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 all of the following conditions are satisfied:
• the company has transferred the significant risks and rewards of ownership to the buyer;
• the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• the amount of turnover can be measured reliably;
• it is probable that the company will receive the consideration due under the transaction; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Turnover from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
• the amount of turnover can be measured reliably;
• it is probable that the company will receive the consideration due under the contract;
• the stage of completion of the contract at the end of the reporting period can be measured reliably; and
• the costs incurred and the costs to complete the contract can be measured reliably.
When the outcome of a contract can be estimated reliably, contract revenue and contract costs are recognised on a contract by contract basis using the stage of completion basis.
The stage of completion of individual contracts is calculated on the proportion of total costs incurred at the reporting date as compared to the projected total costs at completion.
Profit on long term contracts is taken as the work is carried out if the final outcome can be assessed with reasonable certainty. The profit included is calculated on a prudent basis to reflect the proportion of the work carried out at the year-end, by recording turnover and related costs as contract activity progresses. Turnover and cost of sales are calculated as a percentage of direct costs used. Turnover derived from variations on contracts are recognised only when they have been agreed by the customer. Full provision is made for losses on all contracts in the year in which they are first foreseen.
Amounts recoverable on long term contracts and payments on account
Amounts recoverable on long term contracts (AROC) represent the gross unbilled amount for contract work performed to date. They are measured at cost plus profit recognised to date less a provision for foreseeable losses and less progress billed.
AROC is presented in debtors on the balance sheet. If payments received from customers exceed income recognised, the difference is presented in payments received on account on the balance sheet. Payments on account are presented in creditors due within one year on the balance sheet.