16 URBAN DEVELOPMENT CORPORATION Notes to the Non-Consolidated Financial Statements (Continued) Year ended March 31, 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (cont’d) (o)
Related parties (cont’d): A party is related to the corporation, if (cont’d): (iv)
the party is a member of the key management personnel of the corporation or its parent;
the party is a close member of the family of any individual referred to in (i) or (iv);
the party is the company that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan established for the benefit of employees of the corporation, or of any company that is a related party of the corporation. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. The corporation has a related party relationship with its directors, its subsidiaries, associated joint ventures and other related companies, other Government of Jamaica entities and affiliated parties controlled by its directors, senior officers, executives and the Government of Jamaica. “Key management personnel” represents certain senior officers of the corporation and the Government of Jamaica. (p)
Loans: Interest-bearing borrowings are recognised initially at cost. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowing to determine the effective interest.
Revenue recognition: (i)
Real estate trading income: A contract is recognised as a sale when significant risks and rewards of ownership have been transferred to the buyer. Cost of sales, including land, is computed on a first in, first out basis. Where the outcome of the contract cannot be reliably determined, no revenue is recognised. Expected losses on a contract, computed on the basis of contract revenue and directly attributable costs, are recognised immediately.
Rental income: Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct cost incurred in negotiating and arranging an operating lease is added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. Rental income collected in advance is treated as deferred income and is amortized to profit or loss for the related period on a straight-line basis.
Interest income: Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.