Annual report 2019

90

REVENUE The Group has contracting activities in all three of its operational segments. Almost all activities are based on contracts with customers. These activities include construction projects and the execution of service-related contracts. The duration of the construction projects varies from approximately one month to several years. Service-related contracts also vary in duration, mostly from several days to more than a year, in the latter case due to a combination of multiple transports in a single contract. Contracts are agreements under which the Group and the customer have mutually enforceable rights and obligations. A combination of contracts rarely occurs but contract modifications, such as those related to additional work, are common. Additional work included in the recognition of revenue is based on mutually agreed contract modifications. In most cases such modifications or extended services are not distinct and therefore form part of a single performance obligation that is partially completed at the time of the contract modification. Most often the contracts contain only one performance obligation. Performance obligations are the asset to be constructed for the customer or the service that is to be rendered. Revenue recognized is based on contract considerations, including fixed prices and variable prices as well as indexation of raw materials and other costs, possible claims, incentives or liquidated damages. If there is a right to variable remuneration, such as incentive agreements, this is taken into account to the extent that it is highly unlikely that it will be reversed at a later date. Revenue is recognized over time when the customer simultaneously receives and consumes the benefits provided through the Group’s performance or when the Group creates or enhances an asset that the customer controls. Revenue from the contracting of projects in the Dredging & Inland Infra and Offshore Energy operational segments, excluding marine transport and other offshore related services, is recognized based on the progress of the project, mainly using the ‘cost-to-cost’ method. This method, as applied, adequately reflects the extent of the work performed for heterogeneous services for different projects in the period and includes the considerable use of equipment inherent to the Group’s activities. The ‘cost-to-cost’ formula, using (actual) costs as the numerator and estimated total costs as the denominator, includes project costs consisting of payroll costs, materials, costs of subcontracted work, costs of local representatives, rental charges and maintenance costs for the equipment used and other project costs. The Group makes significant estimates and judgements for the projects that depend on the nature of specific project circumstances. Revenue from the contracting of salvage projects (part of the operational segment Towage & Salvage) is recognized based on the progress of the project. For salvage projects completed at the date of the Statement of Financial Position but for which the proceeds are not finally determined between parties, revenue is recognized at expected proceeds, insofar it is highly unlikely that these will be reversed at a later date. Revenue also includes revenue from services rendered to third parties during the reporting period. Such services include marine transport and other services of Offshore Energy. These services are charged to the customers at day rates or other

rates and revenue is recognized/allocated, to a large extent, based on the number of sailing days of the vessel. The output measure relating to total sailing days is considered to be appropriate as sailing days are homogeneous. In the event that the period between payment and the service provided, or the other way around, is less than one year, the Group does not adjust the contract consideration for finance components. OTHER INCOME AND OTHER EXPENSES Other income and Other expenses mainly consist of book results from disposals. If a business combination results in a gain on acquisition, this gain is also recognized in Other income. CONTRACTED WORK Raw materials, consumables, services and contracted work consist of the costs recognized for work performed during the reporting period, excluding personnel expenses, amortization, depreciation and impairments. This item also includes equipment utilization costs, costs of short-term, low value or variable (if applicable) lease expenses, general overhead costs, external costs for research and development where not capitalized, currency translation differences, fair value changes of derivatives related to hedging foreign currency cash flows of projects, and other results/late results. PERSONNEL EXPENSES Personnel expenses consist of wages and salaries for own personnel and the related social security charges and pension costs, including paid and accrued contributions for defined contribution pension plans and movements in assets and liabilities from defined benefit plans including curtailments and settlements, insofar as applicable, and excluding actuarial gains and losses and the limitations on net pension plan assets added or charged directly to group equity. FINANCE INCOME AND EXPENSES Finance income comprises interest received and receivable from third parties, currency gains on financing and compensating results of negative changes in the fair value of financial instruments used to hedge interest or currency results on the financing concerned (hedged item), for which the results of the hedged item are included in the finance income. Interest income is recognized in the statement of profit or loss as it accrues, using the effective interest rate method. Finance expenses include interest paid and payable to third parties which are reported using the effective interest method, expenses resulting from early repayments, arrangement fees, currency losses on financing and results of positive changes in fair value of financial instruments used to hedge interest or currency results on the financing concerned (hedged item), for which the results of the hedged item are included in the finance expenses. The interest component of lease payments is recognized in the statement of profit or loss using the effective interest rate method. RAW MATERIALS, CONSUMABLES, SERVICES AND

ANNUAL REPORT 2019 – BOSKALIS FINANCIAL STATEMENTS 2019 N L P 19 -- BOSKALIS FINANCIAL STATEMENTS 2019