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B.18 PROVISIONS FOR RISKS AND CHARGES
B.19 REVENUE RECOGNITION
Provisions for risks and charges are recognised for losses
and charges of a definite nature, whose existence is certain
or probable, but the amount and/or timing of which cannot
be determined reliably. A provision is recognised only when
there is a current (legal or constructive) obligation for a future
outflow of economic resources as the result of past events and
it is likely that this outflow is required to settle the obligation.
Such amount is the best estimate of the expenditure required
to settle the obligation. Where the effect of the time value of
money is material and the obligation settlement date can be
estimated reliably, the provisions are stated at the present
value of the expected outlay, using a rate that reflects market
conditions, the variation in the cost of money over time, and
the specific risk attached to the obligation.
Increases in the provision due to changes in the time value of
Revenue is recognised at the fair value of the consideration
received for the sale of goods and services in the ordinary
course of the Group’s business. Revenue is recognised net of
value-added tax, expected returns, rebates and discounts.
Revenue is recognised as follows:
(a) Sales of goods
Revenue from the sale of goods is recognised when the risks
and rewards of the goods are transferred to the customer;
this usually occurs when the goods have been delivered to the
customer and the customer has accepted them.
money are accounted for as interest expense.
Risks for which the emergence of a liability is only possible
but not remote are indicated in the disclosures about
commitments and contingencies and no provision is
recognised.
Any contingent liabilities accounted for separately when
allocating the cost of a business combination, are valued
at the higher of the amount obtained using the method
described above for provisions for risks and charges and the
liability’s originally determined present value.
The provisions for risks and charges include the estimated
legal costs to be incurred if such costs are incidental to the
extinguishment of the provision to which they refer.
(b) Sales of services
The sale of services is recognised in the accounting period in
which the services are rendered, with reference to the progress
of the service supplied and in relation to the total services still
to be rendered.
In both cases, revenue recognition depends on there being
reasonable assurance that the related consideration will be
received.
The method of recognising revenue for contract work-in-
progress (construction contracts) is outlined in Section B.13.
