Turnover is measured at the fair value of the consideration received or receivable, net of discounts and value added taxes. Turnover includes revenue earned from the sale of goods and from the rendering of services. Turnover is reduced for estimated customer returns, rebates and other similar allowances.
Sale of goods
Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods has transferred to the buyer. This is usually at the point that the customer has signed for the delivery of the goods.
Rendering of services
Turnover from the rendering of services is recognised by reference to the stage of completion of the contract. The stage of completion of a contract is measured by comparing the costs incurred for work performed to date to the total estimated contract costs. Turnover is only recognised to the extent of recoverable expenses when the outcome of a contract cannot be estimated reliably.
Construction Contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting date. Variations in contract work, claims and incentive payments, are included to the extent that the amount can be measured reliably and its receipt is considered probable.
When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.
Where the outcome of the construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred they are not included in contract costs if the contract is obtained in a subsequent period.
The percentage of completion method is used to determine the appropriate amount to recognise in the given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the total contract costs. Costs incurred in the year in connection with future activity on a contract is excluded from contract costs in determining the stage of completion. These costs are presented as stock prepayments or other assets depending on their nature.