Consolidated Financial Statements 2022 · Page 39

Public Investment Fund and its subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 
(All amounts in million SAR unless otherwise stated) 
Classification: External Confidential 
36 
 
4. 
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued) 
 
4.9 
Revenue from contracts with customers (continued) 
 
(f) 
Principal versus agent considerations  
The Group enters into contracts with its customers for supply of goods or services. The Group determines whether it controls the goods or 
services before they are transferred to customers, and it has the ability to direct the use of the goods or services or obtain benefits from them. 
The following factors indicate that the Group controls the goods or services before they are being transferred to customers.  
• 
The Group is primarily responsible for fulfilling the promise to provide the specified goods or services. 
• 
The Group has inventory risk before the specified goods has been transferred to the customers. 
• 
The Group has discretion in establishing the price for the specified goods or services. 
 
When the Group sells goods or services as a principal, revenue and payments to suppliers are reported on a gross basis in revenue and 
operating costs. If the Group sells goods or services as an agent, revenue and payments to suppliers are recorded in revenue on a net basis, 
representing the margin earned. Whether the Group is considered to be the principal or an agent in the transaction depends on analysis by 
management of both the legal form and substance of the agreement between the Group and its business partners; such judgements impact 
the amount of reported revenue and operating expenses but do not impact reported assets, liabilities or cash flows. 
 
(g) 
Consideration of significant financing component in a contract 
Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant 
financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer 
and when the customer pays for that good or service will be one year or less. The Group concluded that there is no significant financing 
component for those contracts where the customer elects to pay in advance considering the length of time between the customer's payment 
and the transfer of goods or services to the customer. 
 
4.10 Determining the lease term of contracts with renewal and termination options – The Group as lessee 
 
Management determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend 
the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not 
to be exercised. The Group has lease contracts that include extension and termination options. Management applies judgement in evaluating 
whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors 
that create an economic incentive for it to exercise either the renewal or termination option. 
 
The Group typically exercises its option to renew these leases because based on the previous experience and the future intention of the 
management to continue, there is a significant negative effect on production if a replacement asset is not readily available. The re