Urban Renewal Authority 2018-19 Annual Report

128 (expressed in Hong Kong Dollars) NOTES TO THE FINANCIAL STATEMENTS 2. Significant accounting policies (Continued) (e) Revenue recognition (Continued) (ii) Where the Group receives its share of surplus from property development projects undertaken as joint development projects, sharing of such surplus is recognised in accordance with the terms of the joint development agreements, unless the control of the underlying properties under development have not been transferred. Proceeds received in advance from sale of properties of joint development projects prior to their completion are included in trade and other payables. (iii) When the developer is obligated to settle the upfront premium to the Group at the inception of joint development agreement, such upfront premium is recognised as revenue when the Group has no further substantial acts to complete. Generally, such revenue is recognised as soon as the Group has performed its obligations in respect of the upfront premium and it has become non- refundable/non-cancellable. (iv) Interest income is recognised on a time-proportion basis using the effective interest method. (v) Rental income net of any incentives given to the lessee is recognised on a straight line basis over the periods of the respective leases. (vi) Income from Urban Redevelopment Facilitating Services Company Limited (“Facilitating Services”) is recognised upon completion of the sale of the properties by the owners in accordance with the terms of the sale agreement. (f) Contract liabilities A contract liability is recognised when the customer pays non-refundable consideration before the Group recognises the related revenue (see note 2(e)). A contract liability would also be recognised if the Group has an unconditional right to receive non-refundable consideration before the Group recognises the related revenue. In such cases, a corresponding receivable would also be recognised (see note 2(i)). (g) Property, plant and equipment Building comprises rehousing blocks, preservation properties, retained properties, and commercial premises held for self-use. Rehousing blocks represent properties held by the Group for the intended purpose of providing interim accommodation for affected tenants of development projects who are normally charged a rent which is substantially below the market value, with a view to assist primarily the dispossessed tenants who are yet to obtain public housing units. Preservation properties are properties that are of historical or architectural interest to be preserved by the Group. Retained properties represent redeveloped properties held by the Group for conserving the cultural characteristics of the projects before redevelopment and receives rental income. All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses (see Note 2(h)). Historical cost includes expenditure that is directly attributable to the acquisition of the items.