178 F INANC IAL Statements 05 Sect ion Ranhi ll Ut i l i t i es Berhad NOTES TO THE F INANC I AL STATEMENTS For the year ended 31 December 2022 3. SIGNIFICANT ACCOUNTING POLICIES (contd.) Service concession contracts (contd.) (ii) Financial asset model (contd.) An impairment loss is recognised if the carrying amount of these assets exceeds the fair value, as estimated during impairment tests. Fair value is estimated based on the recoverable amount, calculated by discounting future cash flows (value in use method). The portion falling due within less than one year is presented in the consolidated statement of financial position as ‘Current operating financial assets’, while the portion falling due within more than one year is presented in the non-current heading. Revenue and finance income associated with this financial asset model include: • revenue from the construction of the operating financial assets on a percentage of completion basis; • operation and maintenance revenue; and • finance income related to the capital investment in the operating financial assets. Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group and the Company. The Group and the Company do not recognise a contingent liability and asset but discloses its existence in the financial statements. Zakat The Group recognises its obligations towards the payment of zakat on business. Zakat for the current financial year is recognised when the Group has a current zakat obligation as a result of a zakat contribution approved by the board of directors and determined payable to the relevant zakat institutions for the respective financial years. The amount of zakat expense shall be assessed when the Group has been in operation for at least 12 months, i.e. for the period known as “haul”. Zakat on business is calculated by multiplying the zakat rate with zakat base. The rate of zakat on business, as determined by National Fatwa Council is 2.5% of the zakat base. The zakat base of the Group is determined based on net current assets, adjusted for items that do not meet the conditions for zakat assets and liabilities. Current versus non-current classification For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the assets or liabilities and the level of the fair value hierarchy. The Group and the Company present assets and liabilities in statement of financial position based on current/non-current classification. An asset is current when it is: • Expected to be realised or intended to sold or consumed in normal operating cycle; • Held primarily for the purpose of trading; • Expected to be realised within twelve months after the reporting period; or • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
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