China Communications Services Corporation Limited Annual Report 2015
114
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
2. SIGNIFICANT ACCOUNTING POLICIES
(continued)
(m) Inventories
Inventories are carried at the lower of cost and net realizable value.
Cost is calculated using the weighted average cost formula and comprises all costs of purchase and other costs
incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary
to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in
which the related revenue is recognised. The amount of any write-down of inventories to net realizable value and all
losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any
reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an
expense in the period in which the reversals occurs.
(n) Construction contracts
Construction contracts are contracts specifically negotiated with a customer for the construction of an asset or a
group of assets, where the customer is able to specify the major structural element of the design.
The accounting policy for contract revenue is set out in note 2(w)(i). When the outcome of a construction contract
can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the
contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract
revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract
cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.
Construction contracts in progress at the end of the reporting period are recorded at the net amount of costs
incurred plus recognised profit less recognised losses and progress billings, and are presented in the consolidated
statement of financial position as the “Unbilled revenues for contract work” under “Accounts and bills receivable,
net” (as an asset) or the “Amounts due to customers for contract work” (as a liability), as applicable. Progress billings
not yet paid by the customer are included under “Accounts and bills receivable, net”. Amounts received before the
related work is performed are presented as “Receipts in advance for contract work”.
(o) Trade and other receivables
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the
effective interest method, less allowance for impairment of doubtful debts (see note 2(l)).
(p) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount
initially recognised and redemption value being recognised in profit or loss over the period of the borrowings,
together with any interest and fees payable, using the effective interest method.
Debt and equity instruments issued by the group are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
(q) Trade and other payables
Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost.
