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SUSTAINABILITY EFFECTIVE CORPORATE FINANCIAL ADDITIONAL DETAILS OF THE ANNUAL
REPORT LEADERSHIP GOVERNANCE STATEMENTS INFORMATION GENERAL MEETING

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(o) Revenue recognition
(i) Revenue from contracts with customers
• Sales of goods
The Group’s revenue which represents income arising in the course of the Group’s and the Company’s ordinary
activities is recognised by reference to each distinct performance obligation promised in the contract with
customer when or as the Group and the Company transfer the control of the goods and services promised
in a contract and the customer obtains control of the goods or services. Depending on the substance of the
respective contract with customer, the control of the promised goods or services may transfer over time or at 157
point in time.
A contract with customer exists when the contract has commercial substance, the Group, the Company and
their customers have approved the contract and intend to perform their respective obligations, the Group’s,
the Company’s and the customer’s rights regarding the goods or services to be transferred and the payment
terms can be identified, and it is probable that the Group and the Company will collect the consideration to which
it will be entitled to in exchange of those goods or services.
Revenue from contracts with customers is measured at its transaction price, being the amount of consideration
which the Group expects to be entitled in exchange for transferring promised goods or services to a customer,
excluding amounts collected on behalf of third parties such as sales and service taxes or goods and service tax.
If the amount of consideration varies due to discounts, rebates, penalties or other similar items, the Group and MSM MALAYSIA HOLDINGS BERHAD Annual Report 2020
the Company estimate the amount of consideration that it expects to be entitled based on the expected value
method or the most likely outcome but the estimation is constrained up to the amount that is highly probable of
no significant reversal in the future. Transaction price is allocated to each performance obligation on the basis of
the relative standalone selling prices of each distinct good or service promised in the contract.

The Group sells refined sugar, liquid sugar, sugar premix, raw sugar and molasses in connection to the sugar
operation. In addition, the Group also sells rubber, palm oil and mango through its plantation segment.
Revenue from sales of goods from the sugar operation and plantation are recognised net of discount and taxes
at the point in time when control of the goods has transferred to the customer. Depending on the terms of the
contract with the customer, control transfers either upon delivery or shipment of goods to the specific location
agreed with the customer, the risks of obsolescence and loss have been transferred to the customer, and either
the customer has accepted the goods in accordance with the sales contract, the acceptance provisions have
lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.
• Sales with a right of return
When the customer has a right to return the goods within a given period, the Group is obliged to refund the
purchase price. Revenue is adjusted for the expected value of the returns and cost of sales are adjusted for the
value of the corresponding goods expected to be returned.

A refund liability for the expected refunds to customers is recognised as adjustment to revenue and
correspondingly in trade and other payables. At the same time, the Group has a right to recover the goods from
the customer where the customer exercises his right of return and recognises a refund asset and a corresponding
adjustment to cost of sales the refund asset is measured by reference to the former carrying amount of
the product.
Accumulated experience is used to estimate such returns at the time of sale at a portfolio level using the
expected value method. Because the number of goods returned has been steady for years, management
assessed that it is highly probable that a significant reversal in the cumulative revenue recognised will not occur.
The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.