3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The Group made judgements, estimates and assumptions about the carrying amounts of assets and liabilities that were not readily apparent from other sources in the application of the Group’s accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors that are considered to be reasonable under the circumstances. Actual results may differ from the estimates. 3.1 Critical judgements made in applying the Group’s accounting policies Determination of the classification of joint operations and joint ventures Joint arrangements are arrangements over which the Group has joint control, i.e. decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group assesses the substance of each joint arrangement to determine whether it is a joint operation or a joint venture by evaluating the Group’s rights to the assets and obligations for the liabilities arising from the arrangement in accordance with SFRS(I) 11 Joint Arrangements. A joint operation is a joint arrangement whereby the Group has rights to the assets and obligations for the liabilities relating to the arrangement. In respect of its interest in a joint operation, the Group recognises in the consolidated financial statements: • its assets, including its share of any assets held jointly; • its liabilities, including its share of any liabilities incurred jointly; • its revenue from the sale of its share of the output of the joint operation, and its share of revenue from the sale of output by the joint operation; and • its expenses, including its share of any expenses incurred jointly. A joint venture is a joint arrangement whereby the Group has rights to the net assets of the arrangement. Interests in joint ventures are accounted for using the equity method in the consolidated financial statements in accordance with SFRS(I) 1-28 Investments in Associates and Joint Ventures. 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities and the reported amounts of revenue and expenses within the next financial year are discussed below: Construction contracts The Group has significant ongoing construction contracts as at 30 September 2025 that are non-cancellable. For these contracts, revenue is recognised over time by reference to the Group’s progress towards completion of the contract. The measure of progress is determined based on the proportion of contract costs incurred to date to the estimated total contract costs (“input method”). Management has to estimate the total contract costs to complete, which are used in the input method to determine the Group’s recognition of construction revenue. A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. Significant assumptions are used to estimate the total contract sum and the total contract costs which affect the accuracy of revenue recognition based on the percentage-of-completion and completeness of provision for onerous contracts recognised. In making these estimates, management has relied on past experience and the work of specialists. If the remaining estimated contract costs were increase by 0.3% (2024: 0.3%) from management’s estimates, the Group’s profit/(loss) before income tax will (decrease)/increase by approximately $856,000 (2024: $1,089,000). ANNUAL REPORT 2025 KEONG HONG HOLDINGS LIMITED 85 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2025
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