Annual Report 2009 Royal BAM Group nv

3.9 Inventories
a) Land and building rights
Inventories of land and building rights are stated at the lower of cost and net realisable value. The Group capitalises
interest as part of the cost when the land is assigned for construction and active development starts.
b) Property development
The category property development consists of acquired projects for (re)development and land positions in their stage of
development; they are stated at the lower of cost and net realisable value. The Group capitalises interest and other cost
as part of the cost of property development. Capitalisation of interest cost starts at the beginning of development, is
suspended during the period in which active development is interrupted and ceases when the project is completed or
sold.
If the equitable title of a project is transferred in whole or in part to a third party, the capitalised cost of the project is
accounted for in the income statement and the related revenue is recognised.
The control over and essential risks and benefits related to property development in ownership are transferred as soon as
the title to the land and buildings, if any, has been transferred. Property development is accounted for as construction
contracts (Please refer to Note 3.10) if the land has been transferred to the buyer and if essential risks and benefits are
continuously transferred by accession, as construction progresses.
Property development regarding to houses is accounted for in accordance with construction contracts if (a part of) the
property development has been transferred at the start of a project.
Property development regarding to commercial property is accounted for in accordance with construction contracts,
only when the project is sold and there is a legal transfer of land and buildings at that particular time.
c) Raw materials and consumables
Inventories of raw materials and consumables are stated at the lower of cost and net realisable value. Cost is based on the
first-in, first-out (FIFO) principle and includes expenditure incurred in acquiring the inventories and in bringing them to
their existing location and condition.
The net realisable value of this inventory is the estimated selling price in the ordinary course of business, less the
estimated cost of completion and selling expenses. Assets qualify as inventory if they are used in the normal course of
business.
3.10 Construction contracts
Construction contracts are stated at cost incurred and allocated result in line with the progress of the construction, less
identifiable losses and invoiced instalments. The cost price consists of all cost which are directly related to the project and
the allocated direct cost based on the normal production capacity.
If the outcome of a contract can be estimated reliably, project revenue and cost are accounted for in the income
statement based on the progress of work performed. If the outcome of a contract cannot be estimated reliably, revenue
is recognised only to the extent of the contract costs incurred that are likely to be recoverable. If it is probable that the
total contract cost is higher than the total contract revenue, the total expected loss is recognised as an expense.
The Group uses the ‘percentage of completion method’ to determine the appropriate amount to be recognised in a given
period. The stage of completion is measured by reference to the contract cost incurred as a percentage of total actual or
estimated project cost. Revenues and result are recognised in the income statement based on this progress.
Projects are presented in the balance sheet as receivables from or payables to customers on behalf of the contract. If the
costs incurred (including the result recognised) exceed the invoiced instalments, the contract will be presented as a
receivable. If the invoiced instalments exceed the costs incurred (including the result recognised) the contract will be
presented as a liability.
107
2009