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FNA1002 - Project

FNA1002 - Project

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03/18/2014

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FNA1002
FINANCIAL ACCOUNTING
GROUP PROJECT

HYFLUX LTD
B26 GROUP 6
DING DOU
TRAN THI THUY LINH
NGUYEN THAI DUNG

TUTOR:
KATHRINE YUEN

DEPARTMENT OF FINANCE & ACCOUNTING
SCHOOL OF BUSINESS
NATIONAL UNIVERSITY OF SINGAPORE

SEMESTER 2
SESSION 2005/2006
Question 1:

Hyflux is a water and fluid treatment company. While the Hyflux Company main activities are investing on subsidiary companies and producing membrane system, the nature of business undertaken by Hyflux Group includes trading and manufacturing.

Main types of revenue include sale of industrial processes: separation, concentration and purification treatments for manufacturing process streams; water treatment processes and products like seawater desalination, raw water purification, wastewater cleaning, water recycling, water reclamation and ultra pure water production for municipal and industrial clients. In fiscal year 2004, industrial products sale contributes 73%, ie. nearly 65 millions, to its revenue of 88.7 millions S$. The rest is contributed by selling of municipal products (19%) and consumer products (8%). Revenue comes mainly from China (82%) and Singapore (10%)

Main types of expense are raw materials and consumables used (35,917,000S$), personnel expenses (9,302,000S$) and deprecation & amortization costs (3,533,000S$). In 2004, no cost for development, which used to be one of main expenses in 2003.

Question 2:
Revenue recognition means realize and record revenue. The revenue is recorded right
after it is earned, which means upon delivery of goods or upon completion of services.
Hyflux revenue recognition policy is:

\u201cRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Project and contract income

When the outcome of a contract can be reliably measured
- Revenue is recognised using the percentage-of-completion method, measured by the
contract value of work performed to date (based on project milestones) to estimated total
contract value.

When the outcome of a contract cannot be reliably measured
- Revenue is recognised only to the extent of contract costs incurred that is probable to be
recoverable.

(ii) Sale of goods

Revenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer which generally coincides with delivery and acceptance of the goods sold.

(iii) Interest
Interest income is recognised on a time proportion basis (taking into account the effective
yield on the asset) unless collectibility is in doubt.
(iv) Dividends
Dividend income is recognised when the shareholder\u2019s rights to receive payment is
established.\u201d
The revenue recognition for Sale of good is correct as it recorded the revenue after the
delivery of the goods and acceptance of the goods sold.

The revenue recognition for Interest and projects, contracts, which can be reliably measured, are correct, as these above statements imply that they will record only part of the total revenue, which is earned during the accounting period.

The policy also emphasis the importance of reliability principle as it divide the revenue of
project, contract into two categories.
Question 3:
Title/Year
2004
2003
Accounts receivable (S$ \u2019000)
54,388
22,128
Total assets (S$ \u2019000)
305,408
115,854
Percentage of total assets hold as
accounts receivable (%)
(54,388 / 305,408) x 100
=17.8
(22,128 / 115,854)x100=
19.1
Compared to 2003, in 2004, the ratio decreases by 1.3%.

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