CFSL - Annual report 2018

69 CIM FINANCIAL SERVICES LTD ANNUAL REPORT 2018 EXPLANATORY NOTES 30 SEPTEMBER 2018 2. ACCOUNTING POLICIES (CONT’D) 2.6 Significant accounting policies (Cont’d) (d) Revenue recognition Revenue 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, regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or receivable stated net of discounts, returns, value added taxes, rebates and other similar allowances. The specific recognition criteria described below must also be met before revenue is recognised. Interest and similar income For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Fees that the Group considers to be an integral part of these financial instruments are recognised in the EIR. Earnings from finance leases are recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return. Commissions or discounts received from merchants on financing of credit agreements are initially recognised and presented in other liabilities in the Statement of Financial Position. The release to profit or loss is recognised in fee and commission income in the Statement of Profit or Loss. Rental income Rental income is recognised in accordance with the substance of the relevant agreement. Rental income from operating leases net of value added taxes is recognised on a straight line basis over the lease term. Dividend income Dividend income is recognised when the Group’s right to receive the payment is established. Rendering of services Revenue from rendering of services is recognised in the accounting period in which services are rendered. Management fees are recognised as the services are provided. Sale of goods Sale of goods are recognised when the goods are delivered and titles have passed, at which time all of the following conditions are satisfied: • The Group has transferred to the buyer the significant risks and rewards of ownership of the goods; • The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • The amount of revenue can be measured reliably; • It is probable that the economic benefits associated with the transaction will flow to the Group; and • The costs incurred or to be incurred in respect of the transaction can be measured reliably.