FGV HOLDINGS BERHAD | AUDITED FINANCIAL STATEMENTS 2023 51 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 3 MATERIAL ACCOUNTING POLICIES (CONTINUED) (t) Revenue recognition (continued) (i) Revenue from contracts with customers (continued) Expected volume rebates/incentives Certain goods may be sold with volume rebates/incentives comprising distribution incentive, insurance rebate, distribution rebate and special sales incentives. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume rebates/incentives. Accumulated experience is used to estimate and provide for the rebates/incentives, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability for the expected volume rebates/incentives to customers in relation to sales made until the end of the reporting period is recognised as adjustment to revenue and correspondingly in trade and other payables. Quality claims The Group’s obligation to provide quality claims against off-spec goods under the Group’s standard contractual terms is recognised as a provision. Receivables, contract asset and contract liabilities A receivable is recognised when the goods are delivered or services are rendered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Contract asset is the right to consideration in exchange for goods or services that the Group has transferred to the customers. A contract asset is recognised when the services rendered by the Group exceed the amount already billed. Contract liability is the Group’s obligation to transfer goods or services to customers. A contract liability is recognised when the Group has received the sales consideration in advance or billings or payments by the customers exceed the services rendered by the Group. Contract cost The Group has elected the practical expedient to recognise incremental cost incurred to obtain contract with period of less than one year as an expense when incurred.
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