Page 124 - Urban Renewal Authority 2023-24 Annual Report

NOTES TO THE FINANCIAL STATEMENTS

(expressed in Hong Kong Dollars)

2. Material accounting policies (Continued)

(e) Revenue recognition (Continued)
Further details of the Group’s revenue and other income recognition policies are as follows:

(i) Income from sale of properties developed for sale in the ordinary course of business is
recognised when legal assignment is completed, which is the point in time when the customer
has the ability to direct the use of the property and obtain substantially all of the remaining
benefits of the property. Deposits and instalments received on properties sold prior to the date
of revenue recognition are included in contract liabilities (see Note 2(f)).

(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 receivable under operating leases is recognised in profit or loss in equal
instalments over the periods covered by the lease term, except where an alternative basis is
more representative of the pattern of benefits to be derived from the use of the leased asset.
Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net
lease payments receivable. Variable lease payments that do not depend on an index or a rate
are recognised as income in the accounting period in which they are earned.

(vi) Income from Urban Redevelopment Facilitating Services Company Limited 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)).

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