Page 96 - China Mobile Limited - Annual Report 2012

China Mobile Limited
Annual Report 2012
90
Notes to the Financial Statements
(Expressed in Renminbi unless otherwise indicated)
1 Significant Accounting Policies (Continued)
(k) Construction in progress
Construction in progress is stated at cost less impairment losses (see note 1(j)). Cost comprises direct costs of
construction as well as interest expense and exchange differences capitalized during the periods of construction
and installation. Capitalization of these costs ceases and the construction in progress is transferred to property,
plant and equipment when substantially all the activities necessary to prepare the assets for their intended use
are completed. No depreciation is provided for in respect of construction in progress until it is completed and
ready for its intended use. No exchange difference was capitalized to construction in progress during the years
presented.
(l) Inventories
Inventories are carried at the lower of cost and net realizable value. Cost represents purchase cost of goods
calculated using the weighted average cost method. Net realizable value is determined by reference to the sales
proceeds of items sold in the ordinary course of business or to management’s estimates based on prevailing
market conditions.
When inventories are sold, the carrying amount of those inventories is recognized as a deduction of other net
income due to its insignificance. The amount of any write-down of inventories to net realizable value and all
losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of
any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognized as a
reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs. No
reversal of any write-down of inventories occurred during the years presented.
(m) Accounts receivable and other receivables
Accounts receivable and other receivables are initially recognized at fair value and thereafter stated at amortized
cost using the effective interest method less allowance for impairment loss (see note 1(j)), except where the effect
of discounting would be immaterial. In such case, the receivables are stated at cost less allowance for impairment
loss (see note 1(j)).
(n) Deferred revenue
Deferred revenue consists primarily of prepaid service fees received from customers, revenue deferred for
unredeemed point rewards under Customer Point Reward Program (“Reward Program”) and deferred tax credit
on purchase of domestic telecommunications equipment.
Revenue from prepaid service fees are recognized when the mobile telecommunications services are rendered.