment property.4.2.2 Contingent liabilitiesThe determination and treatment of contingent liabilities are based on management’s view of the expected outcomeof the contingencies for matters in the ordinary course of business.Annual Report 2012IOI CORPORATION BERHAD 129