2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements(Prepared under Hong Kong Financial Reporting Standards)31 December 20123. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)Judgements (continued)Revenue recognition (continued)Revenue for hardware that does not require significant customisation, and where any software is consideredincidental, is recognised under HKAS 18 Revenue, where revenue is recognised provided that the entity hastransferred to the buyer the significant risks and rewards of ownership of the goods; the entity retains neithercontinuing managerial involvement to the degree usually associated with ownership nor effective control overthe goods sold; the entity retains neither continuing managerial involvement to the degree usually associatedwith ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; itis probable that the economic benefits associated with the transaction will flow to the entity; and the costsincurred or to be incurred in respect of the transaction can be measured reliably.For hardware, delivery is considered to have occurred upon shipment provided that the risk of loss, andthe title in certain jurisdictions have been transferred to the customer. For arrangements where the criteriafor revenue recognition have not been met because the legal title or risk of loss on products has not beentransferred to the buyer until final payment had been received or where delivery had not occurred, revenueis deferred to a later period when the title or risk of loss passes either on delivery or on receipt of paymentfrom the customer.For further information on the Group’s revenue recognition policies relating to the Group’s material revenuestreams, please refer to note 2.4 to these consolidated financial statements.Derecognition of financial assetsWhen the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrougharrangement, and has neither transferred nor retained substantially all the risks and rewards of theasset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuinginvolvement in the asset. Significant judgement is often required when the Group has neither transferrednor retained substantially all the risks and rewards of the asset nor transferred control of the asset, andestimates the extent of the Group’s continuing involvement in the asset.357