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notes to the financial statements (cont’d)
for the financial year ended 30 June 2014
ANNUAL REPORT 2014
61
2. Summary of significant accounting policies (CONT’D)
2.4 Basis of consolidation (cont’d)
Business combinations (cont’d)
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition
date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset
or liability, will be recognised in accordance with FRS 139 either in profit or loss or as a change to other
comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured.
Subsequent settlement is accounted for within equity. In instances where the contingent consideration does
not fall within the scope of FRS 139, it is measured in accordance with the appropriate FRS.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts
by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously
held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and
the amount recognised for non-controlling interests over the net identifiable assets acquired and liabilities
assumed. If this consideration is lower than fair value of the net assets of the subsidiary acquired, the difference
is recognised in profit or loss.
2.5 Subsidiaries
A subsidiary is an entity over which the Group has all the following:
(i)
Power over the investee (i.e existing rights that give it the current ability to direct the relevant activities
of the investee);
(ii)
Exposure, or rights, to variable returns from its investment with the investee; and
(iii) The ability to use its power over the investee to affect its returns.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less
impairment losses. On disposal of such investments, the difference between net disposal proceeds and their
carrying amounts is included in profit or loss.
2.6 Investments in associates
An associate is an entity in which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control over
those policies.
On acquisition of an investment in associate, any excess of the cost of investment over the Group’s share of the
net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill and included in
the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee over the cost of investment is excluded from the carrying amount of the
investment and is instead included as income in the determination of the Group’s share of the associate’s
profit or loss for the period in which the investment is acquired.
An associate is equity accounted for from the date on which the investee becomes an associate or a joint
venture.