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Notes To The Consolidated Financial Statements
(Expressed in Renminbi)
1
/ China Communications Services Corporation Limited
2
Significant accounting policies
(continued)
(l) Impairment of assets
(continued)
(ii)
Impairment of other assets
(continued)
–
Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has
been a favourable change in the estimates used to determine the recoverable amount.
An impairment loss in respect of goodwill is not reversed.
A reversal of impairment losses is limited to the asset’s carrying amount that would
have been determined had no impairment loss been recognised in prior years. Reversals
of impairment losses are credited to the consolidated income statement in the year in
which the reversals are recognised.
(m) Inventories
Inventories are carried at the lower of cost and net realisable 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 realisable 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 realisable 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 balance sheet date. 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 balance sheet date are recorded at the net amount of costs
incurred plus recognised profit less recognised losses and progress billings, and are presented in
the statement of financial position as the “Gross amount due from customers for contract work”
(as an asset) or the “Gross amount due to customers for contract work” (as a liability), as applicable.
Progress billings not yet paid by the customer are included under “Trade debtors and bills receivable”.
Amounts received before the related work is performed are presented as “Advances received” under
“Trade and other payables”.