Huawei 2011 Annual Report Download - page 49

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(u) Revenue recognition
Revenue is measured at the fair value of the
consideration received or receivable. Provided
it is probable that the economic benefits will
flow to the Group and the revenue and costs, if
applicable, can be measured reliably, revenue is
recognised in prot or loss as follows:
i) Sale of goods and services rendered
Revenue from sales of goods is recognised
when the significant risks and rewards of
ownership of goods have been transferred to
the buyer. Revenue from provision of services
is recognised at the time when the services are
provided. No revenue is recognised if there are
significant uncertainties regarding the recovery
of the consideration due, associated costs or
the possible return of goods. Revenue excludes
value added tax or other sales taxes and is after
deduction of any trade discounts.
ii) Contract revenue
When the outcome of a construction contract
can be estimated reliably, revenue from a xed
price contract is recognised using the percentage
of completion method, measured by reference
to the percentage of contract costs incurred to
date to estimated total contract costs for the
contract.
When the outcome of a construction contract
cannot be estimated reliably, revenue is
recognised only to the extent of contract costs
incurred that it is probable will be recoverable.
iii) Government grants
Government grants are recognised in the
consolidated balance sheet initially when
there is reasonable assurance that they will be
received and that the Group will comply with
the conditions attaching to them. Grants that
compensate the Group for expenses incurred
are recognised as revenue in profit or loss
on a systematic basis in the same periods in
which the expenses are incurred. Grants that
compensate the Group for the cost of an asset are
recognised as deferred income and consequently
are effectively recognised in prot or loss on a
systematic basis over the useful life of the asset.
iv) Rental income from operating leases
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 prot
or loss as an integral part of the aggregate net
lease payments receivable. Contingent rentals
are recognised as income in the accounting
period in which they are earned.
(v) Finance income and expenses
Finance income comprises dividend and interest
income on funds invested (including available-
for-sale financial assets), gains on the disposal of
available-for-sale nancial assets, and changes in the
fair value of nancial assets held for trading. Interest
income is recognised as it accrues using the effective
interest method. Dividend income from unlisted
investments is recognised when the equity holder’s
right to receive payment is established; dividend
income from listed investments is recognised when
the share price of the investment goes ex-dividend.
Finance costs comprise interest expense on
borrowings, unwinding of the discount on
provisions and impairment losses recognised on
nancial assets. Borrowing costs that are directly
attributable to the acquisition, construction or
production of a qualifying asset which necessarily
takes a substantial period of time to get ready for
its intended use or sale are capitalised as part of
the cost of that asset. Other borrowing costs are
expensed in the period in which they are incurred.
The capitalisation of borrowing costs as part of
the cost of a qualifying asset commences when
expenditure for the asset is being incurred, borrowing
costs are being incurred and activities that are
necessary to prepare the asset for its intended use or
sale are in progress. Capitalisation of borrowing costs
is suspended or ceases when substantially all the
activities necessary to prepare the qualifying asset for
its intended use or sale are interrupted or complete.
Foreign currency gains and losses are reported on
a net basis.
Consolidated Financial Statements Summary and Notes